These rate tables are associated with the FDIC's new rule on "Interest Rate Restrictions on Institutions That are Less Than Well Capitalized." (see FDIC's press release). Here's how the FDIC describes this new rule:
The final rule defines nationally prevailing deposit rates as a direct calculation of those national averages, as computed and published by the FDIC based on data available to it. Reliance on the Treasury yields in the regulation would be discontinued. In recognition of the blurring of local deposit market boundaries brought about by the Internet and other innovations, the final rule also establishes a presumption that locally prevailing deposit rates equal the national rates published by the FDIC. This presumption could be overturned by evidence presented by banks to the FDIC.
The rule applies only to the small minority of banks that are less than well capitalized. As of first quarter 2009, there were 248 banks that reported being less than well capitalized, out of more than 8,200 banks nationwide.
The rule is effective January 1, 2010. Effective immediately, the FDIC will regularly publish national rates and caps, and permit institutions that are less than well capitalized to avail themselves of these rates as a safe harbor for complying with the statutory interest rate restrictions.
According to the FDIC, the rule would only apply to 248 of the 8,200 bank that reported being less than well capitalized (as of Q1 2009). However, it could apply to more banks. The CEO of Libertad Bank provided comments on this new rule earlier this year. You can read his comments here. According to the CEO, his bank is subject to these rate restrictions even though his bank is well capitalized:
I am an executive of a financial institution that is currently subject to Part 337.6 rate restrictions. While the institution I work for has capital ratios that would easily classify the institution as well capitalized if measured by those ratios, the institution previously consented to a written agreement with the FDIC that included a capital maintenance provision, and it is therefore classified as 'adequately capitalized' regardless of its capital ratios, and is therefore subject to Part 337.6 rate restrictions.
I also wonder if other banks may be pressured to lower rates in a way that Ally Bank is being pressured by the ABA (see post).
The Libertad Bank CEO provides many details about the problems of these national rate caps. The average rates are too simplistic. There's not only the issue of these not reflecting internet rates, but also the issue of odd terms. Here's how the CEO describes the issue of odd terms:
When the Law and Regulations were originally contemplated, odd rate maturities were the exception not the rule. Today most financial institutions offer below market interest rates on standard term/maturity fixed-rate time deposits, while offering much more attractive interest rates on odd-term time deposits. Financial institutions do this to match their funding to their liquidity needs and projections, but also as a marketing tactic to make it difficult to directly compare one institution’s time-deposit offerings to another institution’s (and in this case making it difficult, if not impossible, for both banks and the FDIC to use simple averages calculated from ‘standard term maturity’ time deposit data to determine prevailing market interest rates).
There's also the issue of rates related to reward checking accounts. The tables only include Interest Checking, and as you might expect, the average rate is very low. There's no inclusion of reward checking accounts, and the Libertad CEO describes this issue on page 10 of his comments.
If you want to give your opinions on this rule, I included contact information in my ABA-letter post.
Thanks to the reader who emailed me the link to this FDIC rate table.