[Federal Register Volume 84, Number 196 (Wednesday, October 9, 2019)]
[Proposed Rules]
[Pages 54044-54045]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-21324]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 84 , No. 196 / Wednesday, October 9, 2019 / 
Proposed Rules  

[[Page 54044]]



FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 337

RIN 3064-AF02


Interest Rate Restrictions on Institutions That Are Less Than 
Well Capitalized

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Notice of proposed rulemaking; supplemental notice.

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SUMMARY: On September 4, 2019, the Federal Deposit Insurance 
Corporation (FDIC) issued a notice of proposed rulemaking with request 
for comments on proposed revisions to its regulations relating to 
interest rate restrictions that apply to less than well capitalized 
insured depository institutions. The FDIC is supplementing that notice 
of proposed rulemaking with an updated regulatory flexibility analysis 
to reflect changes to the Small Business Administration's monetary-
based size standards which were adjusted for inflation as of August 19, 
2019.

DATES: Comments on the updated regulatory flexibility analysis must be 
received on or before November 8, 2019.

ADDRESSES: You may submit comments by any of the following methods:
     FDIC Website: https://www.fdic.gov/regulations/laws/federal/. Follow instructions for submitting comments on the agency 
website.
     Email: [email protected]. Include RIN 3064-AF02 on the 
subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street NW, 
Washington, DC 20429.
     Hand Delivery to FDIC: Comments may be hand-delivered to 
the guard station at the rear of the 550 17th Street Building (located 
on F Street) on business days between 7 a.m. and 5 p.m.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    Please include your name, affiliation, address, email address, and 
telephone number(s) in your comment. All statements received, including 
attachments and other supporting materials, are part of the public 
record and are subject to public disclosure. You should submit only 
information that you wish to make publicly available.
    Public Inspection: All comments received will be posted generally 
without change to https://www.fdic.gov/regulations/laws/federal/, 
including any personal information provided.

FOR FURTHER INFORMATION CONTACT: Ryan T. Singer, Chief, Regulatory 
Analysis Section, Division of Insurance and Research, (202) 898-7352, 
[email protected]; Jennifer M. Jones, Counsel, Legal Division, (202) 
898-6768, [email protected].

SUPPLEMENTARY INFORMATION: On September 4, 2019, the FDIC issued a 
notice of proposed rulemaking with request for comments on proposed 
revisions to its regulations relating to interest rate restrictions 
that apply to less than well capitalized insured depository 
institutions. (See 84 FR 41910 (September 4, 2019).) The FDIC is 
supplementing that notice of proposed rulemaking with an updated 
regulatory flexibility analysis to reflect changes to the Small 
Business Administration's monetary-based size standards which were 
adjusted for inflation as of August 19, 2019. (See 84 FR 34261 (July 
18, 2019).)

Updated Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires that, in connection 
with a proposed rule, an agency prepare and make available for public 
comment an initial regulatory flexibility analysis that describes the 
impact of the proposed rule on small entities.\1\ However, a regulatory 
flexibility analysis is not required if the agency certifies that the 
proposed rule will not have a significant economic impact on a 
substantial number of small entities, and publishes its certification 
and a short explanatory statement in the Federal Register together with 
the proposed rule. The Small Business Administration (SBA) has defined 
``small entities'' to include banking organizations with total assets 
of less than or equal to $600 million that are independently owned and 
operated or owned by a holding company with less than or equal to $600 
million in total assets.\2\
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    \1\ 5 U.S.C. 601 et seq.
    \2\ The SBA defines a small banking organization as having $600 
million or less in assets, where an organization's ``assets are 
determined by averaging the assets reported on its four quarterly 
financial statements for the preceding year.'' See 13 CFR 121.201 
(as amended by 84 FR 34261, effective August 19, 2019). In its 
determination, the ``SBA counts the receipts, employees, or other 
measure of size of the concern whose size is at issue and all of its 
domestic and foreign affiliates.'' See 13 CFR 121.103. Following 
these regulations, the FDIC uses a covered entity's affiliated and 
acquired assets, averaged over the preceding four quarters, to 
determine whether the covered entity is ``small'' for the purposes 
of RFA.
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    Generally, the FDIC considers a significant effect to be a 
quantified effect in excess of 5 percent of total annual salaries and 
benefits per institution, or 2.5 percent of total noninterest expenses. 
The FDIC believes that effects in excess of these thresholds typically 
represent significant effects for FDIC-insured institutions.
    The FDIC is proposing revisions to its regulations relating to 
interest rate restrictions that apply to less than well capitalized 
insured depository institutions, by amending the methodology for 
calculating the national rate and national rate cap. The proposal would 
also modify the current local rate cap calculation and process.
    Specifically, the proposal defines the national rate for a deposit 
product as the average rate for that product, where the average is 
weighted by domestic deposit share. The proposed national rate cap is 
the higher of (1) the rate offered at the 95th percentile of rates 
weighted by domestic deposit share or (2) the proposed national rate 
plus 75 basis points.
    Because the FDIC's experience suggests some institutions compete 
for particular products within their local market area, the proposal 
would continue to provide a local rate cap process.
    Specifically, the proposal would allow less than well capitalized 
institutions to provide evidence that any bank or credit union in its 
local market offers a rate on particular deposit product in excess of 
the national rate cap. If sufficient evidence is provided, then the 
less than well capitalized institution would be allowed to offer 90 
percent of the competing institution's rate on the particular product. 
For the

