cover letter custodian example

Written Samples

15 sample cover letters for custodian position.

Are you looking to land a job as a custodian but unsure how to craft a compelling cover letter?

Look no further!

Sample Cover Letters for Custodian Position

In this article, we present 15 sample cover letters tailored specifically for custodian positions.

These examples showcase various approaches and highlight the key skills and experiences that will make you stand out from the competition.

Whether you are a seasoned professional or just starting your career in the custodial field, you will find inspiration and guidance to create a winning cover letter that will increase your chances of securing an interview.

Sample Cover Letter One

Subject: Application for Custodian Position – [Your Name]

Dear Hiring Manager,

I am writing to express my strong interest in the custodian position at [Company Name]. With three years of experience in janitorial services and a proven track record of maintaining clean and orderly facilities, I am confident in my ability to contribute to your team’s success.

In my current role at [Current Company], I have consistently demonstrated a keen eye for detail and a commitment to ensuring a safe and hygienic environment. My responsibilities include cleaning and sanitizing restrooms, offices, and common areas, as well as performing minor repairs and maintenance tasks. I take pride in my work and always strive to exceed expectations.

I am a reliable and hardworking individual who thrives in a team setting. I possess excellent time management skills and can prioritize tasks effectively to meet deadlines. Additionally, I am comfortable working independently and can be trusted to carry out my duties with minimal supervision.

I am excited about the opportunity to bring my skills and experience to [Company Name] and contribute to maintaining a clean and welcoming environment for your employees and visitors. Thank you for considering my application. I look forward to the possibility of discussing my qualifications further in an interview.

[Your Name]

[Contact Information]

Sample Cover Letter Two

Subject: Custodian Position Application – [Your Name]

Dear [Hiring Manager’s Name],

I am pleased to submit my application for the custodian position at [Company Name]. As a detail-oriented and dedicated professional with five years of experience in the custodial industry, I am well-equipped to handle the responsibilities outlined in the job description.

Throughout my career, I have honed my skills in maintaining clean and orderly environments in various settings, including office buildings, schools, and healthcare facilities. I have a thorough understanding of proper cleaning techniques, safety protocols, and the use of industrial cleaning equipment. My experience has taught me the importance of efficiency, attention to detail, and the ability to adapt to changing priorities.

In my previous role at [Previous Company], I received consistent praise from supervisors and clients for my exceptional work ethic and positive attitude. I take pride in my ability to collaborate with team members and communicate effectively with individuals at all levels of an organization. I am also proactive in identifying and addressing potential issues before they escalate, ensuring a consistently high standard of cleanliness.

I am excited about the prospect of joining [Company Name] and contributing to your mission of providing a clean and welcoming environment. I am confident that my skills, experience, and dedication make me an excellent fit for this position.

Thank you for your time and consideration. I look forward to the opportunity to discuss my qualifications in further detail.

Best regards,

Sample Cover Letter Three

Subject: Custodian Position – [Your Name]

I am writing to apply for the custodian position at [Company Name]. As a highly motivated and reliable individual with a strong commitment to maintaining clean and orderly environments, I am confident in my ability to exceed your expectations.

Although I am new to the custodial field, I possess a solid foundation of skills that are transferable to this role. In my previous position as a retail sales associate, I demonstrated a keen eye for detail and a commitment to maintaining a clean and organized sales floor. I consistently received positive feedback from managers and customers alike for my strong work ethic and ability to go above and beyond in ensuring customer satisfaction.

I am a quick learner and am eager to expand my knowledge and skills in the custodial industry. I am comfortable working independently and can follow instructions and procedures with accuracy and efficiency. Additionally, I am a team player and thrive in collaborative environments, always ready to lend a helping hand to my colleagues.

I am excited about the opportunity to bring my enthusiasm, dedication, and strong work ethic to [Company Name]. I am confident that my transferable skills and eagerness to learn make me a strong candidate for this position.

Thank you for considering my application. I look forward to the chance to discuss my qualifications in more detail and learn more about how I can contribute to your organization.

Sample Cover Letter Four

Subject: Application for Custodian Role – [Your Name]

I am writing to express my strong interest in the custodian position at [Company Name]. With over eight years of experience in the custodial industry and a proven track record of maintaining clean, safe, and inviting environments, I am confident in my ability to make a significant contribution to your team.

Throughout my career, I have demonstrated a deep commitment to providing exceptional custodial services in various settings, including educational institutions, healthcare facilities, and corporate offices. I have a thorough understanding of industry best practices, safety regulations, and the proper use of cleaning equipment and products. My attention to detail, strong work ethic, and ability to prioritize tasks have consistently earned me recognition from supervisors and clients alike.

In my current role at [Current Company], I have taken on additional responsibilities, such as training new team members and implementing more efficient cleaning processes. I am proud to have played a key role in improving overall cleanliness and customer satisfaction ratings. I am confident that my leadership skills, problem-solving abilities, and dedication to continuous improvement will be valuable assets to your organization.

I am excited about the opportunity to bring my expertise and passion for excellence to [Company Name]. I am committed to maintaining the highest standards of cleanliness and contributing to a positive and welcoming environment for your employees, customers, and visitors.

