Brokered Deposit Guidance - Sullivan & Cromwell
January 14, 2015Brokered Deposit GuidanceFDIC Issues Frequently Asked Questions on Identifying, Accepting,and Reporting Brokered DepositsSUMMARYOn January 5, 2015, the Federal Deposit Insurance Corporation (the “FDIC”) issued a FinancialInstitutions Letter (FIL-2-2015) (the “Guidance”), setting forth sweeping guidance regarding brokereddeposits in the form of FAQs. The Guidance answers a wide range of questions regarding classificationof deposits as brokered, as well as acceptance and reporting of brokered deposits.The subjects of the Guidance include “facilitation” generally, bank networks, listing services, prepaid anddebit cards, timing of acceptance of deposits, and interest rate restrictions. Relying on the assertion thatthe FDIC is authorized to interpret the concept of brokered deposits “broadly,” in almost every case theFDIC has answered the question posed by concluding that the deposit at issue is brokered, which, insome cases, represents a departure from industry understanding and/or practice.As a result, theGuidance further confirms that the concept of brokered deposits extends well beyond high interest rate“hot money” deposits that prompted the Federal Deposit Insurance Act (“FDIA”) amendments on thissubject, as well as beyond brokered deposits of limited or no (or even negative) franchise value that haveprompted more recent concerns.The Guidance is relevant to all insured depository institutions (“IDIs”) regardless of size, and shouldprompt even IDIs that have not viewed their deposits as brokered to review their deposits in light of theinterpretations.In particular, an increase in the scope of deposits classified as brokered may haveimplications for an institution’s deposit insurance assessment rate, its contingency funding plan, andcompliance with the federal banking agencies’ proposed minimum liquidity coverage ratio (“LCR”)requirement. In addition, it is unknown whether an IDI that historically had not classified its deposits asNew YorkWashington, D.C.Los Angeles Palo Alto London ParisTokyo Hong Kong Beijing Melbourne Sydneywww.sullcrom.comFrankfurt
brokered would be expected to amend its call reports to reflect the change in status of any deposits thatare classified as brokered under the Guidance.The FAQs in the Guidance are presented as clarifications generally of previous interpretations set out inthe FDIC’s 2011 Study on Core Deposits and Brokered Deposits (the “2011 Study”), which the FDIC staffhas previously indicated was definitive and current guidance on the subject. In some cases the answersrepresent positions that have never before been set out in written form or, as indicated, represent adeparture from industry practice. Nonetheless, the FDIC chose to undertake this process as “guidance,”rather than as a rule that would have provided notice and the opportunity for comment.Potential consequences of the new interpretations in the Guidance include the following: Referrals by insurance agents, lawyers and accountants result in brokered deposits. It is unclear tous how IDIs can monitor this with any degree of certainty. Outside of a narrow set of specific instances, virtually any third-party involvement or intermediationbetween a depositor and an IDI amounts to “facilitating the placement of deposits” and gives rise tobrokered deposits. Dual employees, even those jointly employed by the bank and a subsidiary of thebank (such as a broker-dealer or investment adviser) or the bank’s holding company (including,potentially, the CEO) are treated as deposit brokers, and any deposits that they refer or solicit will bedeemed brokered. General purpose cards sold by third parties, whether or not reloadable, give rise to brokered depositsin most circumstances if federal deposit insurance flows through to the purchasing customers. As aresult, the availability of general purpose prepaid cards covered by federal deposit insurance maydecrease, and the availability of general purpose prepaid cards without insurance and limited purposecards (e.g., for transit, health benefits and the like) may increase. The brokered status of deposits may be more difficult to terminate because any ongoing involvementby an intermediary, including any payment of a renewal fee, holding of an account in the name ofthird parties as agent or custodian for the owner, or access to account information (such as accountbalances), requires that the deposits remain classified as brokered apparently regardless of the tenorof the deposit relationship or other considerations. To the extent that an IDI may need to reclassify deposits as brokered as a result of the writtenguidance, the increase in brokered deposits may have an impact on the IDI’s FDIC deposit insuranceassessments and its liquidity coverage ratio (if applicable), and it may even be necessary to amendpast call reports.-2Brokered Deposit GuidanceJanuary 14, 2015
