Proposal on rate caps for less-than-well-capitalized institutions detailed in FIL

The recent proposal to revise rules governing interest-rate restrictions applied to less-than-well-capitalized depository institutions is summarized in a Financial Institution Letter (FIL) sent Monday by the Federal Deposit Insurance Corp. (FDIC).

The proposed rule would amend the methodology for calculating the national rate and national rate cap for specific deposit products, the FIL notes. The national rate would be the weighted average of rates offered on a given deposit product by all reporting institutions, weighted by domestic deposit share.

As highlighted in the FIL:

  • The national rate cap applicable to less than well-capitalized institutions for particular products would be set at the higher of: (1) the 95th percentile of rates paid by insured depository institutions weighted by each institution’s share of total domestic deposits or (2) the proposed national rate (i.e., the weighted average) plus 75 basis points.
  • The proposed rule would also modify the current local rate cap calculation and process by allowing institutions that are less than well capitalized to offer up to 90% of the highest rate paid on a particular deposit product in the institution’s local market area.

The agency says it welcomes comments regarding the proposed approach as well as other alternative approaches discussed in the notice of proposed rulemaking, published Sept. 4 in the Federal Register.

Comments are due Nov. 4.


Reg lookup: Interest Rate Restrictions on Institutions That Are Less Than Well Capitalized