Thank you for your consideration. I look forward to the opportunity to discuss my qualifications in more detail and learn more about how I can contribute to your organization’s success.

Sample Cover Letter Five

I am excited to apply for the custodian position at [Company Name]. As a reliable and hardworking individual with three years of experience in the custodial field, I am confident in my ability to maintain a clean, safe, and welcoming environment for your organization.

In my current role at [Current Company], I have consistently demonstrated a strong work ethic and a commitment to excellence. My responsibilities include cleaning and sanitizing restrooms, offices, and common areas, as well as restocking supplies and performing minor maintenance tasks. I take pride in my ability to pay close attention to detail and ensure that all areas are maintained to the highest standards of cleanliness and hygiene.

I am a team player and thrive in collaborative environments. I have excellent communication skills and can effectively interact with colleagues, supervisors, and customers. I am also comfortable working independently and can be trusted to carry out my duties with minimal supervision.

In addition to my custodial experience, I have a strong background in customer service. I understand the importance of creating a positive and inviting atmosphere for all who enter the building. I am always willing to go above and beyond to ensure that the needs of employees and visitors are met.

I am excited about the opportunity to bring my skills, experience, and enthusiasm to [Company Name]. I am confident that I can make a valuable contribution to your team and help maintain a clean and welcoming environment.

Thank you for considering my application. I look forward to the possibility of discussing my qualifications in more detail.

Sample Cover Letter Six

I am writing to express my strong interest in the custodian position at [Company Name]. With five years of experience in the custodial industry and a proven track record of maintaining clean, safe, and orderly environments, I am confident in my ability to make a valuable contribution to your team.

Throughout my career, I have demonstrated a deep commitment to providing exceptional custodial services in various settings, including schools, healthcare facilities, and office buildings. I have a thorough understanding of proper cleaning techniques, safety protocols, and the use of industrial cleaning equipment. My attention to detail, strong work ethic, and ability to prioritize tasks have consistently earned me recognition from supervisors and clients alike.

In my previous role at [Previous Company], I took on additional responsibilities, such as training new team members and implementing more efficient cleaning processes. I am proud to have played a key role in improving overall cleanliness and customer satisfaction ratings. I am confident that my leadership skills, problem-solving abilities, and dedication to continuous improvement will be valuable assets to your organization.

Sample Cover Letter Seven

I am pleased to submit my application for the custodian position at [Company Name]. As a detail-oriented and hardworking individual with two years of experience in the custodial field, I am confident in my ability to maintain a clean, safe, and inviting environment for your organization.

I am a quick learner and am always eager to expand my knowledge and skills in the custodial industry. I am comfortable working independently and can follow instructions and procedures with accuracy and efficiency. Additionally, I am a team player and thrive in collaborative environments, always ready to lend a helping hand to my colleagues.

In addition to my custodial experience, I have a strong background in customer service. I understand the importance of creating a positive and welcoming atmosphere for all who enter the building. I am always willing to go above and beyond to ensure that the needs of employees and visitors are met.

I am excited about the opportunity to bring my enthusiasm, dedication, and strong work ethic to [Company Name]. I am confident that my skills and experience make me a strong candidate for this position.

Sample Cover Letter Eight

I am writing to express my strong interest in the custodian position at [Company Name]. With seven years of experience in the custodial industry and a proven track record of maintaining clean, safe, and inviting environments, I am confident in my ability to make a significant contribution to your team.

Sample Cover Letter Nine

I am excited to apply for the custodian position at [Company Name]. As a reliable and hardworking individual with four years of experience in the custodial field, I am confident in my ability to maintain a clean, safe, and welcoming environment for your organization.

Sample Cover Letter Ten

I am writing to express my strong interest in the custodian position at [Company Name]. With six years of experience in the custodial industry and a proven track record of maintaining clean, safe, and orderly environments, I am confident in my ability to make a valuable contribution to your team.

Sample Cover Letter Eleven

I am pleased to submit my application for the custodian position at [Company Name]. As a detail-oriented and hardworking individual with three years of experience in the custodial field, I am confident in my ability to maintain a clean, safe, and inviting environment for your organization.

Sample Cover Letter Twelve

I am writing to express my strong interest in the custodian position at [Company Name]. With eight years of experience in the custodial industry and a proven track record of maintaining clean, safe, and inviting environments, I am confident in my ability to make a significant contribution to your team.

Sample Cover Letter Thirteen

I am excited to apply for the custodian position at [Company Name]. As a reliable and hardworking individual with five years of experience in the custodial field, I am confident in my ability to maintain a clean, safe, and welcoming environment for your organization.

Sample Cover Letter Fourteen

I am writing to express my strong interest in the custodian position at [Company Name]. With seven years of experience in the custodial industry and a proven track record of maintaining clean, safe, and orderly environments, I am confident in my ability to make a valuable contribution to your team.

Sample Cover Letter Fifteen

I am pleased to submit my application for the custodian position at [Company Name]. As a detail-oriented and hardworking individual with four years of experience in the custodial field, I am confident in my ability to maintain a clean, safe, and inviting environment for your organization.

By tailoring your cover letter to highlight your relevant skills, experience, and passion for the custodial field, you can significantly increase your chances of standing out from other applicants and securing an interview.