As noted below, there are a number of additional possible collateral consequences for IDIs on whichat this time there is no further guidance. Because the guidance states “(Updated 12/24/2014),” it ispossible that further updates or clarifications may be forthcoming.BACKGROUNDSection 29 of the Federal Deposit Insurance Act (“Section 29”), as implemented by the FDIC’s regulationsat 12 C.F.R. § 337.6, places restrictions on the acceptance by certain IDIs of deposits obtained through1“deposit brokers,” which deposits are deemed to be “brokered deposits.”2IDIs that are not wellcapitalized may not accept (which includes not only actual acceptance, but also solicitation, renewal orrollover) such brokered deposits. Although an IDI that is adequately capitalized may request a waiver ofthis prohibition from the FDIC, the FDIC appears increasingly reluctant to grant such waivers, and thewaiver process can take considerable time.IDIs that are not well capitalized also are subject torestrictions under Section 29 on the interest rates that they may offer on deposits.Deposits that are classified as brokered can impact an IDI in significant ways, even when they can beaccepted. The amount of an IDI’s brokered deposits can affect the following components of its depositinsurance assessment rate: for a large or highly complex institution, its core deposits ratio; for a small institution (generally under 10 billion in assets) that has experienced a more than40% growth in assets over the past four years, its adjusted brokered deposit ratio; and for any institution that is either not well capitalized or that has a composite CAMELS rating belowa ‘2’, and that has a ratio of brokered deposits to domestic deposits greater than 10 percent, anadditional brokered deposit adjustment.In addition, for a banking organization subject to the federal banking agencies’ proposed minimum LCRrequirement (generally applicable to banking organizations with at least 50 billion in assets), theassumed outflow rate applied to many brokered deposits is higher than that applied to other deposits.3112 U.S.C. § 1831f; 12 C.F.R. § 337.6. Deposit brokers formerly were required by Section 29A of theFDIA to provide written notification to the FDIC that they were acting as such, but Congress repealedthis requirement through the Financial Regulatory Relief and Economic Efficiency Act of 2000. As aresult, the primary importance of the statutory definition of “deposit broker” is to characterize thedeposits obtained by an IDI through such a deposit broker as “brokered deposits.”2Certain high interest rate deposits offered by IDIs that are less than well capitalized are considered“brokered deposits” even without any third-party involvement, as in those situations the offering IDIitself is considered the “deposit broker” under the statute. See 12 U.S.C. § 1831f(g)(3).3See 78 Fed. Reg. 71,818, 71,840 (Nov. 29, 2013). Generally, the outflow rate applied to a particulardeposit depends in part on whether that deposit is brokered and, if so, whether it is a reciprocalbrokered deposit, brokered sweep deposit, or other type of brokered deposit. The outflow rate-3Brokered Deposit GuidanceJanuary 14, 2015
