FDIC Proposes Rate Cap Updates

Aug 20, 2019
The FDIC issued a proposed rule modifying interest rate restrictions on less-than-well-capitalized banks. The plan would set rate caps at the higher of (1) the 95th percentile of rates paid by insured depository institutions weighted by each institution’s share of total domestic deposits, or (2) the proposed national rate plus 75 basis points.

The proposal, which is open for a 60-day comment period, also would simplify the current process for local rate caps by allowing less-than-well-capitalized institutions to offer up to 90 percent of the highest rate paid on a particular deposit product in the institution’s local market area.

ICBA has told the FDIC that its rate restrictions on are out of step with the market. In a comment letter and op-ed, ICBA called on the FDIC to raise and reform rate restrictions to ensure the current methodology doesn’t lead to a liquidity crisis or unnecessarily loop in well-capitalized institutions.