Use these sample cover letters as a starting point, and personalize them to reflect your unique qualifications and the specific requirements of the position you are applying for.

With a compelling cover letter and a strong resume, you will be well on your way to landing your dream job as a custodian.

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Cover Letter Examples Custodian Cover Letter

Custodian Cover Letter Sample

Your resume should have a fantastic custodian cover letter to match it. Use our cover letter writing tips and custodian cover letter sample to produce a cover letter that hiring managers will love.

Want an aesthetic cover letter? Select a new design from our collection of cover letter templates .

Custodian Resume & Related Cover Letters

Custodian Cover Letter Template

Average custodian salaries in the us, how to write a custodian cover letter.

Make sure your cover letter is formatted well to give it a professional appearance.

Copy-paste Custodian Cover Letter (Text Format)

FIRST AND LAST NAME

Email: [email protected]

Phone: (123) 456-7891

Address: Street, City, State

LinkedIn: linkedin.com/in/yourprofile

[Today’s Date]

[Hiring Manager’s Name] [Company Address] [Company City, State xxxxx] [(xxx) xxx-xxxx] [[email protected]]

Dear [Mr./Ms./Mx.] [Manager’s Name],

My name is [Custodian Applicant] and I’m delighted to apply for the position of Head Custodian at Laketown University that I found on Indeed.com. With my reliable and respectful nature, perfect attendance record, and 15+ years of custodial experience, I believe I’m the ideal candidate for the role. I’m fully committed to creating a sanitary, safe, and organized environment at Laketown University.

I’m currently the Head Custodian at Harmony Shopping Mall, where I’ve been rewarded annually for my exceptional performance. Foot traffic at this mall reaches over 2 million a month, so following safety and sanitary measures are essential. I manage a team of 7 custodial staff and create a cleaning and maintenance schedule for them every month using Microsoft Excel. I also perform biweekly inspections of the entire mall area for which I’ve written over 1000+ reports for the facility management team. Working at Harmony has been a fantastic experience, and I hope to commit myself in the same way at [Company Name].

At Wandi High School, my daily tasks included trash removal in 55+ rooms, 4 large hallways, and maintaining 20+ classrooms. I’ve learned the importance of working fast and paying attention to even the smallest of details. As a result, I consistently cleaned ahead of schedule and used the extra time to complete other maintenance work, including painting, plumbing, and light carpentry work.

I’d love to have the chance to speak more about this role with you through an interview. My phone number is (xxx-xxx-xxxx), and my email address is [email protected]. Thank you for your time and consideration.

The following table includes information from O*NET Resource Center by the U.S. Department of Labor, Employment and Training Administration (USDOL/ETA). Used under the CC BY 4.0 license. The data is presented based on the top states in the USA.

Average custodian annual salaries by state

Learn how to write an excellent custodian cover letter that will impress hiring managers and help you land interviews using these three actionable tips.

1. Refer to the job posting on your cover letter

Custodians are essential workers and are always in demand. Stay ahead of the competition by expertly tailoring your cover letter with the following steps:

1. Include the hiring manager’s information: Address your cover letter directly to the hiring manager by name. You can find out their name through a quick Google search or by calling and asking the company.

At the top of your cover letter, include:

• the hiring manager’s name
• the company’s address
• the phone number
• the email address

Adding these details at the start of your custodial cover letter shows that you’re thorough.

2. Explain what you can do for the company: Write a cover letter introduction that not only highlights your skills but explains your purpose for applying.

Frame your purpose positively by presenting yourself as a capable worker. Always mention how you can help the company, rather than how it can benefit you. Have a look at an extract from our custodian cover letter introduction:

My name is [Custodian Applicant] and I’m delighted to apply for the position of Head Custodian at Laketown University that I found on Indeed.com. With my reliable and respectful nature, perfect attendance record, and 15+ years of custodial experience, I believe I’m the ideal candidate for the role. I’m fully committed to creating a sanitary, safe, and organized environment at Laketown University.

3. Always relate your experiences back to the job position: In your body paragraphs, describe your work history and key achievements , and then mention how these experiences will help you in your new role.

Employers use applicant tracking systems (ATS) to filter out applications, so use job-related keywords from their ad and include them in your custodial cover letter.

Showing that you understand the job requirements of your new employer and have transferable skills will make you stand out. Here’s an example from our custodial cover letter:

I manage a team of 7 custodial staff and create a cleaning and maintenance schedule for them every month using Microsoft Excel. I also perform biweekly inspections of the entire mall area for which I’ve written over 1000+ reports for the facility management team. Working at Harmony has been a fantastic experience, and I hope to commit myself in the same way at Laketown University.

2. Follow the correct cover letter format

Custodians need to pay attention to details when working. The formatting of your cover letter should show that you pay attention to detail.

Keep your cover letter on one page : Employers have limited time, so write a one-page cover letter that illustrates your most relevant skills .

Choose an appropriate font : Use a standard cover letter font like Times New Roman, Arial, or Verdana that matches your resume template and looks professional. Keep your font size between 10.5 and 12 points so employers can easily read your cover letter.

Save your cover letter as a PDF : Always save your resume and cover letter as PDFs . Using PDFs preserves the original formatting and ensures that no one can modify your work.

