§ 303.243 - Brokered deposits.

§ 303.243 Brokered deposit waivers.

Cross Reference

Link to an amendment published at 86 FR 6787, Jan. 22, 2021.

deposits.

(a) Brokered deposit waivers -

(1) Scope. Pursuant to section 29 of the FDI Act (12 U.S.C. 1831f) and part 337 of this chapter, an adequately capitalized insured depository institution may not accept, renew or roll over any brokered deposits unless it has obtained a waiver from the FDIC. A well-capitalized insured depository institution may accept brokered deposits without a waiver, and an undercapitalized insured depository institution may not accept, renew or roll over any brokered deposits under any circumstances. This section contains the procedures to be followed to file with the FDIC for a brokered deposit waiver. The FDIC will provide notice to the depository institution's appropriate federal banking agency and any state regulatory agency, as appropriate, that a request for a waiver has been filed and will consult with such agency or agencies, prior to taking action on the institution's request for a waiver. Prior notice and/or consultation shall not be required in any particular case if the FDIC determines that the circumstances require it to take action without giving such notice and opportunity for consultation.

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2) Where to file. Applicants shall submit a letter application to the appropriate FDIC office.

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3) Content of filing. The application shall contain the following:

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i) The time period for which the waiver is requested;

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ii) A statement of the policy governing the use of brokered deposits in the institution's overall funding and liquidity management program;

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iii) The volume, rates and maturities of the brokered deposits held currently and anticipated during the waiver period sought, including any internal limits placed on the terms, solicitation and use of brokered deposits;

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iv) How brokered deposits are costed and compared to other funding alternatives and how they are used in the institution's lending and investment activities, including a detailed discussion of asset growth plans;

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v) Procedures and practices used to solicit brokered deposits, including an identification of the principal sources of such deposits;

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vi) Management systems overseeing the solicitation, acceptance and use of brokered deposits;

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vii) A recent consolidated financial statement with balance sheet and income statements; and

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viii) The reasons the institution believes its acceptance, renewal, or rollover of brokered deposits would pose no undue risk.

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4) Additional information. The FDIC may request additional information at any time during processing of the application.

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5) Expedited processing for eligible depository institutions. An application filed under this section by an eligible depository institution as defined in this paragraph will be acknowledged in writing by the FDIC and will receive expedited processing, unless the applicant is notified in writing to the contrary and provided with the basis for that decision. For the purpose of this section, an applicant will be deemed an eligible depository institution if it satisfies all of the criteria contained in § 303.2(r) except that the applicant may be adequately capitalized rather than well-capitalized. The FDIC may remove an application from expedited processing for any of the reasons set forth in § 303.11(c)(2). Absent such removal, an application processed under expedited procedures will be deemed approved 21 days after the FDIC's receipt of a substantially complete application.

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6) Standard processing. For those filings which are not processed pursuant to the expedited procedures, the FDIC will provide the applicant with written notification of the final action as soon as the decision is rendered.

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7) Conditions for approval. A waiver issued pursuant to this section shall:

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i) Be for a fixed period, generally no longer than two years, but may be extended upon refiling; and

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ii) May be revoked by the FDIC at any time by written notice to the institution.

(b) Primary purpose exception notices and applications -

(1) Scope. This section sets forth a process for an agent or nominee, or an insured depository institution on behalf of an agent or nominee, to notify the FDIC that it will rely upon a designated exception in § 337.6(a)(5)(v)(I)(1)(i) and (ii) of this chapter. This section also sets forth a process for an agent or nominee, or an insured depository institution on behalf of an agent or nominee, to apply for the primary purpose exception, as described in § 337.6(a)(5)(v)(I)(2) of this chapter.

(2) Definitions. For purposes of this paragraph (b):

(i) Third party means an agent or nominee that submits a notice that it will rely upon a designated exception in § 337.6(a)(5)(v)(I)(1)(i) and (ii) of this chapter or applies to be excluded from the definition of deposit broker pursuant to the primary purpose exception as described in § 337.6(a)(5)(v)(I)(2) of this chapter.

