The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) on May 29 issued a final rule changing the way the FDIC administers its statutory restrictions on the deposit interest rates paid by banks that are less than well capitalized. The Federal Deposit Insurance Act requires the FDIC to prevent banks that are less than well capitalized from soliciting deposits at interest rates that significantly exceed prevailing rates. The FDIC’s current regulation ties permissible interest rates paid by these banks on some deposits solicited nationally to the comparable maturity Treasury yield, and ties permissible interest rates on deposits solicited locally to undefined prevailing local interest rates.
The final rule defines nationally prevailing deposit rates as a direct calculation of those national averages, as computed and published by the FDIC based on available data. Reliance on the Treasury yields in the existing regulation would be discontinued. In recognition of the blurring of local deposit market boundaries brought about by the Internet and other innovations, the final rule also establishes a presumption that locally prevailing deposit rates equal the national rates published by the FDIC. This presumption could be overturned by evidence presented by banks to the FDIC.
As of first quarter 2009, there were 248 banks that reported being less than well capitalized, out of more than 8,200 banks nationwide. The rule is effective January 1, 2010. Effective immediately, the FDIC will regularly publish national rates and caps, and permit institutions that are less than well capitalized to avail themselves of these rates as a safe harbor for complying with the statutory interest rate restrictions.