3. Finish strong with a compelling call to action

Show initiative and confidence by ending your cover letter with a call to action (CTA). A CTA politely requests an interview and invites the employer to contact you.

Include your phone number and email address at the end of your custodian cover letter so that the hiring manager can easily find this information. Make sure your contact details match the details in your resume and cover letter header .

Finally, thank the hiring manager for reading your cover letter and end with an appropriate sign-off like “Sincerely” and your name. Here’s an example from our custodian cover letter sample:

I’d love to have the chance to speak more about this role with you through an interview. My phone number is (xxx-xxx-xxxx), and my email address is [email protected]. Thank you for your time and consideration. Sincerely, Your Name

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Custodian cover letter example

Cover letter header

Cover letter greeting, cover letter introduction, cover letter middle part (body), how to end a custodian cover letter (conclusion & sign-off).

The word custodian means someone who guards, protects, or maintains property. That means a custodian position requires more than simply cleaning up. A custodian cover letter that won’t get swept into the circular file must convey your sense of responsibility to the buildings and grounds you work.

Within this custodian cover letter guide, you will learn how to craft an application letter that will get you that interview. Keep reading for tips and hints on:

• The structure of a cover letter and the paragraphs the cover letter should include
• Making the most of the space you have in each part of your cover letter (header, greeting, intro, body and conclusion)
• The content of your cover letter
• How to avoid common errors when writing your custodian cover letter.

Resume.io is an expert resource for job seekers in all fields and at all levels of their careers. Check out our collection of 180+ adaptable cover letter examples and writing guides!

Best format for a custodian cover letter

A blank page in which to convince an employer to offer you an interview can be daunting, but never fear because structure will make writing your custodian cover letter much easier. So Before you launch into writing, you need to know what to include in your application document.

The format of a custodian cover letter should contain the following elements:

• The cover letter header
• The greeting / salutation
• The cover letter intro
• The middle paragraphs (body of the letter)
• The ending paragraph of your cover letter (conclusion and call-to-action)

Resume.io offers a general overview on writing cover letters, the comprehensive cover letter guide. Specific advice on optimizing each custodian cover letter paragraph and section can be found below.

This custodian cover letter example will give you an outline for writing your own cover letter:

Dear Mr. Purdew,

After working as a custodian for a range of corporate clients and being responsible for the maintenance of office premises, I am interested in pursuing the custodian position at JB Retailers. While much of the work is at night (which suits my personal circumstances), the changeover as people come into the office is my favorite part of the shift.

I work hard to provide my clients with a clean and fully functioning workplace, as well as dealing with all manner of light maintenance tasks. I am successful when nothing gets in the way of clients doing their best work in the office. Coming in to a freshly polished desk, squeaky-clean meeting room, and fully stocked fridge is a great way to start the working day.

I enjoy working for an office services company as this means that I have a wide variety of work and I can build on my experience. My work over the past two years has included:

• Kitchens and dining areas: cleaning and sanitizing surfaces and equipment
• Meeting rooms & offices: Cleaning duties, managing stationary, tech maintenance
• Floor care & windows: Cleaning, waxing & vacuuming floors, washing windows
• Recycling management: Managing complex recycling requirements

Alongside my custodian duties, I have experience in managing the ongoing repair and maintenance of basic office technology. I have worked with corporate procurement teams to ensure that obsolete tech is replaced in a timely fashion. Every custodian is responsible for the smooth functioning of the office environment.

Having worked for over 30+ companies on an outsourced basis, I have a wealth of references should you wish to investigate further. I look forward to hearing about the needs of your clients and hope that I might be a reliable and skilled addition to your team.

Martin Hillersdon

Neatness is of the utmost importance in your line of work, so start off with a clean custodian cover letter header. The main point of the header is to clearly state your name and contact information so when a hiring manager wants to schedule your interview, they know just how to reach you. 

Secondarily, visuals are powerful, so make sure your header leaves the right impression. Legibility comes before cute fonts or overly bright colors. Align the style of your cover letter header with your resume design to create a complete application package.

Get professional with your contact info

Playing around with fun email addresses is common, but is not the way to make a great impression on an employer. Do yourself a favor: If you don’t already, get a Gmail, Outlook or other email account and use one of the following formats:

• [email protected]

Any variation on that theme works. If you have a common name, try adding a middle initial or one or two digits on the end.

The greeting of your custodian cover letter sets the tone for the rest of your content. The standard “Dear [Mr./Ms./Mrs./Dr. Last name]” should be your go-to greeting because it sounds professional, but friendly. Be aware, however, that you need to know the correct honorific to use.

Your best bet, especially if you are unsure of who to address or how, is a quick call to the company. The extra effort may distinguish you from other applicants who did not make that call. Try to avoid the old-fashioned and stiff “To Whom It May Concern.” Instead, opt for “Dear Hiring Manager” if you absolutely cannot find the correct person to address.

There are times when it may be appropriate to start off with “Hello [name of hiring manager].” For instance, if you have a recommendation from a current employee and know that the company is a casual one or if you are already acquainted with the hiring manager.

The first paragraph of your custodian cover letter serves to introduce you to your prospective employer and to give them a preview of what the rest of your letter will contain. Start off strong with a sentence that offers an overview of your work history and a positive description about you.

