FDIC Voted to Approve a Long List of Policy Proposals in Meeting Yesterday

07/31/24

The FDIC Board met yesterday and voted to approve multiple proposals that could create changes for Ohio banks if implemented. Below is a summary of each proposed policy.

Brokered Deposits:

The proposed rule is meant to simplify the "deposit broker" definition and would limit the primary purpose exception so that only insured depository institutions could apply for it.

Also, the proposal would change "the definition of deposit broker to, among other things, eliminate the automatic exemption for affiliated sweeps that are using additional third parties and also cover fee-based arrangements," Gruenberg said during the meeting.

"The proposed rule would change the notice and application requirements for the primary purpose exception to apply only to banks, which, among other things, would help address the underreporting of brokered deposits," he added. "All of these changes would significantly enhance the protections of the brokered deposit rule."

The FDIC will solicit public comments for 60 days, Gruenberg said.

Vice Chair Travis Hill opposed the proposal partly because of the primary purpose exception changes. He said the "new standard is harder to understand, harder to meet and further removed from the words of the statute."

Uninsured Deposits

Also during the meeting, the FDIC Board voted unanimously to issue a request for information regarding deposit data, such as information on uninsured deposits, that is currently not part of regulatory reports. The agency will ask questions such as, "How do banks measure or evaluate the stability of different types of uninsured deposits?" and "What are the challenges in calculating and reporting uninsured deposits on the Call Report?" It will accept public comments for 60 days.

Industrial Loan Charters

The FDIC board voted in favor of a proposal to amend its existing rules governing parent companies of industrial banks and industrial loan companies. Specifically, the proposed rule would amend part 354 of the FDIC's rules and regulations to establish additional criteria the agency would consider when both assessing the risks presented to an industrial bank by its parent organization and evaluating the industrial bank's ability to function independently of the parent organization, according to an FDIC summary.

Other proposed changes would clarify the relationship between written commitments and the FDIC's evaluation of the statutory factors applicable to an industrial bank filing; ensure that a parent company of an industrial bank would be subject to part 354 if there is a change of control at the parent company or a merger in which the parent company is the resultant entity; and provide the FDIC the regulatory authority to apply part 354 to other situations where an industrial bank would become a subsidiary of a company that is not subject to federal consolidated supervision. Comments on the proposal are due 60 days after publication in the Federal Register.

Living Wills

The FDIC board approved final guidance for resolution plan submissions -also known as "living wills"- for banks with more than $250 billion. The guidance was developed jointly with the Federal Reserve. It was first proposed last year but incorporates changes made in response to public feedback, according to the agency.

The guidance is organized around key areas of potential vulnerability, such as capital, liquidity, and operational capabilities that could be needed in resolution, the FDIC said. In addition, the deadline for banks to submit their resolution plans has been extended from March 31, 2025, to Oct. 1, 2025.

Bank Control Changes

The FDIC board voted to move ahead with a proposed rule to require parties acquiring FDIC-insured institutions to give advanced notice to the agency even if the Federal Reserve plans to review the change in control request.

Currently, no person may acquire control of an insured depository institution without providing at least 60 days prior written notice to the appropriate federal banking agency, according to the FDIC. However, the agency's regulations exempt transactions from the notice requirement in cases where the Fed reviews a Change in Bank Control notice. Also, in practice, the FDIC has waived the notice requirement when the Fed has accepted "passivity commitments" from an investor. The proposed rule would remove the exemption, override the practice and request further public comment regarding the

Fair Hiring in Banking Act

Following the public board meeting, the FDIC announced that the board had also approved revisions to Fair Hiring in Banking Act regulations, allowing applicants with certain past offenses and particular expungements to work in banking.

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