US FDIC may change Brokered Deposit Rules – Potentially Benefiting Fintechs

  • Brokered Deposits are deposits that have been placed with a bank by an intermediary firm (a “broker”) for an end customer.
  • The current rules prevent banks that are not classed as “well capitalised” by the Federal Deposit Insurance Corporation (FDIC) from taking brokered deposits.
  • The logic is that deposits from deposit brokers in the past were more likely to be moved from the bank if there is a problem – and so increase the riskiness of the bank.
  • This is being looked at again now partly because of fintech. For example, a fintech firm might want to enable their customers to hold deposits with a bank through the fintech firm’s app (and the fintech firm would be paid a fee by the bank). This may currently be a brokered deposit.
  • Current rules may also class health savings plans and prepaid cards as brokered deposits.
  • The FDIC has issued a “notice of proposed rulemaking” to update the brokered deposit rules.
  • If implemented, the changes may allow more fintech firms to place deposits with FDIC insured banks, without being considered as deposit brokers – giving these fintech firms access to a wider range of banks to work with.