If you are entering the job market for the first time, use examples from your academic experience to show that you are reliable and trustworthy. Also consider any volunteer activity you have that demonstrates work skills. Remember that employers hiring for entry-level jobs understand that applicants will not have a lot of related work experience. They are looking for the qualities that will make you a good employee.

If you do have work experience, choose an achievement that most closely relates to the custodial position you seek.

The body, or middle part, of your custodian cover letter comprises two or three paragraphs that expand on your introduction. The key to this section is finding the right balance between professionalism and personality.

Employers want to know that you will be able to integrate into the custodial team, so choose an anecdote that illustrates how you worked with others in a previous position, on a committee, or on a school project. Clearly explain your role and achievement.

Mind the ATS

While you may think of the Applicant Tracking System that manages your application for HR departments as a concern for your resume, it may also take keywords in your cover letter into account.

Increase your chances of making it past the ATS by including relevant keywords and phrases in your cover letter as well as your resume. This step also signals to employers that you understand what they are looking for in a custodian.

If you have held custodian positions before, pick one or two examples that best relate to the job you are applying for and detail your main responsibilities. Even better, if you implemented a process that saved time or money or expanded your skills while on the job, write about those successes. Highlight any skills you have that could add value to your employment, such as repair or skilled trades knowledge.

It’s also a good idea to tell your prospective employer why you want to work at their company specifically.

You’ve done the main work in the body of your custodian cover letter. Your conclusion is time to add the finishing touches. The first sentence or two should restate your qualifications so they are fresh in your prospective employer’s mind. 

Then, remind them of the point of your letter: You want an interview! Politely suggest that you would love to discuss the opportunity further at their earliest convenience. Finally, sign off with “Sincerely” or “Regards” and your name.

The cover letter example text below shows one method of asking for an interview.

Avoiding basic mistakes in a custodian cover letter

• Don’t get too casual. Every job is a professional job, so keep your cover letter business-like. While you should reveal a bit of your personality to show that you will make a great team member, don’t stray into the irrelevant.
• Keep your stories short. The best work examples to use in your custodian cover letter take only one or two sentences to explain. Hiring managers are busy people, so you need to get your message across quickly.
• Avoid using the same cover letter over and over. Every job is different, so every cover letter should be, too.
• Edit to keep out typos and other errors. Use spellcheck and grammar tools. Then have a friend or colleague look over your letter. Why take the chance of missing out on an opportunity because of a tiny mistake?
• Poor formatting. The layout and design doesn’t need to be complicated, but a simple, organized cover letter template can help.

Key takeaways

• Even if you have no work experience, you can write a custodian cover letter that shows you are an excellent candidate.
• Carefully read the job description and craft your letter to address the needs of each employer instead of sending on generic letters.
• Present a professional visual image with your custodian cover letter as well as your resume.
• Check out our adaptable custodian cover letter sample to begin creating a great layout.

If you’re looking for additional inspiration for cover letter writing, you can check out our related maintenance and repair cover letter examples:

• Housekeeping cover letter sample
• Maintenance and repair cover letter sample
• Construction cover letter sample
• Electrician cover letter example
• Mechanic cover letter sample

Free professionally designed templates

Custodian Cover Letter Guide With Samples & Expert Advice

Craft the perfect Custodian Cover Letter—Get Tips, Examples, and Expert Advice To Kickstart Your Career. Let's Go!

Shaoni Gupta

Read more posts by this author.

Crafting the perfect custodian cover letter can make all the difference in landing your next job.

As a custodian, you play a crucial role in maintaining cleanliness and order, ensuring that environments are safe and pleasant for everyone.

This blog will guide you through the essential elements of a compelling custodian cover letter irrespective of your experience.

Custodian Cover Letter Template for Freshers

[Henry William] [Abc lane] [LA, California, Zip Code] [[email protected]] [123 456 789]

Hiring Manager [Xyz Company] [Company Address] [LA, California, Zip Code]

Dear Hiring Manager,

I'm writing to [Company Name] to express interest in the Custodian role. As a recent graduate with practical experience gained from internships and pertinent certificates, I'm excited to join your team and keep things tidy, safe, and well-organized.

I gained a lot of experience in teamwork, maintenance, and cleaning during my coursework and internships. I have an excellent attention to detail and a strong commitment to efficiency, so I guarantee a high level of cleanliness. My main credentials are listed below:

Certifications:

OSHA Safety Certificate

Certified Custodial Technician (CCT)

First Aid and CPR Certification

Internships:

Custodial Intern at [School/Organization Name]

Assisted with daily cleaning tasks, including sweeping, mopping, and vacuuming.

Sanitized restrooms and replenished supplies.

Performed minor maintenance and reported any repair needs.

Facilities Maintenance Intern at [Company/Organization Name]

Conducted routine inspections to ensure cleanliness and safety.

Collaborated with the maintenance team to address issues promptly.

Used cleaning equipment and chemicals safely and effectively.

I'm sure that my excitement and abilities make me a great fit for this role. The prospect of joining [Company Name] and helping to keep everyone in a nice environment excites me. I appreciate your consideration of my application.

