2024-18214. Unsafe and Unsound Banking Practices: Brokered Deposits Restrictions

Summary of Estimated Annual Burden

[OMB No. 3064-0099]

Information collection (IC) (obligation to respond)	Type of burden (frequency of response)	Number of respondents	Number of responses per respondent	Time per response (HH:MM)	Annual burden (hours)
1. Application for Waiver of Prohibition on Acceptance of Brokered Deposits, 12 CFR 337.6(c) (Required to Obtain or Retain a Benefit)	Reporting (On Occasion)	3	2.375	06:00	42
2. Notice Submission for Primary Purpose Exception Based on Placement of Less Than 10 Percent of Customer Assets Under Management—Implementation, 12 CFR 303.243(b)(3) (Required to Obtain or Retain a Benefit)	Reporting (On Occasion)	7	1.091	03:00	24
3. Application for Primary Purpose Exception Based on 10 Test With Additional 3rd Party—Implementation, 12 CFR 303.243(b)(4)(i) (Required to Obtain or Retain a Benefit)	Reporting (On Occasion)	10	1.138	10:00	110
4. Application for Primary Purpose Exception Not Based on Business Arrangements that Meets a Designated Exception—Implementation, 12 CFR 303.243(b)(4)(ii) (Required to Obtain or Retain a Benefit)	Reporting (On Occasion)	7	4.238	10:00	300
5. Notice Submission for Primary Purpose Exception Based on the Placement of Less Than 10 Percent of Customer Assets Under Management—Ongoing, 12 CFR 303.243(b)(3)(vii) (Required to Obtain or Retain a Benefit)	Reporting (Quarterly)	7	4.364	00:30	16
6. Reporting for Primary Purpose Exception Based on the Placement of Less Than 10 Percent of Customer Assets Under Management with Additional 3rd Party—Ongoing, 12 CFR 303.243(b)(4)(vi) (Required to Obtain or Retain a Benefit)	Reporting (Quarterly)	10	4.552	00:30	23
7. Reporting for Primary Purpose Exception Not Based on the Business Arrangements that meets a Designated Exception—Ongoing, 12 CFR 303.243(b)(4)(vi) (Required to Obtain or Retain a Benefit)	Reporting (Quarterly)	7	16.952	00:15	30
Total Annual Burden (Hours)					545
Note: The estimated annual time burden for a given collection is the product, rounded to the nearest hour, of the estimated annual number of responses and the estimated time per response. The estimated annual number of responses is the product, rounded to the nearest whole number, of the estimated annual number of respondents and the estimated annual number of responses per respondent. This methodology ensures the estimated annual burdens in the table are consistent with the values recorded in OMB's consolidated information system.

( print page 68267)

The total estimated annual burden for OMB No. 3064-0099 is 545 hours, an increase of 168 hours from the most recent PRA renewal.^[132]

Comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the FDIC's functions, including whether the information has practical utility; (b) the accuracy of the estimates of the burden of the information collection, including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. All comments will become a matter of public record.

Comments on aspects of this document that may affect reporting, recordkeeping, or disclosure requirements and burden estimates should be sent to the address listed in the ADDRESSES section of this document. Written comments and recommendations for this information collection also should be sent within 30 days of publication of this document to www.reginfo.gov/​public/​do/​PRAMain. Find this particular information collection by selecting “Currently under 30-day Review—Open for Public Comments” or by using the search function.

C. Plain Language

Section 722 of the Gramm-Leach-Bliley Act requires the agencies to use plain language in all proposed and final rules published after January 1, 2000. The FDIC invites comment on how to make this proposed rule easier to understand.

For example:

• Have the agencies organized the material to inform your needs? If not, how could the agencies present the proposed rule more clearly?
• Are the requirements in the proposed rule clearly stated? If not, how could the proposal be more clearly stated?
• Does the proposed regulation contain technical language or jargon that is not clear? If so, which language requires clarification?
• Would a different format (grouping and order of sections, use of headings, paragraphing) make the proposed regulation easier to understand? If so, what changes would achieve that?
• Is this section format adequate? If not, which of the sections should be changed and how?
• What other changes can the agencies incorporate to make the proposed regulation easier to understand?

