April 10, 2020

Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street NW
Washington, DC 20429

Re: SIFMA Comment on Proposal Revising Brokered Deposits Restrictions (RIN 3064-AE94)

Dear Sirs and Madams:

The Securities Industry and Financial Markets Association (“SIFMA”)1 appreciates the opportunity to comment on the proposal by the Federal Deposit Insurance Corporation (the “FDIC”) to revise its regulations implementing section 29 of the Federal Deposit Insurance Act (“FDI Act”), which imposes restrictions on the ability of insured depository institutions (“IDIs”) to accept brokered deposits, and
defines the scope of products and parties that constitute brokered deposits and deposit brokers, respectively (the “Proposal”).2

SIFMA supports the FDIC’s efforts to modernize its regulatory framework for brokered deposits by providing greater clarity and certainty regarding the types of products that constitute brokered deposits. Consistent with SIFMA’s membership and organizational focus, our comments in this this letter are focused on the Proposal’s application to securities broker-dealers and their brokerage customers. Broker-dealers frequently offer their customers products that involve the placement of deposits at IDIs, such as brokerage accounts that “sweep” customers’ uninvested cash balances into deposit accounts at an IDI. These arrangements reduce the level of risk in the customer’s portfolio, and also reduce risk to IDIs by providing an additional source of funding that is qualitatively safer and more stable than the types of “hot money” deposits that Congress intended to address with section 29 of the FDI Act. When deposits from brokerage customers are deemed to be brokered deposits under the FDIC’s regulations, however, IDIs may be limited in their ability to accept these funds, or may pay lower rates of interest to compensate for higher deposit insurance assessments, which in turn may reduce the customer’s return, undercut a stable source of deposit funding for IDIs, and discourage the allocation of excess customer cash to insured deposits, which are risk-free assets.