|
[Main Tabs]
[Table of Contents - 4000]
[Index]
[Previous Page]
[Next Page]
[Search]
4000 - Advisory Opinions
Deposit Incentive Programs: Would the bank be Deemed "Deposit
Broker" or be Confined by Certain Interest Rate Limitations Under
Section 29 of the FDI Act
FDIC--94--37
July 19, 1994
Valerie J. Best, Counsel
Thank you for your letter dated July 15, 1994. You write that your
client, an unidentified federally chartered savings bank (the
"Bank"), intends to offer two deposit incentive programs. Under
the first program, Bank customers would be offered one of various forms
of bonuses for referring new depositors to the Bank. The bonus could be
in the form of an increased interest rate on either existing or future
deposits in the Bank, cash or merchandise. Under the second incentive
program, significant Bank depositors (e.g., depositors with
large accounts) would be provided incentives to encourage repeat
business. Such incentives likely would include slightly higher interest
rates than are otherwise offered on comparable deposit programs offered
by the Bank to members of the public generally, or merchandise.
Although not discussed in your letter, I assume that, like most
incentive programs, the cost of the incentive packages to the Bank is
relatively small.
You asked me to confirm that, with respect to the first incentive
program, customers receiving incentives to refer additional business to
the Bank would not be deemed to be deposit brokers under section 29 of
the Federal Deposit Insurance Act (the "FDI Act"). You also asked
me to confirm that the Bank would not be deemed to be a deposit broker
under either program. I agree that, under the circumstances described
in your letter, the Bank and the Bank's customers would not be
"deposit brokers," as that term is defined in the statute and
implementing regulations.
Section 29 of the FDI Act imposes certain interest rate limitations
on any depository institution that is not "well capitalized,"
however. 1
If the Bank is not well capitalized and therefore subject to such
interest rate limitations, I anticipate that the value of any
incentives paid by the Bank under the incentive programs would be
deemed to constitute additional interest payments for purposes of
calculating the interest paid under section 29(h).
You also write that, as to both deposit incentive programs, you
understand that such programs are permissible under applicable
provisions of the FDI Act and the Rules and Regulations of the FDIC
thereunder. 2
While it is true that premiums are not prohibited by
{{10-31-94 p.4889}}the FDI Act and the FDIC's Rules and
Regulations, it appears from your letter that the Bank's primary
Federal regulator is the Office of Thrift Supervision ("OTS"). I
therefore suggest that you contact staff at the OTS to determine
whether or not statutory or regulatory provisions enforced by the OTS
regulate the payment of premiums. You may also wish to discuss with OTS
staff what, if any, impact the Truth in Savings Act has on incentive
programs.
I trust this adequately responds to your inquiry. Please call me at
(202) 898-3812 if you have any
questions.
1The interest rate limitations applicable to "adequately
capitalized" depository institutions are discussed in FDIC Advisory
Opinions 93--18 and 93--19 (March 11, 1993). The interest rate
limitations applicable to "undercapitalized" depository
institutions are set forth at section 29(h) of the FDIA and 12 C.F.R.
337.6(b)(3)(ii). The terms "well capitalized," "adequately
capitalized," and "undercapitalized," have the same meaning as
provided under regulations implementing section 38 of the FDI Act. With
regard to depository institutions for which the primary Federal
regulator is the Office of Thrift Supervision, regulations defining
capital measures generally appear at 12 C.F.R. Part 565. Go Back to Text
2Premiums are the subject of section 329.103 of the FDIC's
Rules and Regulations (12 C.F.R. 329.103) (payments that are not deemed
to be interest). Go Back to Text
[Main Tabs]
[Table of Contents - 4000]
[Index]
[Previous Page]
[Next Page]
[Search]
|
