Pub. 8 2018 Issue 2

9 ISSUE 2. 2018 providers, the leading reciprocal deposit placement network in the United States is operated by Promontory Interfinancial Network, LLC, which invented reciprocal deposits and offers two of the nation’s largest reciprocal deposit placement services: Insured Cash Sweep®, or ICS®, and CDARS®. The Economic Growth, Regulatory Relief, and Consumer Protection Act This new law recognizes something that many in the banking sector have long understood –reciprocal deposits behave as core deposits in that they are “sticky” (CDARS deposits reinvest at a rate of approximately 80 percent, for example), and that the institution accepting the deposit maintains the relationship with the depositor. 2 Specifically, the law amends section 29 of the Federal Deposit Insurance Act so that, subject to the definitions, terms, and conditions of the Act as amended: • If a bank is well capitalized and has a composite condition of outstanding or good (CAMELS 1 or 2), its reciprocal deposits up to the lesser of $5 billion or 20 percent of the bank’s total liabilities are no longer considered brokered. Reciprocal deposits over these amounts are allowed, but the incremental amount (overage) is treated as brokered. • If a bank drops below well capitalized, the bank no longer requires a waiver from the FDIC to continue accepting reciprocal deposits, so long as the bank does not receive an amount of reciprocal deposits that causes its total reciprocal deposits to exceed a specified previous average. As before, interest rate restrictions apply while the bank is less than well capitalized. Banks now have a much larger, approved source of stable deposits that can be tapped. This means banks can help even more customers—including businesses (large and small), nonprofits, municipal governments, financial advisers, and even individuals—to safeguard their funds, potentially at even higher levels. All at the same time attracting locally priced, large-dollar deposits, which can be used to reinvest in the bank’s community. Furthermore, banks can use reciprocal deposits to replace more expensive deposits, like routinely collateralized deposits that come with tracking burdens, and those from listing services (generally associated with wholesale pricing and no loyal or local customer relationship). w Making the Most of This New Opportunity Now is the time to act by taking advantage of this important change in banking law. Read more about the new law and about the nation’s largest, most well- known reciprocal deposit services by visiting promnetwork.com. For more information, contact Glenn Martin at gmartin@promnetwork.com. 1The Bank Executive Business Outlook Survey is a publication of Promontory Interfinancial Network, LLC. 2Promontory Interfinancial Network calculates the reinvestment rate as the per - centage of the aggregate balance of CDARS deposits that are reinvested through CDARS within 28 days of maturity.