I'm excited about the prospect of talking more about my application. To arrange an interview, don't hesitate to get in touch with me at [Phone Number] or [Email Address].

[Henry William]

Custodian Cover Letter Sample for Freshers

[Samantha Jones] [Abc lane] [LA, California, Zip Code] [[email protected]] [123 456 789]

Hiring Manager

[Xyz Company] [Company Address] [LA, California, Zip Code]

I would like to apply immediately for the [Company Name] Custodian position. I am ready to support your team by keeping a clean and safe atmosphere, as I have the necessary certifications and real-world experience from internships.

Custodial Intern, [School/Organization Name]

Performed daily cleaning tasks and sanitized restrooms.

Assisted with minor maintenance and reported repair needs.

Maintenance Intern, [Company/Organization Name]

Conducted inspections for cleanliness and safety.

Collaborated with the team to address maintenance issues.

I'm prepared to join [Company Name] and contribute to upholding strict safety and hygiene standards because I'm committed and meticulous. I'm excited for the chance to talk about how my abilities can help your team. To schedule an interview, please contact me at [Phone Number] or [Email Address].

Thank you for your time and consideration.

Sincerely, [Samantha Jones]

Custodian Cover Letter Sample for Experienced Candidates

[Emma James] [Abc lane] [LA, California, Zip Code] [[email protected]] [123 456 789]

I'm writing to [Company Name] to express interest in the Custodian role. Having worked in custodial jobs for more than [number] years, I am sure I can make a valuable contribution to your organisation. My commitment to upholding hygienic and secure surroundings renders me an ideal candidate for this position.

Experience:

Over [number] years of custodial experience in various settings, including office buildings, schools, and healthcare facilities.

Expertise in using cleaning equipment such as buffers, scrubbers, and vacuum cleaners.

Proficient in waste disposal and recycling processes.

Skilled in performing minor repairs and reporting major maintenance issues.

Conducted routine inspections and preventative maintenance tasks to ensure a safe environment.

Assisted with setting up and breaking down for events and meetings.

Managed inventory of cleaning supplies and equipment to ensure availability.

Followed all health and safety regulations diligently.

I am highly skilled in using a variety of cleaning tools and chemicals safely and effectively. My proactive approach and ability to work independently or as part of a team ensure that all tasks are completed to the highest standards.

I am excited about the opportunity to bring my skills and experience to [Company Name]. Thank you for considering my application. I look forward to the possibility of discussing how I can contribute to your team. Please contact me at [Phone Number] or [Email Address] to schedule an interview.

Sincerely, [Emma James]

Custodian Cover Letter Template for Experienced Candidates

[Sam Parson] [Abc lane] [LA, California, Zip Code] [[email protected]] [123 456 789]

[Hiring Manager] [Xyz Company] [Company Address] [LA, California, Zip Code]

I am excited to apply for the Custodian position at [Company Name]. With extensive experience in custodial services and a strong commitment to maintaining clean and orderly environments, I am eager to bring my skills to your team.

Over [number] years of professional custodial experience.

Proficient in all aspects of cleaning and sanitation, including floors, windows, and restrooms.

Skilled in operating and maintaining various cleaning equipment.

Expertise in waste management and recycling procedures.

Conducted regular inspections to ensure compliance with safety and cleanliness standards.

Coordinated with team members to efficiently complete large-scale cleaning projects.

Maintained inventory and ordered supplies to ensure adequate stock levels.

Adhered strictly to health and safety guidelines, ensuring a safe environment for all.

I have received recognition for my dependability, efficiency, and attention to detail throughout my work. I'm sure that my proactive demeanour and commitment to maintaining impeccable hygiene standards would make me an invaluable member of your team.

I'm excited for the chance to talk about how [Company Name] can benefit from my expertise and abilities. For a convenient time to schedule an interview, please contact me at [Phone Number] or [Email Address].

Thank you for your consideration.

Sincerely, [Sam Parson]

How To Write a Custodian Cover Letter ? (Step by Step Guide)

Step 1: Header

Include your contact information at the top of the letter.

Follow this with the date.

Include the employer’s contact information below the date.

Step 2: Salutation

Address the hiring manager directly by name if possible.

If the name is unknown, use a general salutation like "Dear Hiring Manager."

Step 3: Introduction

Start with a brief introduction that mentions the position you are applying for.

State where you found the job listing.

Include a strong opening statement that summarizes your relevant experience and enthusiasm for the role.

Step 4: Highlight Certifications

List any relevant certifications you hold.

Mention certifications such as safety certificates, custodial technician certifications, and first aid/CPR certifications.

Step 5: Detail Your Experience

Use bullet points to clearly list your relevant work experience.

Highlight specific responsibilities and tasks you have performed in your previous roles.

Mention your skills, such as using cleaning equipment, waste management, and adherence to safety protocols.

Step 6: Closing Paragraph

Reiterate your interest in the position.

Thank the hiring manager for their consideration.

Mention your availability for an interview.

Provide your contact information again for convenience.

What Should You Include In Custodian Cover Letter?

You can demonstrate your qualifications and fit for the position in a thorough and eye-catching custodian cover letter by utilizing these tips.