For example, brokered deposits that are not reciprocal brokered or brokered sweep deposits areassigned a 100% outflow rate if they have no maturity or mature within the LCR’s 30-day window.Moreover, federal banking agency guidance indicates that IDIs that “rely upon” brokered deposits shouldincorporate prompt corrective action-related downgrade triggers into their contingency funding plans; anIDI may not be able to renew or roll over existing brokered deposits upon such a downgrade and,consequently, may need to access separate sources of funding.4Section 29 generally defines a “deposit broker” as a person “engaged in the business of placing deposits,or facilitating the placement of deposits,” of third parties with IDIs.5The FDIC does not appear to requirea person to be “engaged in the business” of facilitating the placement of deposits to satisfy the secondprong of this definition.6The statutory definition of “deposit broker” is subject to certain enumeratedexceptions; among others, these exceptions apply to an IDI (with respect to funds placed with that IDIitself); an employee of an IDI, with respect to funds placed with the employing institution; and an agent ornominee whose primary purpose is not the placement of funds with depository institutions.7The FDIC has sought to provide more clarity with respect to these definitions and the correspondingexceptions through its implementing regulations at 12 C.F.R. § 337.6, as well as through a number ofstaff advisory letters issued over the years. Particular areas of focus have included determining whethercertain activities constituted “placing deposits” or “facilitating the placement of deposits,” and determiningwhether a person or entity otherwise involved in facilitation comes within the “primary purpose”exception.8In addition, in response to a Congressional mandate in the Dodd-Frank Wall Street Reform andConsumer Protection Act, the FDIC issued the 2011 Study. While reiterating that “there should be noparticular stigma attached to the acceptance by well-capitalized banks of brokered deposits per se andapplied to a particular brokered deposit also may depend on whether the deposit is fully insured, aswell as its maturity.4See Interagency Policy Statement on Funding and Liquidity Risk Management (March 17, 2010), at13, available at 2010/sr1006a1.pdf.512 U.S.C. § 1831f(g)(1). A “deposit broker” also includes a person engaged in the business ofplacing deposits with IDIs for the purpose of selling interests in those deposits to third parties, and anagent or trustee who establishes a deposit account to facilitate a business arrangement to use theproceeds of the account to fund a prearranged loan. Id.6Cf. FDIC Advisory Opinion 93-30 (June 15, 1993) (“When considered together, we believe these factstend to support the conclusion that the Affinity Groups are neither ‘engaged in the business of placingdeposits’ nor ‘facilitating the placement of deposits’ with the Bank, as contemplated by section 29.”).712 U.S.C. § 1831f(g)(2).8See, e.g., FDIC Advisory Opinion 04-04 (July 28, 2004) (finding that an Internet listing service thatmet certain criteria was not “facilitating the placement of deposits”); FDIC Advisory Opinion 05-02(Feb. 3, 2005) (finding the “primary purpose” exception to apply in the case of a brokerage firm thatswept idle customer funds into transaction accounts at affiliated banks, provided certain conditionswere met).-4-Brokered Deposit GuidanceJanuary 14, 2015
that the proper use of such deposits should not be discouraged,” the 2011 Study also expressedconcerns about the use of brokered deposits by IDIs and recommended that Congress not amend orrepeal the brokered deposit statute.9The 2011 Study reviewed the FDIC’s prior brokered depositguidance and set forth its position with respect to certain interpretive issues.The FDIC staff hasrepeatedly advised, since the publication of the 2011 Study, that the study represents the FDIC’sdefinitive positions on brokered deposits. The positions set forth in the Guidance now supersede thosetaken in the 2011 Study in certain respects.DISCUSSIONThe full set of FAQs is attached as an appendix to this memorandum. New interpretations included in theFAQs or clarifications of previous interpretations that may be of particular significance include thefollowing.A. DEPOSIT BROKER STATUS AND THE ROLE OF COMPENSATIONThe FAQs provide that a third party may be considered a deposit broker even if it “receives no fees orother direct compensation from the depository institution where the funds are placed.” Notably, the FAQsalso state that “insurance agents, lawyers, or accountants that refer clients to a bank are deposit brokers.”It thus appears that uncompensated referrals could be considered brokered. It is not clear whether abank would have a duty to inquire of its customers in this regard.10B. EXCEPTIONS TO THE DEFINITION OF DEPOSIT BROKERThe FAQs provide guidance on the following exceptions to the “deposit broker” definition: