The Nose of the Camel?

At FDIC’s December meeting, the Board approved an updated regulation relating to interest rate limits on banks that are less than well capitalized.

The changes are intended to provide flexibility for institutions subject to the interest rate restrictions and ensures that those institutions will be able to compete for deposits regardless of the interest rate environment.

One way this flexibility is enhanced according the explanatory Fact Sheet is:

MORE COMPREHENSIVE NATIONAL RATE – The final rule defines the National Rate to include credit union rates for the first time.

  • “National Rate” is defined as the weighted average of rates paid by all IDIs and credit unions on a given deposit product, for which data are available, where the weights are each institution’s market share of domestic deposits.

The Level Playing Field

Is this what bankers mean by “a level playing field?” To implement this rule, the FDIC camel must poke its nose into co-ops’ tent to track credit union rates on “given deposit products.” Be alert for more “leveling” activities in the future.

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