Q: What are the restrictions on brokered deposits?
A: Section 29 of the FDI Act includes restrictions on the acceptance of brokered deposits and certain restrictions on deposit interest rates. Under Section 29, an undercapitalized insured depository institution may not accept, renew, or roll over any brokered deposit. An adequately capitalized insured depository institution may not accept, renew, or roll over any brokered deposit unless the institution has applied for and been granted a waiver by the FDIC. A well-capitalized insured depository institution, for the purposes of Section 38 of the FDI Act, is not restricted by Section 29 in accepting or renewing brokered deposits.
Deposit rate restrictions prevent a bank that is not well capitalized from circumventing the prohibition on brokered deposits by offering rates significantly above market in order to attract a large volume of deposits quickly. As a general rule, a bank that is not well capitalized may not offer deposit rates more than 75 basis points above average national rates for deposits of similar size and maturity. See section G of this document for additional information.