The exception for IDIs applies only to the IDI itself and not to any of its affiliates, clarifying thatsubsidiaries of the IDI (apparently including operating subsidiaries) would not qualify for theexception. The exception for employees of an IDI applies solely to an employee (i) who is employed exclusivelyby the IDI; (ii) whose compensation is primarily in the form of a salary; (iii) who does not sharecompensation with a deposit broker; and (iv) whose office space or place of business is usedexclusively for the benefit of the IDI which employs the employee. Accordingly, the exception does92011 Study at 3.10FDIC Advisory Opinion 93-46 (July 21, 1993) discussed the circumstance in which “[a] person . . .calls and assists in the opening transaction, but does not identify himself as being a broker.” Thestaff concluded that the funds would be brokered deposits, further stating that “[t]he key here iswhether the depository institution knows or has reason to know that the funds are being placed by abroker. If so, then the depository institution will be subject to any applicable restrictions onacceptance of brokered deposits based on its capital category.”-5-Brokered Deposit GuidanceJanuary 14, 2015
not apply to a contractor, a dual employee of the IDI and its affiliate, or, potentially, an employeeeligible for a bonus in an amount greater than his or her base salary. 11It may be that for bank holding company systems where employees are employed by a separateservice company subsidiary, all deposits placed or facilitated by those employees would beconsidered brokered despite exclusive service level employment agreements between theservice company and the bank with respect to the employees, although this would seem to be aharsh and unintended result. In determining whether a third party qualifies for the exception for an agent or nominee whoseprimary purpose is not the placement of funds with depository institutions (the “primary purpose”exception), an IDI cannot rely on the amount of revenue generated by the third party’s placementactivities as compared to its other activities. Instead, the intent of the party in placing (or facilitatingthe placement of) deposits must be evaluated to ensure that it is to promote a goal other than that ofplacing deposits for others (for example, the intent of the third party cannot be to earn fees throughthe placement of the deposits). In general, the primary purpose exception does not apply to companies that distribute financialproducts, such as general purpose prepaid cards, apparently whether or not reloadable. This mayalso include prepaid salary cards used by some employers. Card companies or retail stores thatoperate or sell general purpose prepaid cards where the funds are placed in custodial accounts atIDIs are considered deposit brokers. It appears that limited-use cards (for example, those used forhealth care or transportation benefits) may not give rise to brokered deposits. The FDIC will look to the following factors in determining whether to classify a third party thatdistributes debit cards or similar products that serve multiple purposes as a deposit broker: (1) thestated primary purpose of the third party in distributing the cards; (2) the features of the card (such aswhether the card is reloadable); and (3) the compensation (if any) received by the third party from thebank for distributing or marketing the cards. Colleges that provide debit cards to students that also act as the student’s identification card andvehicle for access to student loan funds may be considered deposit brokers if, for example, thereloadability and the permanency of the accounts indicate that the primary purpose of the card is toprovide access to the account at the IDI. According to the FAQs, this conclusion would be confirmedby the payment of fees or commissions to the college by the IDI.11FDIC Advisory Opinion 92-75 (Nov. 3, 1992) addressed the issue of bank employees who receivedsubstantial bonuses. The staff stated that in order to definitively address the circumstancespresented in the letter, “we would have to know more about the exact mechanics of how the amountsof salary and bonus of an employee are adjusted after the fact to ensure that more than 50% of thatemployee's compensation consists of salary.”-6-Brokered Deposit GuidanceJanuary 14, 2015
