Investment Management partner Casey Jennings was quoted in an S&P Global article titled, “FDIC’s brokered deposit proposal expected to face industry pushback.”

“Banks with over $10 billion in total assets will face more regulatory consequences under the new rules,” said Casey Jennings. “The amount of brokered deposits is partly used to determine the assessment fees to the FDIC insurance fund. The more brokered deposits, the higher assessment fees.”

“Large banks are also subject to the liquidity coverage ratio requirements, which require them to hold more high-quality, liquid assets against brokered deposits, because of the assumption that those deposits are more likely to cause cash outflows over a 30-day stress period. Brokered deposits are not counted as a source of stable funding, so large banks have to find other funding to maintain the net stable funding ratio,” Jennings said.

“For small banks that are under $10 billion in total assets and well-capitalized, there are no major restrictions to use brokered deposits, but there is a pronounced regulatory stigma. A large number of brokered deposits makes examiners more cautionary about inadequate risk management,” Jennings said.

“From our understanding by talking to banks, their examiners really turn the screws on when it comes to high use of brokered deposits,” Jennings said.

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Casey J. Jennings

(202) 661-7166
jennings@sewkis.com

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