[[Page 54045]]

reasons discussed below, the FDIC certifies that the proposed rule will 
not have a significant economic effect on a substantial number of small 
entities.
    Based on March 31, 2019, Call Report data, the FDIC insures 5,371 
depository institutions, of which 4,004 are considered small entities 
for the purposes of RFA.\3\ As of March 31, 2019, 20 small, FDIC-
insured depository institutions were less than well capitalized.\4\ 
This represents less than two-fifths of one percent of all FDIC-insured 
institutions as of March 31, 2019, and approximately one-half of one 
percent of small, FDIC-insured institutions. For 17 small institutions 
that were less than well capitalized as of March 31, 2019, and that 
reported rates to a private data aggregator, FDIC analysts compared the 
national rate caps calculated under the current methodology with the 
national rate caps which would have been in effect under the proposal 
during the month of March across 11 deposit products.\5\ As described 
in more detail below, the analysis shows that the proposed national 
rate caps are less restrictive than the current national rate caps, and 
would reduce the likelihood that less than well capitalized 
institutions would need to avail themselves of the local rate cap 
determination process.
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    \3\ March 31, 2019, FFIEC Call Report.
    \4\ Id. The 20 institutions do not include any quantitatively 
well capitalized institutions that may have been administratively 
classified as less than well capitalized.
    \5\ The 11 products are savings accounts, interest checking 
accounts, money market deposit accounts, 1-month, 3-month, 6-month, 
12-month, 24-month, 36-month, 48-month, and 60-month CDs. Jumbo and 
non-jumbo rate caps reported for the week of March 4, 2019, were 
averaged for each of the 11 products to calculate a single rate cap 
per product under the current methodology. (https://www.fdic.gov/regulations/resources/rates/historical/2019-03-04.html).
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    Five of the 17 (just under 30 percent) less than well capitalized 
institutions for which data were available reported offering rates 
above the national rate caps calculated under the current methodology 
for seven out of the 11 products considered.\6\ Under the proposed 
methodology, three institutions reported rates above the national rate 
caps on two products. Thus, the number of deposit products with rates 
constrained by the national rate cap is reduced for all five 
institutions, and two of those institutions would be relieved of the 
need to avail themselves of the local rate cap determination process.
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    \6\ This is not meant to suggest that these institutions are not 
in compliance with the national rate caps, but rather that they have 
sought and received local rate determinations that allow them to 
offer certain products at rates above the national caps.
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    For the 3-month, 6-month, 36-month, and 48-month CD products, two 
less than well capitalized small institutions reported offering rates 
above the national rate caps calculated under the current methodology. 
On average, the reported offering rates were 6, 13, 29, and 58 basis 
points above the national rate caps, respectively.
    Three institutions reported offering rates above the national rate 
caps calculated under the current methodology for the 12-month and 24-
month CD products, and four reported offering rates above the national 
rate caps as currently calculated for the 60-month CD product. Rates 
offered on the 12-month and 24-month CD products were 37 and 45 basis 
points above the national rate caps, on average. Rates offered on the 
60-month CD product averaged 26 basis points above the national rate 
cap for that product.
    Across all deposit products offered at rates above the national 
rate caps calculated under the current methodology, the rates offered 
were 30 basis points above the national rate caps on average.
    Had the national rate caps in effect at the time been calculated 
under the proposed methodology, then two less than well capitalized 
small institutions would have reported offering rates that averaged 11 
basis points above the national rate cap for the 3-month CD product, 
and one institution would have reported offering a rate three basis 
points above the national rate cap for the 48-month CD product.
    Across all deposit products offered at rates above the national 
rate caps calculated under the proposed methodology, the rates offered 
were 7 basis points above the national rate caps on average.
    No less than well capitalized small institution reported offering a 
rate above the national rate caps calculated under the current or 
proposed methodology for savings, interest checking, MMDA, or 1-month 
CD products during the timeframe considered.
    The number of small, less than well capitalized institutions with 
offered rates above the national rate caps falls from five under the 
current methodology to three under the proposed methodology. Thus, the 
number of small less than well capitalized institutions that need to 
rely on a local rate cap is expected to fall.
    The FDIC cannot more precisely quantify the effects of the proposed 
rule relative to the current methodology because it lacks data on the 
dollar amounts placed in deposit products broken down by the rates 
offered. However, few small institutions are less than well 
capitalized, and most of those small, less than well capitalized 
institutions for which data were available reported rates across the 11 
deposit products considered that were below the national rate caps as 
calculated under both the current and proposed methodologies. For the 
few less than well capitalized institutions as of March 31, 2019 whose 
deposit interest rates are constrained by the current national rate cap 
but not the proposed rate cap, the effect of the rule would be burden 
reducing in the sense of reducing the need for local rate cap 
determinations.
    Based on the foregoing information, the FDIC certifies that the 
proposed rule will not significantly affect a substantial number of 
small entities. The FDIC welcomes comments on its analysis. 
Specifically, what data would help the FDIC better quantify the effects 
of the proposal compared with the current methodology?

Federal Deposit Insurance Corporation.

    Dated at Washington, DC, on September 26, 2019.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2019-21324 Filed 10-8-19; 8:45 am]
BILLING CODE 6714-01-P