C. DURATION OF BROKERED STATUSThe FAQs stress that any ongoing involvement by a deposit broker means that the deposits must remainclassified as brokered. Examples of involvement include the payment of a renewal fee, holding of anaccount in the name of third parties as agent or custodian for the owner, or access to accountinformation, such as the account balance. As a result, deposits that an IDI may have thought were nolonger brokered because, for example, the deposit was a CD that has since rolled over may still beconsidered brokered apparently regardless of the amount of time the deposits have remained at the IDI.D. ACCEPTING DEPOSITSThe FAQs expand the scope of when a deposit is considered “accepted” by an IDI. This is important foran IDI that declines from well capitalized to adequately capitalized because, after the decline, it cannotcontinue to accept brokered deposits without a waiver from the FDIC. For undercapitalized IDIs, there isan outright ban on accepting brokered deposits and no waiver is available. There are consequenceseven for well-capitalized IDIs, as well, because under federal banking agency guidance, IDIs that rely onbrokered deposits are directed to incorporate prompt corrective action-related downgrade triggers intotheir contingency funding plans.According to the FAQs, nonmaturity deposits, such as interest checking or savings accounts, effectivelyare treated as being accepted every day. If this view is confirmed, in the absence of a waiver (for whichexpedited processing is generally unavailable), an IDI may need to close any nonmaturity depositaccounts that are classified as brokered if the IDI’s capital classification declines from well capitalized toadequately capitalized.The FAQs caution bank management to contact the bank’s primary federalregulator when closing these accounts because of the potential significant impact on liquidity or otherfactors affecting bank operations.E. INTEREST RATE RESTRICTIONSAn IDI that declines from being well capitalized generally may not offer interest rates on its deposits that,at the time the funds are accepted, renewed or rolled over, are significantly higher than market rates.12This was the original significant operative restriction arising from the legislation on brokered deposits.There are several FAQs on the interest rate restrictions at the end of the guidance, including with respectto the calculation of market rates and the rates offered by the bank on its accounts (for example, withrespect to the inclusion of incentives paid to customers and any fees paid to deposit brokers).*12*See 12 C.F.R. § 337.6(b).Copyright Sullivan & Cromwell LLP 2015-7Brokered Deposit GuidanceJanuary 14, 2015*
ABOUT SULLIVAN & CROMWELL LLPSullivan & Cromwell LLP is a global law firm that advises on major domestic and cross-border M&A,finance, corporate and real estate transactions, significant litigation and corporate investigations, andcomplex restructuring, regulatory, tax and estate planning matters.Founded in 1879, Sullivan &Cromwell LLP has more than 800 lawyers on four continents, with four offices in the United States,including its headquarters in New York, three offices in Europe, two in Australia and three in Asia.CONTACTING SULLIVAN & CROMWELL LLPThis publication is provided by Sullivan & Cromwell LLP as a service to clients and colleagues. Theinformation contained in this publication should not be construed as legal advice. Questions regardingthe matters discussed in this publication may be directed to any of our lawyers listed below, or to anyother Sullivan & Cromwell LLP lawyer with whom you have consulted in the past on similar matters. Ifyou have not received this publication directly from us, you may obtain a copy of any past or futurerelated publications from Nathalie-Claire Chiavaroli ( 1-212-558-3976; chiavarolin@sullcrom.com) in ourNew York office.CONTACTSNew YorkWhitney A. Chatterjee 1-212-558-4883chatterjeew@sullcrom.comH. Rodgin Cohen 1-212-558-3534cohenhr@sullcrom.comElizabeth T. Davy 1-212-558-7257davye@sullcrom.comMitchell S. Eitel 1-212-558-4960eitelm@sullcrom.comMichael T. Escue 1-212-558-3721escuem@sullcrom.comJared M. Fishman 1-212-558-1689fishmanj@sullcrom.comC. Andrew Gerlach 1-212-558-4789gerlacha@sullcrom.comAndrew R. Gladin 1-212-558-4080gladina@sullcrom.comWendy M. Goldberg 1-212-558-7915goldbergw@sullcrom.comErik D. Lindauer 1-212-558-3548lindauere@sullcrom.comJiang Liu 1-212-558-3093liujia@sullcrom.comMark J. Menting 1-212-558-4859mentingm@sullcrom.comCamille L. Orme 1-212-558-3373ormec@sullcrom.comRebecca J. Simmons 1-212-558-3175simmonsr@sullcrom.comDonald J. Toumey 1-212-558-4077toumeyd@sullcrom.comMarc Trevino 1-212-558-4239trevinom@sullcrom.comMark J. Welshimer 1-212-558-3669welshimerm@sullcrom.comMichael M. Wiseman 1-212-558-3846wisemanm@sullcrom.com-8Brokered Deposit GuidanceJanuary 14, 2015
