Updates on the Treatment of Reciprocal Deposits

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Michael P. Kurtz, CPA

In September, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency (the “Agencies”) issued a notice of proposed rule on the treatment of reciprocal deposits.  The proposed rule would conform with the FDIC’s current regulations and changes to Section 202 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. The main effect of the proposed rule is to permit FDIC insured financial institutions, to except certain amounts of reciprocal deposits from treatment as brokered deposits under certain circumstances. The proposed rule is the first of a two part effort by the FDIC to revisit the brokered deposit rules, with the second part due later this year on the brokered deposit and rate cap regulations.

The following points were taken from the summary of the proposed changes:

  • Section 202 of the Act amends Section 29 of the Federal Deposit Act to except a capped amount of reciprocal brokered deposits from treatment as brokered deposits for certain insured depository institutions. Section 202 defines terms including "reciprocal deposits," "covered deposits," and "agent institution."
  • The FDIC is proposing to incorporate these statutory definitions into section 337.6(e)(2) of the FDIC Rules and Regulations, without change.
  • Section 202 also confirms that the current statutory and regulatory rate restrictions for less than well capitalized institutions apply to reciprocal deposits that are excepted from treatment as brokered deposits. The FDIC is proposing conforming amendments to section 337.6(b)(2)(ii).
  • Proposing to make conforming amendments to its assessments regulations, Part 327 of the FDIC Rules and Regulations, to be consistent with the statutory definition of reciprocal deposits.

Click here to read the entire Financial Institution Letter.