(ii) Notice filer means a third party or an insured depository institution on behalf of a third party, that submits a written notice that the third party will rely upon a designated business exception in § 337.6(a)(5)(v)(I)(1)(i) and (ii) of this chapter.

(iii) Applicant means a third party, or an insured depository institution on behalf of a third party, that applies to be excluded from the definition of deposit broker pursuant to the primary purpose exception, as described in § 337.6(a)(5)(v)(I)(2) of this chapter.

(3) Notice requirement for designated business exceptions. A third party, or an insured depository institution on behalf of a third party, must notify the FDIC through a written notice that the third party will rely upon a designated business exception described in § 337.6(a)(5)(v)(I)(1)(i) and (ii) of this chapter in order to rely on that designated business exception.

(i) Contents of notice. The notice must include: The designated exception upon which the third party will rely; a brief description of the business line; the applicable specific contents for the designated exception; either a statement that there is no involvement of any additional third party who qualifies as a deposit broker or a brief description of any additional third party that may qualify as a deposit broker; and if the notice is provided by a nonbank third party, a list of the insured depository institutions that are receiving deposits by or through the particular business line. The applicable specific contents for the following designated exceptions are:

(A) 25 percent test (as described in § 337.6(a)(5)(v)(I)(1)(i) of this chapter).

(1) The total amount of customer assets under administration by the third party for that particular business line; and

(2) The total amount of deposits placed by the third party on behalf of its customers, for that particular business line, at all depository institutions, being placed by that third party.

(B) Enabling transactions test (as described in § 337.6(a)(5)(v)(I)(1)(ii) of this chapter).

(1) Contractual evidence that there is no interest, fees, or other remuneration, being paid to any customer accounts; and

(2) A certification that all customer deposits that are placed at insured depository institutions are in transaction accounts.

(ii) Additional information for notices. The FDIC may request additional information from the notice filer at any time after receipt of the notice.

(iii) Additional notice filers. The FDIC may include notice and/or reporting requirements as part of a designated exception identified under § 337.6(a)(5)(v)(I)(2)(xiv) of this chapter.

(iv) Subsequent notices. A notice filer that previously submitted a notice under this section shall submit a subsequent notice to the FDIC if, at any point, the notice filer no longer meets the designated business exception that was the subject of its previous notice.

(v) Ongoing requirements for notice filers. Notice filers that submit a notice under the 25 percent test must provide quarterly updates to the FDIC on the figures described in paragraph (b)(3)(i)(A) of this section that were provided as part of the written notice. Notice filers that submit a notice under the enabling transactions test must provide an annual certification to the FDIC that the third party continues to place all customer funds at insured depository institutions into transaction accounts and that customers do not receive any interest, fees, or other remuneration.

(vi) Revocation of primary purpose exception. The FDIC may, with notice, revoke a primary purpose exception of a third party, or a person required to submit a notice under paragraph (b)(3)(iii) of this section, that qualifies for the primary purpose exception due to reliance on a designated exception, if:

(A) The third party no longer meets the criteria for a designated exception;

(B) The notice or subsequent reporting is inaccurate; or

(C) The notice filer fails to submit required reports.

(4) Application requirements. A third party, or an insured depository institution on behalf of a third party, may submit an application to the FDIC seeking a primary purpose exception for business relationships not designated in § 337.6(a)(5)(v)(I)(1) of this chapter.

(i) For applications for primary purpose exception to enable transactions with fees, interest, or other remuneration provided to the depositor. Applicants that seek the primary purpose exception where customer funds that are placed at depository institutions are placed into transaction accounts, and fees, interest, or other remuneration are provided to the depositor, must include the following information, with respect to the particular business line:

(A) Contractual evidence on the amount of interest, fees, or other remuneration, being paid on customer accounts;

(B) Any marketing materials provided by the third party to insured depository institutions or its customers;

(C) The average number of transactions for all customer accounts, and an explanation of how its customers utilize its services for the purpose of making payments and not for the receipt of a deposit placement service or deposit insurance;

(D) The percentage of customer funds placed in deposit accounts that are not transaction accounts;

(E) A description of any additional third parties that provide assistance with the placement of deposits at insured depository institutions; and

(F) Any other information that the FDIC requires to initiate its review and render the application complete.