Washington, D.C.Eric J. Kadel, Jr. 1-202-956-7640kadelej@sullcrom.comWilliam F. Kroener III 1-202-956-7095kroenerw@sullcrom.comStephen H. Meyer 1-202-956-7605meyerst@sullcrom.comJennifer L. Sutton 1-202-956-7060suttonj@sullcrom.comAndrea R. Tokheim 1-202-956-7015tokheima@sullcrom.comSamuel R. Woodall III 1-202-956-7584woodalls@sullcrom.com 1-310-712-6603brownp@sullcrom.comMark J. Welshimer 44-20-7959-8495welshimerm@sullcrom.comGeorge H. White III 44-20-7959-8570whiteg@sullcrom.comWilliam D. Torchiana 33-1-7304-5890torchianaw@sullcrom.comRobert Chu 61-3-9635-1506chur@sullcrom.comBurr Henly 61-3-9635-1508henlyb@sullcrom.comKeiji Hatano 81-3-3213-6171hatanok@sullcrom.comLos AngelesPatrick S. BrownLondonParisMelbourneTokyo-9Brokered Deposit GuidanceJanuary 14, 2015DC LAN01:303087.3
APPENDIXGUIDANCE ON IDENTIFYING, ACCEPTING, AND REPORTING BROKERED DEPOSITSFREQUENTLY ASKED QUESTIONS(Updated 12/24/2014)A. BROKERED DEPOSITS AND DEPOSIT BROKERSA1. What is a “brokered deposit”?The term “brokered deposit” is defined in the FDIC’s regulations as “any deposit that is obtained,directly or indirectly, from or through the mediation or assistance of a deposit broker.”1 Thus, themeaning of the term “brokered deposit” depends upon the meaning of the term “deposit broker.”A2. What is a “deposit broker”?A “deposit broker” is “[a]ny person engaged in the business of placing deposits, or facilitating theplacement of deposits, of third parties with insured depository institutions, or the business of placingdeposits with insured depository institutions for the purpose of selling interests in those deposits to thirdparties.”2 This definition is very broad. Subject to certain exceptions, a deposit broker is any person,company or organization engaged in “placing deposits” belonging to others, or “facilitating theplacement of deposits” belonging to others, at an insured depository institution. As a result of this broaddefinition, a brokered deposit may be any deposit accepted by an insured depository institution from orthrough a third party, such as a person or company or organization other than the owner of the deposit.A3. How does the FDIC view brokered deposits?Brokered deposits can be a suitable funding source when properly managed as part of an overall,prudent funding strategy. However, some banks have used brokered deposits to fund unsound or rapidexpansion of loan and investment portfolios, which has contributed to weakened financial and liquiditypositions over successive economic cycles. The overuse of brokered deposits and the impropermanagement of brokered deposits by problem institutions have contributed to bank failures and losses tothe Deposit Insurance Fund.A4. What are the restrictions on brokered deposits?Section 29 of the Federal Deposit Insurance (FDI) Act includes restrictions on the acceptance ofbrokered deposits and certain restrictions on deposit interest rates. Under Section 29, anundercapitalized insured depository institution may not accept, renew, or roll over any brokereddeposit.3 An adequately capitalized insured depository institution may not accept, renew, or roll over112 C.F.R. § 337.6(a)(2).12 C.F.R. § 337.6(a)(5)(i)(A).3Capital group assignments are made quarterly in accordance with the FDIC’s Rules and Regulations, using the methodagreed upon by the Federal Financial Institutions Examination Council Surveillance Task Force for calculating capital ratios.The method uses data reported in an institution’s Consolidated Reports of Income and Condition (Call Reports), Report of2