D. Riegle Community Development and Regulatory Improvement Act of 1994

Pursuant to section 302(a) of the Riegle Community Development and Regulatory Improvement Act of 1994 ^[133] (RCDRIA), in determining the effective date and administrative compliance requirements for new regulations that impose additional reporting, disclosure, or other requirements on IDIs, each Federal banking agency must consider, consistent with principles of safety and soundness and the public interest, any administrative burdens that such regulations would place on affected depository institutions, including small depository institutions, and customers of depository institutions, as well as the benefits of such regulations. In addition, section 302(b) of the RCDRIA requires new regulations and amendments to regulations that impose additional reporting, disclosures, or other new requirements on IDIs generally to take effect on the first day of a calendar quarter that begins on or after the date on which the regulations are published in final form.^[134] The FDIC invites comments that further will inform its consideration of the RCDRIA.

VII. Request for Comments

The FDIC invites comment from all members of the public regarding all aspects of the proposal. In particular, the FDIC seeks feedback on the scope of the proposed rule and its requirements, and responses to the following specific questions:

Deposit Broker Definition

1. Does the FDIC's proposed amendment to the “deposit broker” definition align more closely with the statutory language and purpose of section 29 of the FDI Act? Why or why not?

2. Is the FDIC's proposed change to remove “matchmaking activities” from the “deposit broker” definition and proposal to add a deposit allocation provision appropriate? Why or why not?

3. Is the consideration of fees appropriate when determining whether a person is a “deposit broker”? Are there any additional factors the FDIC should consider adding to the “deposit broker” definition? Please explain and provide data to support your views.

Primary Purpose Exception Analysis

4. Is the proposed updated primary purpose exception analysis appropriate? Why or why not?

5. Are the proposed changes to the primary purpose exception application process appropriate? Is it appropriate to limit the application process to IDIs? Is the proposed process sufficiently clear to allow IDIs to obtain the required information on all third parties within a deposit placement arrangement?

6. Are there any additional factors the primary purpose exception application process should consider?

Designated Exceptions

7. Should previously approved primary purpose exceptions be added to the regulatory list of “designated exceptions” as meeting the primary purpose exception under the proposed rule if they satisfy the proposed primary purpose exception?

8. Should any of the designated exceptions be removed, or new ones added? Please explain.

9. Should the enabling transactions designated exception be amended to include only non-reloadable prepaid card programs, such as gift cards? Please explain.

10. For the proposed BSDE, is the use of “assets under management” appropriate? Is the definition of “assets under management” sufficiently clear under the proposed rule? Is it appropriate to request the total amount of deposits placed by the broker-dealer or investment adviser on behalf of its customers at all IDIs and the total amount of customer assets under management as of the last quarter and as of the date of the notice filing?

Reciprocal Deposits

11. Given that the limited reciprocal deposits exception is intended for IDIs that are in good condition and well managed, should there be any ability for an IDI to regain “agent status” absent a return to being a well-rated and well-capitalized IDI?

12. Can allowance of regaining “agent status” potentially run counter to the goals of having an IDI focus on addressing its problems because the exception would potentially allow an IDI that is less than well-capitalized and not well-rated to grow its deposits through this avenue?

13. If an IDI could regain “agent status” absent a return to being a well-rated and well-capitalized IDI, is it appropriate to allow the IDI to regain ( print page 68268) “agent status” after the third consecutive calendar quarter during which the IDI did not at any time receive reciprocal deposits that caused its total reciprocal deposits to exceed its special cap? Should it be a shorter or longer time period?

