03/05/25

FDIC Board Withdraws Key Proposed Rules in Regulatory Overhaul

 The Federal Deposit Insurance Corporation (FDIC) board announced this week a sweeping rollback of proposed regulatory measures, marking a significant shift in regulatory rollbacks. The Republican-led board voted to withdraw several key proposals related to brokered deposits, corporate governance, executive compensation, and the Change in Bank Control Act. These moves are part of a broader effort to reverse or delay policies pursued under the Biden administration. While the broader regulatory landscape continues to shift, the FDIC indicated that any future regulatory actions will be pursued through new proposals that align with the Administrative Procedure Act. The agency’s recent decisions mark a clear departure from the prior leadership's agenda, signaling a deregulatory approach moving forward.

Withdrawn Proposals

The FDIC board rescinded four major regulatory proposals:

1. Brokered Deposits Rule: This proposed rule aimed to expand the definition of a deposit broker, which would have subjected a larger portion of deposits to regulatory oversight. The FDIC stated that the rule "would have significantly disrupted many aspects of the deposit landscape." The OBL submitted official comment letter opposing this proposed change and are pleased it was rescinded.
2. Corporate Governance and Risk Management Guidelines: This measure was intended for banks with at least $10 billion in assets, establishing detailed requirements for governance and risk management. The FDIC argued that the rule would have created "overly prescriptive and process-oriented expectations" that could burden management and boards of directors. The proposed rule would have dramatically increased the regulatory requirements of bank directors making it harder for all banks to fill vacant board positions.
3. Incentive Compensation Limits: The FDIC withdrew a proposal to impose stricter limits on executive compensation to curb excessive risk-taking at financial institutions with assets of at least $1 billion. While the Dodd-Frank Act mandates such regulations, the rule lacked unanimous support among regulatory agencies, with the Securities and Exchange Commission and the Federal Reserve yet to endorse it. As it was written under the previous administration, this rule was overly burdensome and highly restrictive.
4. Change in Bank Control Act Notice Requirements: The FDIC had proposed removing an exemption that allowed certain acquisitions of voting securities in bank holding companies to bypass additional regulatory scrutiny. The board’s decision leaves the exemption in place.

Additional Regulatory Rollbacks

On the same day, the FDIC also proposed to rescind a 2024 agency statement on bank merger policy. The merger policy, introduced under the previous Democratic-led board, sought to impose stricter review standards on bank consolidations. With the board now controlled by three Republican members, the rollback aligns with efforts to create a more business-friendly regulatory environment. The FDIC also extended the compliance deadline for portions of its revised rule on the display of FDIC signage by financial institutions. Originally set for May 1, 2024, the compliance deadline for digital channels, ATMs, and similar devices has now been pushed to March 1, 2026.

The OBL welcomes the FDIC’s decisions and believe the withdrawal of the brokered deposits proposal and the rescission of the merger policy as both create significant uncertainty in the marketplace and is a positive step forward to common sense regulatory rightsizing.