Comments to FDIC on rate cap rules

Mary, thanks for your post.  I agree with you.  Most banks have a loan/deposit ratio of 80% or less--and little need to offer pricing reflected by the treasury curve + a premium.  Banks like American Commerce, with higher l/d ratios "pay up" because it makes sense for us--not because we're in any sort of distress.  It only goes to reason that mega banks with enormous levels of liquidity aren't willing to pay 1 bp more for funding than required...because they're not lending out the money!  My bank sports a 55% efficiency ratio.  COF is merely another line item in my income statement.  American Commerce Bank can afford to pay higher deposit rates (to the benefit of depositing customers) because our overhead elsewhere is lower.  Overall, we still generate healthy returns for our shareholder.  Wholesale funding should be managed within reasonable limits, but penalizing banks that become capital constrained with rate caps is entirely punitive--with no redeeming purpose that I can see.

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Bob Koncerak
EVP/CFO & COO
American Commerce Bank, National Association
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Original Message:
Sent: 02-13-2019 19:59
From: Mary Fowler
Subject: Comments to FDIC on rate cap rules

The comment period on the rate cap rule and brokered deposits is now open.  See:

https://www.govinfo.gov/content/pkg/FR-2019-02-06/pdf/2018-28273.pdf 

I hope you will join me in the attempt to make common-sense changes to the rules which could threaten our industry in general, and our own banks in particular. The national average rate needs to be recognized as the big mistake that it is. It's not hard to see that a national average rate of .71% for a 12 month Jumbo CD just isn't anywhere near a correct market rate. Here is a link to the National Average Rates and Rate Caps:

FDIC: Weekly National Rates and Rate Caps - Weekly Update

With the one year US Treasury (the safest investment possible) at 2.57%, how can anyone defend the idea that the current market rate for a 12 month Jumbo CD is anywhere near .71%? This needs to be corrected yesterday, just as the FDIC corrected it in 2009 without any legislation. Our bank is losing 12 month CD renewals frequently, even though we are offering 2.64% APY for one year. There is a problem here, and in the event of a recession it would probably be a disaster. Please work with us to protect your jobs and our jobs and the banking industry. Here is a link to see or submit comments:

FDIC: Federal Register Citations

Thank you.

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Mary Fowler
Chief Executive Officer
The Peoples Bank
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