Alternatives

14. Would rescinding a designated exception for sweep deposits be appropriate? Why or why not?

15. Would limiting the BDSE to sweep deposits placed at affiliated IDIs be appropriate? Why or why not?

16. Are there any additional alternatives the FDIC should consider?

Appendix 1: Sweep Deposits and Brokered Deposit Reporting, Call Report, December 31, 2023

Part I—Number of IDIs Reporting Sweep Deposits, and Related Data—Call Report, Schedule RC-E Memorandum Items 1. h and 1. i , December 31, 2023

	All IDIs	IDIs with TA>$100B	IDIs with TA>$50B<$100B	IDIs with TA>$10B<$50B	IDIs with TA>$5B<$10B	IDIs with TA<$5B
1. Total Number of IDIs	4,587	33	13	112	120	4,309
2. # of IDIs Reporting Non-Zero Sweep Deposits	1,375	31	12	85	86	1,161
3. % of IDIs Reporting Non-Zero Sweep Deposits	29.98%	93.94%	92.31%	75.89%	71.67%	26.94%
4. Sweep Deposits as % of Total Deposits Average Among IDIs Reporting Sweep Deposits	8.15%	11.16%	9.72%	15.88%	9.95%	7.35%
Affiliate Sweep Deposits
5. # of IDIs Reporting Affiliate Sweep Deposits	132	19	4	17	10	82
6. % of IDIs Reporting Affiliate Sweep Deposits	2.88%	57.58%	30.77%	15.18%	8.33%	1.90%
7. Affiliate Sweeps as % of Total Deposits—Average Among IDIs Reporting Sweeps	12.97%	11.57%	6.97%	34.60%	9.42%	9.53%
8. Largest Reported Affiliate Sweeps as % Total Deposits at an IDI	100.00%	74.17%	18.53%	100.00%	66.49%	100.00%
Non-Affiliate Sweep Deposits
9. # of IDIs Reporting Non-Affiliate Sweep Deposits	1,308	28	11	80	83	1,106
10. % of IDIs Reporting Non-Affiliate Sweep Deposits	28.52%	84.85%	84.62%	71.43%	69.17%	25.67%
11. # of IDIs With No Affiliate Sweeps That Reporting All Non-Affiliate Sweeps as Not Brokered i	895	3	2	28	42	820
12. IDIs From Line 11 as Percentage of IDIs on Line 9	68.4%	10.7%	18.2%	35.0%	50.6%	74.1%
13. Non-Affiliate Sweeps as % of Total Deposits Average Among IDIs Reporting Sweeps	7.26%	4.51%	8.07%	9.52%	9.18%	7.01%
14. Greatest Non-Affiliate Sweeps as % of Total Deposits at an IDI	101.65%	21.87%	21.82%	101.65%	35.26%	57.81%
15. # of IDIs with Non-Affiliate Sweeps ≥50% of Total Deposits	2	0	0	1	0	1
16. # of IDIs with Non-Affiliate Sweeps ≥25% of Total Deposits	47	0	0	6	4	37
17. # of IDIs with Non-Affiliate Sweeps >10% of Total Deposits	336	3	2	24	33	274

Part II—Dollar Volumes of Sweep Deposits—Call Report, Schedule RC-E, Memorandum Items 1. h and 1. i , December 31, 2023

	All IDIs	IDIs with TA>$100B	IDIs with TA>$50B<$100B	IDIs with TA>$10B<$50B	IDIs with TA>$5B<$10B	IDIs with TA<$5B
1. Reported Total Deposits at All IDIs	18,813,298,058	13,232,515,916	740,962,100	1,972,296,250	685,082,045	2,182,441,747
2. Reported Total Sweeps	1,427,142,903	951,624,313	69,540,704	269,437,563	51,281,295	85,259,028
3. Reported Total Affiliated Sweeps	748,878,759	608,077,343	18,375,917	108,835,380	5,776,164	7,813,955
4. Reported Total Non-Affiliate Sweeps	678,264,144	343,546,970	51,164,787	160,602,183	45,505,131	77,445,073

Part III—Estimates of Unaffiliated Sweep Deposits Not Reported as Brokered Deposits, December 31, 2023

[Dollar amounts in thousands]

