On January 27, 2009, the FDIC proposed to amend its regulation relating to interest rate restrictions on institutions that are less than well capitalized. The proposed regulation would tie the interest rate caps to published national interest rates and eliminate the concept of local deposit market areas.
Section 29 of the Federal Deposit Insurance Act places statutory limitations on the ability of any insured depository institution that is not well capitalized to accept funds obtained by or through any deposit broker. Because of the statutory definition of a deposit broker, these limitations also limit the interest rates which may be paid by insured depository institutions that are less than well-capitalized. In order to be considered well-capitalized, an institution may not be subject to any written agreement or order issued by its primary federal regulatory which requires the institution to meet and maintain a specific capital level for any capital measure.
Under the existing regulations, any institution that is not well capitalized (including any institution subject to a regulatory enforcement action with capital requirements) may generally not pay interest in excess of 75 basis points over the average interest paid for comparable deposits in the institution’s “normal market area.”