1. Professional Experience

Give a thorough account of your relevant work history, highlighting your accomplishments and special duties from prior positions.

Examples include managing waste, operating cleaning equipment, doing little repairs, and cleaning and maintaining a variety of buildings.

2. Hard Skills

Emphasize particular technical abilities that have a direct bearing on cleaning job.

Mastery of cleaning equipment (such as buffers, scrubbers, and vacuum cleaners), acquaintance with cleaning supplies and their safe usage, and the ability to do routine maintenance tasks are a few examples.

3. Soft Skills

Highlight the essential character traits and soft skills that make you a successful career.

Examples include having a keen eye for detail, being dependable and on time, having good time management skills, and being able to work both independently and collaboratively.

4. Dedication to Hygiene and Safety

Demonstrate your commitment to keeping things tidy and safe, which is essential for a custodial position.

As an illustration, consider following health and safety guidelines, carrying out routine inspections, and guaranteeing adherence to cleaning requirements.

5. Communication and Interpersonal Skills

Stress how well you can interact with coworkers, managers, and other stakeholders.

Examples include being transparent about maintenance requirements in reports, working with colleagues to finish tasks, and being quick to answer questions and provide comments.

Here's a collection of cover letters for different jobs that you can explore:

Cover Letter for Office Manager

Cover Letter for Paralegals

Cover Letter for Graphic Designers

Cover Letter for Esthetician

Cover Letter for Customer Service Agent

Contact Tracer Position Cover Letter Guide

Mistakes to Avoid

Here are few key mistakes you should avoid while write your cover for the role of a custodian:

1. Being Too Generic

A one-size-fits-all cover letter should be avoided. Tailor each cover letter to the particular position and business, demonstrating that you have done your homework and are aware of their requirements.

2.Ignoring the Job Description

The preferences and requirements specified in the job description should not be disregarded. Make your cover letter unique by emphasizing how your qualifications and experience meet the job's requirements.

3. Using a Weak Opening

Don't begin with a lifeless or general introduction. Draw the reader in with a compelling introductory paragraph that expresses your interest in the position and your most pertinent credentials.

4.Not Including Contact Information

Make sure your contact details are current and accessible. Verify again that the phone number and email address you provided are accurate.

5.Omitting a Call to Action

Don't forget to end your paragraph with a call to action. Tell the hiring manager how excited you are about the job and ask them to get in touch with you to arrange an interview.

Key Takeaways

A well-crafted custodian cover letter is essential for making a strong first impression and securing an interview.

Remember to highlight your relevant certifications, professional experience, and key skills, both technical and interpersonal.

Avoid common mistakes such as being too generic, ignoring the job description, and using a weak opening.

By following these tips, you can demonstrate your qualifications and enthusiasm for the role, increasing your chances of landing the custodian job you desire.

This article has been written by Shaoni Gupta. She works as a content writer at Vantage Lens . Her areas of interest range from art to astronomy. When she's not writing, she is daydreaming about stepping into the worlds of high fantasy novels.

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Professional Custodian Cover Letter Examples for 2024

Your custodian cover letter must immediately highlight your dedication to maintaining cleanliness and order. Display your understanding of effective cleaning techniques and safety protocols right from the start. Showcase your reliability and ability to work independently with minimal supervision. Your cover letter should also reflect your adeptness in handling cleaning equipment and managing waste disposal efficiently.

Cover Letter Guide

Custodian Cover Letter Sample

Cover Letter Format

Cover Letter Salutation

Cover Letter Introduction

Cover Letter Body

Cover Letter Closing

No Experience Custodian Cover Letter

Key Takeaways

Writing a custodian cover letter can be a daunting task, especially when you've just begun your job hunt and realized a standout cover letter is a must. Unlike your resume, it's your chance to narrate the story of your proudest professional achievement. Striking the perfect balance between formality and originality, without falling into the trap of clichés, can be challenging. Additionally, keeping it concise within one page adds to the pressure. Here's how you can craft a letter that shines.

• Create a custodian cover letter to persuade the recruiters you're the best candidate for the role;
• Use industry-leading custodian cover letter templates and examples to save time;
• Dedicate your custodian cover letter space to your best achievement;
• Make sure your custodian cover letter meets recruiters' expectations and standards.

Avoid starting at the blank page for hours by using Enhancv's AI - just upload your resume and your custodian cover letter will be ready for you to (tweak and) submit for your dream job.

If the custodian isn't exactly the one you're looking for we have a plethora of cover letter examples for jobs like this one:

• Custodian resume guide and example
• Handyman cover letter example
• Facilities Manager cover letter example
• Maintenance Manager cover letter example
• Homemaker cover letter example
• Housekeeping Manager cover letter example
• Cleaning Manager cover letter example
• Electronic Technician cover letter example
• Resident Assistant cover letter example
• Housekeeping Supervisor cover letter example
• Electrician Apprentice cover letter example

Custodian cover letter example

James Jones

Chicago, Illinois

+1-(234)-555-1234

[email protected]

• Emphasize relevant experience, such as leading a team to overhaul a maintenance regime, which showcases leadership and initiative taken in past roles.
• Highlight achievements, like reducing floor-related complaints by 25% and cutting chemical usage by 30%, to demonstrate the impact of your work on operations and sustainability.
• Align personal values with company values, showing a shared commitment to clean and sustainable environments, which suggests a good culture fit.
• Mention client satisfaction rates (in this case, 95%), to provide quantifiable results that back up your claims of service quality improvement.

