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December 15, 2020

FDIC Gives Early Holiday Gift to Banks with Approval of Rules on ILCs and Brokered Deposits


Tuesday, Dec. 15, 2020

Contact: Pamela Russell at 202-618-6433 or


FDIC Gives Early Holiday Gift to Banks with Approval of Two Rules on 

Acquisition of Industrial Banks and Broader Access to Brokered Deposits 

Mainstreet Americans Get a Lump of Coal


Washington, D.C.  –  Stephen Hall, Legal Director and Securities Specialist, issued the following statement in response to the FDIC’s approval today of two rules that will benefit the banking industry but cause potential harm to Americans:

“This morning’s action by the FDIC is just another example of regulators pushing through rules that benefit industry over Mainstreet Americans. There is no public benefit associated with these two rules; however, there is a real concern that gifts to the banking industry will increase risks to the financial system and American taxpayers.

“One rule will facilitate the acquisition of industrial banks by commercial enterprises, violating the cardinal rule established almost 70 years ago that banking and commerce should remain separate. Those combinations cannot be adequately supervised, they pose instability risks, and they can even foster unfair competition. For these reasons, the FDIC itself imposed a moratorium on such acquisitions for years, yet it now sees fit to encourage rather than ban such conglomerations. It also appears that the FDIC made the final rule even worse than the proposal, giving commercial parents even more influence or control over their industrial banks.

“The other rule is also a gift to banks and not a measure that will protect the banking system or serve the public interest. That rule will make it easier for less than well-capitalized banks to accept ‘brokered deposits,’ an asset so fleeting that it earned the nickname ‘hot money.’ Banks—particularly struggling banks—may find them attractive because they allow for rapid balance sheet growth. But for precisely that reason, they’re risky because they can be withdrawn from the bank as quickly as they came in, triggering sudden instability. And here too, the FDIC never justified the risks. In fact, the rule will increase the threat of bank instability without conferring any real benefit since there are plenty of well-capitalized banks that can already accept brokered deposits. And here too, it seems that last minute changes to the proposed rule will significantly expand access to brokered deposits, even by less than well-capitalized banks.

“The FDIC was established to promote bank safety and soundness and protect the Deposit Insurance Fund, not to indulge the banking industry’s wish list. Unfortunately, the agency has betrayed its core mission again; this time twice in one day.”


Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit

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