any brokered deposit unless the institution has applied for and been granted a waiver by the FDIC. Awell-capitalized insured depository institution, for the purposes of section 38 of the FDI Act, is notrestricted by Section 29 in accepting or renewing brokered deposits.4Deposit rate restrictions prevent a bank that is not well capitalized from circumventing the prohibitionon brokered deposits by offering rates significantly above market in order to attract a large volume ofdeposits quickly. As a general rule, a bank that is not well capitalized may not offer deposit rates morethan 75 basis points above average national rates for deposits of similar size and maturity. See sectionG of this document for additional information.A5. What factors are considered when determining if a third party is a deposit broker?The definition of deposit broker applies to third parties engaged in “placing deposits” and “facilitatingthe placement of deposits.” The term “facilitating the placement of deposits” is interpreted broadly toinclude actions taken by third parties to connect insured depository institutions with potentialdepositors. As a result, a third party could be a deposit broker even when the third party does not openbank accounts on behalf of depositors or directly place funds into bank accounts.The third party may qualify as a deposit broker even if it receives no fees or other direct compensationfrom the depository institution where the funds are placed. The fee structure is simply one factor usedby the FDIC in determining whether a particular party is a deposit broker. Other factors include thenature of the fees (i.e., whether the amount of the fees is connected to the amount of deposits placed atthe insured depository institution), the purported purpose of the fees (i.e., whether the fees are intendedto reward the third party for placing deposits as opposed to rewarding the third party for providing someother service), and the degree of involvement by the third party in placing the deposits.B. PLACING DEPOSITS AND FACILITATING THE PLACEMENT OF DEPOSITSB1. What activity qualifies as “placing deposits”?A third party “places deposits” for others when the third party actually delivers the funds to an insureddepository institution. In this situation, unless the third party is covered by one of the exceptions to thedefinition of deposit broker (discussed in section E of this document), the third party will be a depositbroker and the deposits will be brokered deposits.B2. What activities qualify as “facilitating the placement of deposits”?Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks, or Thrift Financial Report. See Capital Groups(available at: https://www.fdic.gov/deposit/insurance/risk/rrps ovr.html).4A bank under a formal agreement with a directive to meet or maintain a specific capital level is not considered to be wellcapitalized.2
When a third party takes any actions that connect an insured depository institution with depositors orpotential depositors, the third party may be “facilitating the placement of deposits.” Hence, the thirdparty may be a deposit broker.B3. Are there instances when facilitating the placement of deposits or placing deposits would notbe considered the brokering of deposits?Yes. For example, one of the exceptions to the definition of “deposit broker” is the “trustee of a pensionor other employee benefit plan, with respect to funds of the plan.” Under this exception, the trustee isnot classified as a deposit broker even if the trustee places the plan’s deposits (or facilitates theplacement of the plan's deposits) at an insured depository institution.B4. Do companies or organizations that provide marketing for an insured depositoryinstitution, in exchange for volume-based fees, qualify as deposit brokers because they arefacilitating the placement of deposits?Yes. Some insured depository institutions attempt to attract new depositors through advertising orreferrals by third parties (such as nonprofit affinity groups as well as commercial
FDIC Issues Frequently Asked Questions on Identifying, Accepting, and Reporting Brokered Deposits SUMMARY On January 5, 2015, the Federal Deposit Insurance Corporation (the "FDIC") issued a Financial Institutions Letter (FIL-2-2015) (the "Guidance"), setting forth sweeping guidance regarding brokered deposits in the form of FAQs.
Letter (FIL-42-2016) providing revised guidance regarding brokered deposits in the form of Frequently Asked Questions (the "2016 FAQs"). The 2016 FAQs followed the FDIC's issuance of brokered deposit FAQs in January 2015, which created substantial industry concerns regarding the breadth of the definition
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