(ii) For applications for primary purpose exception not covered by paragraph (b)(4)(i) of this section. Applicants that seek the primary purpose exception, other than applications under paragraph (b)(4)(i) of this section, must include, to the extent applicable:

(A) A description of the deposit placement arrangements between the third party and insured depository institutions for the particular business line, including the services provided by any relevant third parties;

(B) A description of the particular business line;

(C) A description of the primary purpose of the particular business line;

(D) The total amount of customer assets under management by the third party, with respect to the particular business line;

(E) The total amount of deposits placed by the third party at all insured depository institutions, including the amounts placed with the applicant, if the applicant is an insured depository institution, with respect to the particular business line. This includes the total amount of term deposits and transactional deposits placed by the third party, but should be exclusive of the amount of brokered CDs, as defined in § 337.6(a)(5)(v)(I)(3) of this chapter, being placed by that third party;

(F) Revenue generated from the third party's activities related to the placement, or facilitating the placement, of deposits, with respect to the particular business line;

(G) Revenue generated from the third party's activities not related to the placement, or facilitating the placement, of deposits, with respect to the particular business line;

(H) A description of the marketing activities provided by the third party, with respect to the particular business line;

(I) The reasons the third party meets the primary purpose exception;

(J) Any other information the applicant deems relevant; and

(K) Any other information that the FDIC requires to initiate its review and render the application complete.

(iii) Additional information for applications. The FDIC may request additional information from the applicant at any time during processing of the application.

(iv) Application timing.

(A) An applicant that submits a complete application under this section will receive a written determination by the FDIC within 120 days of receipt of a complete application.

(B) If an application is submitted that is not complete, the FDIC will, within 45 days of submission, notify the applicant and explain what is needed to render the application complete.

(C) The FDIC may extend the 120-day timeframe, if necessary, to complete its review of a complete application, with notice to the applicant, for a maximum of 120 additional days.

(v) Application approvals. The FDIC will approve an application -

(A) Submitted under paragraph (b)(4)(i) of this section if the FDIC finds that the third party's marketing materials indicate that the primary purpose of placing customer deposits at insured depository institutions is to enable transactions, and:

(1) Nominal interest, fees, or other remuneration is being paid on any customer accounts, or

(2) The third party's customers make, on average, more than 6 transactions a month.

(B) Submitted under paragraph (b)(4)(ii) of this section if the FDIC finds that the applicant demonstrates that, with respect to the particular business line under which the third party places or facilitates the placement of deposits, the primary purpose of the third party's business relationship with its customers is a purpose other than the placement or facilitation of the placement of deposits.

(vi) Ongoing reporting for applications.

(A) The FDIC will describe any reporting requirements, if applicable, as part of its written approval for a primary purpose exception.

(B) Applicants that receive a written approval for the primary purpose exception, shall provide reporting to the FDIC and, in the case of an insured depository institution, to its primary Federal regulator, if required under this section.

(vii) Requesting additional information, requiring re-application, imposing additional conditions, and withdrawing approvals. At any time after approval of an application for the primary purpose exception, the FDIC may at its discretion, with written notice and adequate justification:

(A) Require additional information from an applicant to ensure that the approval is still appropriate, or for purposes of verifying the accuracy and correctness of the information provided to an insured depository institution or submitted to the FDIC as part of the application under this section;

(B) Require the applicant to reapply for approval;

(C) Impose additional conditions on an approval; or

(D) Withdraw an approval.

[86 FR 6787, Jan. 22, 2021]