In December 2020, the FDIC approved a Final Rule to reframe the definition and exceptions for “brokered deposits”. Historically, the FDIC has broadly defined virtually any third party connecting a depositor with a bank as a “deposit broker” and the resulting deposits as “brokered deposits”. The Final Rule responds to long-standing industry criticisms seeking to narrow these terms. The Final Rule aims to permit substantially more deposits to be excluded from treatment as “brokered deposits” by narrowing the definition of “deposit broker” and by establishing a number of specific designated business exceptions that would automatically meet the “primary purpose” exception from the “deposit broker” definition. It is anticipated that the Final Rule will provide more flexibility for banks to enter into bank-fintech partnerships and other arrangements.

The Final Rule is effective April 1, 2021. However, entities may continue to rely on existing staff advisory opinions or other interpretations that predated the Final rule until January 1, 2022, at which point those opinions and interpretations will be moved to inactive status.

This alert memorandum discusses our key takeaways and summarizes the notable points from the Final Rule, including key modifications from the proposed rule.