On February 4, representatives of the Federal Deposit Insurance Corporation (FDIC) sent a letter to David Hanrahan, the president and CEO of Capital Bank of New Jersey, in which they elaborated on a particular question and answer regarding the categorization of deposits as brokered deposits. Such a categorization can lead to increased FDIC assessment rates and could, under certain circumstances, impose serious restrictions on the ability of an insured depository institution to accept or roll over such deposits absent a waiver from the FDIC. The letter was sent in response to a question posed by the bank in response to an FAQ released by the FDIC in early January. The original question, identified as Question B6, posed this question: “Are insurance agents, lawyers, or accountants that refer clients to a bank considered to be deposit brokers?” This was answered by the FDIC as follows: “Yes. By referring clients to a bank, these persons are facilitating the placement of deposits. Therefore, they are deposit brokers, and the deposits would be brokered.”

In its elaboration, the representatives of the FDIC stated, “[w]e recognize that within a community, there are many business professionals that conduct banking business with a particular insured financial institution (IDI), and, due to that banking allegiance, often refer their customers to a particular financial institution on an informal basis for deposit products. Those types of informal deposit referrals that are not related to a programmatic arrangement, such as a written agreement or referral fee between the IDI and the business professional, would not be considered brokered. Rather, Question B6 relates to more formal, programmatic arrangements, such as where (1) the professional has entered into a written agreement with the bank for the referral of depositors; or (2) the professional receives fees from the bank. In either of these two cases, the FDIC would consider the professional to have facilitated the placement of deposits in the bank and therefore, the deposits received by the IDI to be brokered.”

It is not clear whether the FDIC will formally amend its FAQ to reflect the further guidance. A copy of the letter was sent by the FDIC to the American Bankers Association, which made it accessible through a link in its daily publication, and to the New Jersey Bankers Association.

The FDIC letter is available here.