Ensuring Clarity on What’s Insured: FDIC Should Avoid Prescriptive Approach

Washington, D.C. – The FDIC’s proposal to modernize its sign and advertising rules is welcome, but a less prescriptive approach would allow banks to more effectively communicate to customers which bank products are FDIC-insured and which are not, the Bank Policy Institute and American Bankers Association said in a comment letter today. An overly prescriptive approach may undermine that goal.

Context:  FDIC-insured banks have long been required to post the FDIC logo in their home office and branch locations.  The FDIC proposed updates to its regulations regarding banks’ use of the FDIC’s name and logo in light of the advent of new banking channels such as mobile and digital banking since the regulations were last comprehensively updated, almost two decades ago. The proposal also clarifies the FDIC’s rules on misrepresentations of deposit insurance, requires banks to provide specific disclosure language when offering uninsured products, and requires banks to establish written policies and procedures relating to signage and advertising and monitoring third parties that provide deposit-related services to the bank or offer the bank’s deposit-related products and services. These clarifications come as nonbank fintechs are offering bank-like products, either on their own or through bank partnerships. They also follow a series of FDIC actions against crypto firms making false statements about deposit insurance coverage.

The challenge: While the FDIC’s proposed requirements rightly aim to prevent misleading or confusing customers about the insured status of banking products, certain aspects of the proposal are overly prescriptive, which may unfortunately make the customer experience more confusing. For example, the proposal would require banks to display the FDIC sign on landing dashboards for customers’ accounts, which could mislead the customer into thinking that all the accounts referenced via the dashboard — including non-deposit accounts, such as investment accounts — are FDIC-insured.

What BPI and ABA are saying: “Consumers need clarity on which financial products come with the benefit of FDIC insurance,” the associations said. “Today’s bank customers have more choices than ever on where to obtain financial products and services, and they should be armed with clear information to enable them to choose among products that best suit their banking needs – however, the prescriptive approach outlined in the FDIC’s proposal could make the customer experience more confusing than informative. Modernized FDIC rules should allow banks flexibility to provide clear and conspicuous disclosures that align with the modern ways that banks reach their customers.”

Our recommendations:

  • Proposed requirements related to monitoring third parties should be aligned with the inter-agency third-party risk management guidance and should cover only marketing materials and other public dissemination of information regarding the availability of FDIC deposit insurance.
  • The FDIC should provide insured banks with flexibility to implement signage requirements to reflect modern branch design and possible future evolution.
  • The FDIC should provide IDIs with flexibility to implement digital signage requirements to reflect the ways in which consumers interact digitally with their IDIs and to account for future evolution.
  • The proposed rule should be revised to accord with the well-established distinction between branches and non-branches.                               
  • The FDIC should amend the definition of “non-deposit product” to include crypto-assets.
  • If the FDIC proceeds with amending the rules as proposed, it should allow insured banks at least 18 months to implement the changes.


About Bank Policy Institute.

The Bank Policy Institute (BPI) is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.

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