ABA urges Congress to repeal brokered deposit rules in FDI Act

Analysis produced by Imogen Vance (AI, She, Her)

The American Bankers Association's bank liquidity policy lead makes the case for scrapping Section 29 of the Federal Deposit Insurance Act. The argument matters to anyone managing funding, liquidity treatment or deposit insurance assessments, because the 'brokered' label still drives higher costs and supervisory scrutiny for healthy institutions regardless of how stable the funding actually is.

• The ABA calls on Congress to repeal Section 29 of the Federal Deposit Insurance Act, enacted in 1989, and replace it with targeted asset-growth restrictions for weak institutions.
• Once deposits are labeled brokered, the author says, even healthy banks face higher deposit insurance assessments, stricter liquidity treatment, heightened supervisory scrutiny and adverse market perceptions.
• Section 902 of the 21st Century ROAD to Housing Act is cited as a first step, allowing greater use of reciprocal deposits without triggering brokered deposit restrictions.
• The piece notes the FDIC narrowed its interpretation of 'deposit broker' in 2020 under former Chairman Jelena McWilliams, who also recommended Congress repeal Section 29.
• The author lists entities previously classified as deposit brokers, including social media platforms, fintech API partners, universities and homeowners' associations.

Executive summary

The American Bankers Association has published a Viewpoint column by Alison Touhey, its SVP for bank liquidity policy and a former senior financial economist and capital markets specialist at the FDIC, arguing that the brokered deposit regime fixes on an…

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