	All IDIs	IDIs with TA>$100B	IDIs with TA>$50B<$100B	IDIs with TA>$10B<$50B	IDIs with TA>$5B<$10B	IDIs with TA<$5B
1. Reported Total Sweeps Not Reported As Brokered	1,130,350,872	748,795,994	47,741,450	224,773,693	40,435,786	68,603,949
2. Reported Total Affiliate Sweeps (From Line 3 in Part II Above)	748,878,759	608,077,343	18,375,917	108,835,380	5,776,164	7,813,955
3. Reported Total Non-Affiliate Sweeps Estimated to Not Be Reported as Brokered (Line 1 minus Line 2 Above) ii	381,472,113	140,718,651	29,365,533	115,938,313	34,659,622	60,789,994
4. Reported Total Non-Affiliate Sweeps Confirmed to Be Correctly Reported as Non-Brokered	iii  97,479,855	iv  66,427,468	0	v  31,052,387	0	0
5. Reported Total Non-Affiliate Sweeps Estimated to be Incorrectly Reported as Not Brokered (Line 3 minus Line 4 Above)	283,992,258	74,291,183	29,365,533	84,885,926	34,659,622	60,789,994
6. Reported Total Non-Affiliate Sweeps	678,264,144	343,546,970	51,164,787	160,602,183	45,505,131	77,445,073
( print page 68269)
7. Reported Total Non-Affiliate Sweeps Estimated to be Correctly Reported as Brokered (Line 6 minus Line 3 Above)	296,792,031	202,828,319	21,799,254	44,663,870	10,845,509	16,655,079
8. # of IDIs Reporting All Non-Affiliate Sweeps as Not Brokered vi	895	3	2	28	42	820
i  IDIs reporting: (1) no affiliate sweeps; (2) a non-zero value for non-affiliate sweeps; and (3) total non-affiliated sweeps that equal total sweeps not reported as brokered. The remaining IDIs represent: (1) IDIs that correctly reported all non-affiliated sweeps as brokered; (2) IDIs that correctly reported a portion of unaffiliated sweeps as non-brokered and incorrectly reported a portion of sweeps as non-brokered; (3) and IDIs with a portion of affiliate sweeps and a portion of non-affiliated sweeps that is either reported correctly or incorrectly.
ii  Assumes all total affiliate sweeps are not reported as brokered. Under current regulations, affiliate sweeps would need to be associated with a “25 percent test” PPE through the notice process or the IDI is relying on the Exclusive Placement Arrangement for these deposits to be considered non-brokered.
iii  This $97,479,855,000 amount is correctly reported as not brokered because it reflects amounts reported by two IDIs, which accept sweep deposits from a non-affiliated clearing broker that has filed a notice with the FDIC indicating that it operates under a primary purpose exception where less than 25 percent of assets under administration are placed at insured depository institutions, and do not use a 3rd party deposit allocation service. A review of other IDIs reporting of non-affiliate sweeps deposits as brokered may reveal other instances of non-affiliate sweeps deposits being correctly reported as non-brokered if the sweep deposits are coming from a broker-dealer or other custodian that has filed a primary purpose exception notice with the FDIC and no other third party is involved that provides matchmaking services or otherwise meets the deposit broker definition without an applicable exception.
iv  This $66,427,468,000 amount is correctly reported as not brokered because it reflects amounts reported by an IDI, which accepts sweep deposits from a non-affiliated clearing broker that has filed a notice with the FDIC indicating that it operates under a primary purpose exception where less than 25 percent of assets under administration are placed at insured depository institutions and does not use a 3rd party deposit allocation service.
v  This $31,052,387,000 amount is correctly reported as not brokered because it reflects amounts reported by an IDI, which accepts sweep deposits from a non-affiliated clearing broker that has filed a notice with the FDIC indicating that it operates under a primary purpose exception where less than 25 percent of assets under administration are placed at insured depository institutions and does not use a 3rd party deposit allocation service.
vi  IDIs reporting no affiliate sweeps, a non-zero value for non-affiliate sweeps, and total non-affiliated sweeps that equal total sweeps not reported as brokered.