OBL Joins 75 Other Associations Pushing Back on FCC Rural Broadband Rule

08/07/24

On Monday, OBL, along with 75 other state bankers associations, urged the Federal Communications Commission (FCC) to eliminate the requirement for banks to obtain specific Weiss safety ratings to be eligible to provide letters of credit (LOC) to telecommunications providers under the FCC's Rural Digital Opportunity Fund (RDOF).

Launched in 2020, the RDOF aims to expand high-speed broadband in rural areas across the U.S. Currently, the FCC mandates that banks issuing LOCs to telecommunications providers receiving financial support from the RDOF must maintain a Weiss bank safety rating of B- or higher. Many banks discovered in late 2023 that they were no longer eligible to issue LOCs due to unexplained drops in their safety ratings, as highlighted in joint comments filed by the associations. The FCC granted a temporary waiver for this requirement earlier this year and proposed changes to the requirement in July, seeking public comments on potential revisions.

In our comments,the associations argued that the existing regulatory framework and supervision of banks should provide the FCC with sufficient assurance that banks issuing LOCs are not at risk of failure. They pointed out that the Weiss rating organization is not a nationally recognized statistical rating organization (NRSRO) registered with the Securities and Exchange Commission (SEC). "There is no transparency regarding the formula used for generating their bank safety ratings, and several comments on their website raise concerns about the reliability of their analysis," they noted.

The associations suggested two alternatives to the Weiss rating system if the FCC insists on retaining a verification method. One option is to require eligible banks to have a rating from an NRSRO that is equivalent to a BBB- or better rating by Standard & Poor's. Another option is an affidavit signed by a bank officer declaring that the bank is "adequately capitalized" or "well capitalized" as of the date the LOC is issued, with a requirement for the bank officer to promptly notify the telecommunications provider if the bank's capital ratio falls below the "adequately capitalized" level.