Banking agencies release 2018 ratios used to determine compliance with rules on deposit production

Host state loan-to-deposit ratios – used by regulators to determine compliance with rules to keep banks from opening branches just to gather deposits – were released by the federal banking regulators Friday; they replace ratios issued a year ago (June 21, 2017).

The Federal Reserve, Federal Deposit Insurance Corp. (FDIC), and the Office of the Comptroller of the Currency (OCC) jointly released the ratios used in compliance with section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. In addition to determining compliance with deposit production through branches, section 109 also also prohibits branches of banks controlled by out-of-state bank holding companies from operating primarily for the purpose of deposit production, the agencies said.

“Section 109 provides a process to test compliance with the statutory requirements,” the agencies said. “The first step in the process involves a loan-to-deposit ratio test that compares a bank’s statewide loan-to-deposit ratio to the host state loan-to-deposit ratio for banks in a particular state.”

A second step is conducted if a bank’s statewide loan-to-deposit ratio is less than one-half of the published ratio for that state or if data are not available at the bank to conduct the first step, the agencies stated. The second step requires the appropriate agency to determine whether the bank is reasonably helping to meet the credit needs of the communities served by the bank’s interstate branches.

A bank failing both steps is in violation of section 109 and is subject to sanctions by the appropriate agency, according to the agencies.

The agencies released the updated host state loan-to-deposit ratios with their joint announcement.

Agencies issue host state loan-to-deposit ratios

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