Today, the FDIC issued a Final Rule on "Interest Rate Restrictions on Insured Depository Institutions That Are Not Well-Capitalized." The Final Rule, which is almost identical to the Proposed Rule, changes the way the FDIC will administer its statutory restrictions on the deposit interest rates paid by depository institutions that are less than well-capitalized.

The FDIC staff memorandum addressed to the FDIC Board of Directors recommending that the Board adopt the Final Rule, details that the Final Rule would provide a "simple method" for calculating interest rate caps and would "more closely align" the FDIC's regulations with the FDI Act in preventing institutions that are not well-capitalized from paying interest rates on deposits that "significantly exceed" market averages.

Significantly, the Final Rule defines "national rate" as "a simple average of rates paid by all insured depository institutions and branches for which data are available." In recognizing that the competition for deposit pricing has become national in scope, the Final Rule creates a presumption that the prevailing rate in an institution's local market area is the national rate as defined by the FDIC. Institutions that believe that the prevailing rate in their local market is higher than the FDIC's published rate, can assert to the regional FDIC office, that it is operating in a "high rate environment." The process for doing this will be released by the FDIC prior to the implementation date.

A Financial Institution Letter (FIL-25-2009) issued on the Final Rule, highlighted that the FDIC will monitor and immediately begin to publish a schedule of national rates by maturity and the rate caps. Separate national rates and rate caps will be posted for NOW accounts, money market deposit accounts, and savings accounts. The rate cap will be the national rate plus 75 basis points.

The Final Rule becomes effective on January 1, 2010 in order to give insured depository institutions adequate time to adjust to the new rules.