FinTech companies in the US may see the trading brokered deposits rules change soon.
The Federal Deposit Insurance Corporation (FDIC) has issued a notice of proposed rulemaking, the aim of which is to modernize its brokered deposit regulations, which were first introduced in 1989.
“The proposal would, among other things, modernize a regulatory framework built for a different era to remove regulatory disincentives to offering deposit accounts to customers through different channels,” stated the independent body.
The proposal would set up new rules for analyzing whether deposits placed through deposit placement arrangements qualify as brokered deposits.
Those rules include third parties like FinTech firms and insured depository institutions (IDI).
The proposed rules would redefine the deposit broker definition to apply to any person that engages in specified activities. Moreover, it would enable a wholly-owned operating subsidiary to be eligible for the “IDI exception” to the “deposit broker” definition under certain circumstances.
Commenting on the proposal, Jelena McWilliams, chairman of the FDIC, said, “Today, the term ‘brokered deposits’ encompasses a diverse range of deposit placement arrangements, including traditional brokered CDs, various types of brokerage sweep accounts, certain prepaid card programs and health savings accounts, and a range of other types of deposit products that involve online or mobile third parties.
“When Congress enacted brokered deposits restrictions 30 years ago, most of these types of deposit placement arrangements did not exist, and today they exhibit meaningfully different characteristics from the traditional brokered deposits Congress sought to address.”
Saying that the rules have “a real impact on how banks deliver products and services to consumers, including the more than 20 million unbanked Americans who could have greater access to banking services”, McWilliams said the “proposed rule would establish a new, transparent framework for determining what qualifies as a brokered deposit.”
“The framework reflects the transformative changes both in the banking industry and in how consumers interact with banks and access banking services while remaining,” McWilliams continued.
To ensure the proposals align with the needs of the market, the FDIC has announced that it is looking for people to comment on the proposed approach as well as responses to specific questions and issues discussed in the notice.
People looking to respond will have until mid-February to do so.
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