National Rate Cap Notice of Proposed Rulemaking

I concur Mary,

My biggest questions are about how they are anticipating handling off-tenor offerings.  Also I am curious if they are acknowledging credit union offerings as insured deposits.  

The statement is very limited in addressing off-tenor offering for both the national rate averages and the local rate cap.   If they are suggesting that disclosed off-tenor offerings be considered for calculating the FDIC averages this would be a very good proposal.  For example, if an institution offers:

6 Months .75%
12 Months 1.20%
13 Months 2.10%
24 Months 1.50%
60 Months 1.60%

Then the offerings used for calculating the survey averages should be the highest rate offered for that term or any shorter maturity period.  This would properly incorporate the willingness of a financial institution to pay for deposits.  Below are the numbers that would be used for the average calculations.

6 Months .75%
12 Months 1.20%
24 Months 2.10%
60 Months 2.10%

Using this approach for the local rate caps, the financial institution could use the highest rate offered for deposits of this term or any term shorter (including off-tenor terms) in their 90% of the top of the market calculation.

What does everyone think of this?

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Neil Stanley
TS Banking Group
Treynor, Iowa
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Original Message:
Sent: 08-21-2019 13:29
From: Mary Fowler
Subject: National Rate Cap Notice of Proposed Rulemaking

The much anticipated NPR on the rate cap rules was released yesterday (https://www.fdic.gov/news/board/2019/2019-08-20-notice-dis-b-fr.pdf ) and will have a 60 day comment period.  There are many positives in the NPR, and a lot of progress has been made. What is being proposed is much better than what we have now, with potential to get even better. I'm not sure why they still want to use the Rate Watch data, knowing it's not representative of real rates, but adding the 95th percentile method yields a workable rate for 1 year + terms; not sure of the outlook for < 1 year and non-mat. deposits. The local rate cap proposal is much better than the current rule, but I'm not sure I could get my customers to accept 90% of the rate they could get down the street; still, a vast improvement. Even though they recognize that we compete against internet rates, that scenario is not factored in to the local rate cap. Hopefully, the 95th percentile rate cap will make those problems irrelevant.

Kudos to the FDIC and Ch. Jelena McWilliams for recognizing the seriousness of the problems and acting as quickly as possible to fix them.  This despite many regulators telling me during the past year that change was unlikely.

We now have the opportunity to effect even more change by offering common sense ideas in comments on the NPR.

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Mary Fowler
Chief Executive Officer
The Peoples Bank
Magnolia AR
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