WASHINGTON -- Come Nov. 7 banks will no longer have to alert the Federal Deposit insurance Corp. of plans to grow more than 7.5% from one quarter to the next.

In the name of snipping red tape, the FDIC decided last month to drop its so-called rapid growth rule.

The agency said the regulatory burden reduction will save the industry 1,625 hours a year.

Since 1990, insured institutions have been required to give the FDIC notice of plans to build assets more than 7.5% in any consecutive three-month period by soliciting insured brokered deposits or secured borrowings, including repurchase agreements.

The rule was put into effect before the FDIC gained a variety of new tools to clamp down on banks. By December 1992, regulators had the power to impose greater sanctions on a bank as its capital diminished.

These "prompt corrective action" rules made the rapid growth regulation less necessary, the FDIC said.

The need to report quick growth also was undercut by the agency's brokered deposit rule, which bars undercapitalized banks from accepting brokered deposits. Adequately capitalized banks can buy brokered deposits only if they get a special waiver from the FDIC.

Both rules, the FDIC said, "address the same risks resulting from rapid growth."

-- Shannon Henry and Barbara A. Rehm

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.