FDIC Moves To Update Custodial Deposit Rules In The Wake Of Synapse Collapse
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The Federal Deposit Insurance Corporation proposed a new rule on Tuesday to enhance recordkeeping requirements for banks working with fintech companies. The rule follows the collapse of Synapse, which left millions in customer funds frozen. The regulator stated that the new regulation aims to ensure banks can quickly access customer funds even if a fintech partner fails.
Earlier this year, Synapse, a BaaS firm, collapsed after a disagreement with its banking partner, Evolve Bank & Trust. This left Synapse clients, including Yotta and Copper, unable to reach their funds.
According to the update, the proposed rule would mandate that banks keep detailed records of each fintech customer’s funds. This includes reconciling individual accounts daily to avoid confusion about which funds belong to which customers. The FDIC revealed that this change will help banks determine deposit ownership more accurately and manage funds better if a fintech partner collapses.
The New Recordkeeping Rule Aims To Improve Transparency And Accountability
Martin Gruenberg, the Federal Deposit Insurance Corporation’s Chairman, noted that this rule is crucial for improving transparency and accountability. He added that it will enhance the regulator’s ability to assess insurance claims and ensure compliance with anti-money laundering laws. Gruenberg stated that the rule will also aid in countering the financing of terrorism by improving recordkeeping.
The new rule will require banks to follow these updated standards. The Federal Deposit Insurance Corporation said these standards will be monitored by the main federal regulator that oversees banks. It noted that after the rule is proposed, there will be a 60-day period during which the public can give their opinions and feedback about the rule.
The Federal Deposit Insurance Corporation board approved a new policy update on Tuesday to tighten scrutiny on bank mergers. The regulator said the measure, passed by a 3-2 vote, requires banks to provide more detailed information about proposed mergers.
FDIC Committed To Considering More Factors When Evaluating Competitive Impacts
Emphasizing its initiative to tighten security, the Federal Deposit Insurance Corporation said it will now consider factors beyond deposit concentrations when evaluating competitive impacts. These may include small business and residential loan origination.
Previously, the regulator assessed competition mainly by looking at customer deposit locations. The updated rule aims to ensure that mergers lead to institutions that benefit consumers and present lower risks. It adds stricter reviews for mergers, resulting in institutions with $100 billion or more in assets.
According to the regulator, the new rule replaces a measure from 2008 and aligns with a 2021 executive order by President Joe Biden. The order emphasized the need for greater scrutiny of competition across different industries.
The Acting Comptroller of the Currency, Michael Hsu, noted that the new policy will provide clearer guidelines for banks and improve their chances of gaining regulatory approval for mergers.
Hsu stated that the updated rules will act as benchmarks for evaluating merger transactions. He added that the policy changes are intended to offer banks better insight into regulatory expectations and enhance the overall approval process.
