On July 26, 2018, Representative Blaine Luetkemeyer (R-MO), chairman of the Financial Institutions and Consumer Credit Subcommittee of the House Financial Services Committee, along with Representative Scott Tipton (R-CO), sent a letter asking FDIC Chair Jelena McWilliams to review the agency's interpretation of brokered deposits. The representatives criticized the existing limitations on brokered deposits as "not [having] been adequately updated to reflect technological, legal, business model and product range changes."
The FDIC's Study on Core Deposits and Brokered Deposits states that "there should be no particular stigma attached to the acceptance of brokered deposits per se and the proper use of such deposits should not be discouraged," but in practice, the agency's policy does discourage banks from accepting brokered deposits. The representatives identify the "additional deposit insurance and higher capital and supervisory limitations" as costs restricting banks from participating in innovative markets.
For fintech and other service companies seeking bank partnerships, the FDIC's brokered deposit interpretation often presents a hurdle. The broad interpretation of what constitutes a deposit broker and, thereby, brokered deposits is sometimes surprising for new entrants into the financial services sector. Given the evolution of the marketplace, fintech companies will be watching to see how the FDIC responds to the representatives' request.