Interest Rate Restrictions on Institutions That Are Less Than Well Capitalized

 
CONTENT
Federal Register, Volume 84 Issue 196 (Wednesday, October 9, 2019)
[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]
========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________
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.
========================================================================
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.
-----------------------------------------------------------------------
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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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