Statement clarifies how some sweep deposits must be reported as ‘brokered’

Deposits swept from broker dealers with a primary purpose exception (PPE) to unaffiliated insured depository institutions (IDIs) must be reported as “brokered” if there are any additional third parties involved that qualify as a deposit broker, according to a statement issued Friday by the federal insurer of bank deposits.

The statement, the Federal Deposit Insurance Corp. (FDIC) said, was issued as a reminder. It also refers to a new question and answer updating the Banker Resource Center Brokered Deposits page on the agency’s website.

“Broker dealers placing deposits at IDIs not affiliated with the broker dealers have filed notices for the 25 Percent Test PPE indicating that additional third parties are involved in their deposit placement arrangements,” the statement reads. “The FDIC has reviewed agreements between certain broker dealers and the additional third parties designated in the PPE notice filings. Under these agreements, the additional third parties’ involvement was characterized in a variety of ways, including as administrative services. Based on this review, the FDIC has found that the additional third parties are engaging in facilitating the placement of deposits,9 for example by engaging in matchmaking activities,10 which meet the deposit broker definition.”

The statement acknowledges that an IDI may not have a direct relationship with an additional third-party providing services to a broker dealer with a PPE. “However, when reporting sweep deposits, it is the IDI’s responsibility to file accurate Call Report data, and it therefore may be necessary for the IDI to review the agreements between the broker dealer and any additional third party to evaluate and determine whether the additional third party is facilitating the placement of deposits, including by engaging in matchmaking activities,” the statement notes.

The statement also concedes that IDIs, after good faith efforts, may not have been reporting certain deposits as brokered on their call reports due to a misunderstanding of how the facilitation aspect of the deposit broker definition applies when additional third parties are involved.

“This Statement intends to address this misunderstanding by reminding IDIs how additional third parties may satisfy the deposit broker definition,” the statement notes. “Such IDIs may, after a reassessment of additional third party involvement, determine that certain deposits previously reported as non-brokered should be reported as brokered. In these cases, the FDIC will not require such IDIs to refile Call Reports that predate the issuance of this Statement. However, IDIs are encouraged to consult with their accountants and attorneys to discuss whether refiling of Call Reports may be appropriate and whether other regulatory filings may be impacted.”

Statement of the Federal Deposit Insurance Corporation Regarding Reporting of Sweep Deposits on Call Reports