FDIC proposed revisions to its regulations covering interest rate restrictions that apply to less than well-capitalized insured depository institutions. Under the proposed rule, FDIC would amend the methodology for calculating the national rate and national rate cap for specific deposit products. The proposed rule would also greatly simplify the local rate cap calculation and process by allowing less than well-capitalized institutions to offer up to 90% of the highest rate paid on a particular deposit product in the local market area of the institution. Comments will be accepted until November 04, 2019.
The proposed national rate would be the weighted average of rates paid by all insured depository institutions on a given deposit product, for which data are available, where the weights are each institution’s market share of domestic deposits. The key difference between the proposed national rate and the current national rate is that the calculation of the proposed national rate would be a weighted average based on an institution’s share of total domestic deposits, while the current methodology is based on an institution’s number of branches. The national rate cap for particular products would be set at the higher of:
- the 95th percentile of rates paid by insured depository institutions weighted by each institution’s share of total domestic deposits, OR
- the proposed national rate plus 75 basis points
FDIC would compute the permissible national rate cap applicable for different deposit products and maturities on a monthly basis and would plan to publish such information on the FDIC website on a monthly basis. The proposal would also provide a new simplified process for institutions that seek to offer a local market rate that exceeds the national rate cap. The proposal would eliminate the current two-step process where less than well-capitalized institutions request a high rate determination from FDIC and, if approved, calculate the prevailing rate within local markets. Instead, a less than well-capitalized institution would need to notify its appropriate FDIC regional office that it intends to offer a rate that is above the national rate cap and provide evidence that it is competing against an institution or credit union that is offering a rate in its local market area in excess of the national rate cap.
Comment Due Date: November 04, 2019
Keywords: Americas, US, Banking, Interest Rate, Interest Rate Cap, Interest Rate Restrictions, ALM, Asset and Liability Management, FDIC
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