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FDIC – Deposit rate paid to insiders

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  • #31855
    Evelyn
    Participant

    Does the restriction in the Reg O statute 12 U.S.C. Sec. 376 – No member bank shall pay to any director, officer, attorney, or employee a greater rate of interest on the deposits of such director, officer, attorney, or employee than that paid to other depositors on similar deposits with such member bank – apply to FDIC banks (state-chartered, non-member bank)?

    #31860
    rcooper
    Keymaster

    12 USC 376 (https://www.law.cornell.edu/uscode/text/12/376): No member bank shall pay to any director, officer, attorney, or employee a greater rate of interest on the deposits of such director, officer, attorney, or employee than that paid to other depositors on similar deposits with such member bank.

    member bank
    (a) The terms “banks”, “national bank”, “national banking association”, “member bank”, “board”, “district”, and “reserve bank” shall have the meanings assigned to them in section 221 of this title .

    This would apply to the OCC since they would be considered a member bank under that definition. The FDIC released this in 1998 (https://www.fdic.gov/news/news/inactivefinancial/1998/fil9841a.html). It does say “inactive” in the webaddress, but the webpage does not indicate that. I would suggest confirming this with the FDIC before relying on it. And, of coure, it would be a fine to comply with the requirement as a best practice even if it isn’t technically applicable. Again, check with the FDIC to ensure there isn’t a more current information.

    “…While section 22(e) of the Federal Reserve Act (12 U.S.C. 376) generally limits a member bank’s authority to pay employees a greater rate of interest than the rate paid to other depositors on similar deposits, the FDIC is not aware of any current regulatory restrictions directly prohibiting a nonmember bank from doing so, assuming there were no implications of insider abuse or of evading certain limited regulatory requirements concerning executive compensation.”

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