Five tips on formatting your custodian cover letter

Do you want to make a good impression on recruiters and, at the same time, follow the best industry advice on writing your custodian cover letter?

Make sure to include the following:

• Header and Salutation;
• Introductory paragraph;
• Body paragraph;
• Closing paragraph;
• Signature (this one is up to you).

Remember to use the same modern, simple font for your custodian cover letter as you did for your resume (e.g. Lato, Rubik, etc.)

Ensure your custodian cover letter is single-spaced and is wrapped around a one-inch margin, like in our cover letter templates .

Once completed, use our cover letter builder to export your custodian cover letter in the best format to keep your information intact - PDF.

At the end of the day, your custodian cover letter won't be assessed by the Applicant Tracker System (ATS) software, but by the recruiters. Your information should thus be legible, organized, and follow a structured logic.

The top sections on a custodian cover letter

• Header: The header should include your name, address, contact information, and the date, ensuring that the hiring manager can easily identify you and know how to reach you for an interview.
• Greeting: Use a professional salutation (e.g., "Dear Hiring Manager") to show respect and to personalize your cover letter, indicating that you've taken the time to address the potential employer directly.
• Introduction: Introduce yourself and express your enthusiasm for the custodian position, mentioning where you found the job listing and why you're interested in this specific opportunity.
• Body: Highlight your relevant experience, skills such as attention to detail, ability to follow safety procedures, and capacity for maintaining cleanliness across various facilities, showcasing why you are an ideal fit for the custodian role.
• Closing: Close your cover letter with a call to action, such as requesting an interview, and a thank you to the employer for their time and consideration, leaving them with a professional final impression.

Key qualities recruiters search for in a candidate’s cover letter

• Attention to Detail: Demonstrates thoroughness and accuracy in cleaning and maintenance tasks, appealing to employers who prioritize quality and meticulousness.
• Physical Stamina and Mobility: Essential for performing tasks that require bending, lifting, and prolonged periods of standing or walking, which are often part of a custodian's job description.
• Reliability and Punctuality: Important for custodians who frequently work unsupervised and must adhere to strict schedules to avoid disruptions in the workplace or institution.
• Knowledge of Cleaning Chemicals and Equipment: Shows capability in the safe and effective use of various cleaning products and machinery, which is vital for efficiency and maintaining a safe environment.
• Problem-Solving Skills: Helpful for identifying and addressing maintenance issues quickly and effectively, minimizing the potential for larger problems or safety hazards.
• Experience in Cleaning and Maintenance: Directly relevant previous work experience shows that the candidate can hit the ground running and has a practical understanding of the expectations and routines associated with custodial work.

Personalizing your custodian cover letter salutation

Always aim to address the recruiter from the get-go of your custodian cover letter.

• the friendly tone (e.g. "Dear Paul" or "Dear Caroline") - if you've previously chatted up with them on social media and are on a first-name basis;
• the formal tone (e.g. "Dear Ms. Gibbs" or "Dear Ms. Swift") - if you haven't had any previous conversation with them and have discovered the name of the recruiter on LinkedIn or the company website;
• the polite tone (e.g. "Dear Hiring Manager" or "Dear HR Team") - at all costs aim to avoid the "To whom it may concern" or "Dear Sir/Madam", as both greetings are very old-school and vague.

List of salutations you can use

• Dear Hiring Manager,
• Dear [Employer's Name],
• Dear [Department] Team,
• Dear [Company Name] Recruiter,
• Dear [Job Title] Hiring Committee,
• Dear [Mr./Ms./Dr.] [Last Name],

First introductions in your custodian cover letter

Within your custodian cover letter introduction , genuinely state what you like about the organization.

Research the latest company projects, honorary awards, company updates, etc.

Write up to two sentences to let recruiters know what impresses you about the company,

This would help you to set a good tone for the rest of the communication.

Choosing your best achievement for the middle or body of your custodian cover letter

Now that you have the recruiters' attention, it's time to write the chunkiest bit of your custodian cover letter .

The body consists of three to six paragraphs that focus on one of your achievements.

Use your past success to tell a story of how you obtained your most job-crucial skills and know-how (make sure to back these up with tangible metrics).

Another excellent idea for your custodian cover letter's middle paragraphs is to shine a light on your unique professional value.

Write consistently and make sure to present information that is relevant to the role.

Two ideas on how to end the final paragraph of your custodian cover letter

Closing your custodian cover letter , you want to leave a memorable impression on recruiters, that you're a responsible professional.

End your cover letter with how you envision your growth, as part of the company. Make realistic promises on what you plan to achieve, potentially, in the next six months to a year.

Before your signature, you could also signal hiring managers that you're available for the next steps. Or, a follow-up call, during which you could further clarify your experience or professional value.

What to write on your custodian cover letter, when you have zero experience

The best advice for candidates, writing their custodian cover letters with no experience , is this - be honest.

If you have no past professional roles in your portfolio, focus recruiters' attention on your strengths - like your unique, transferrable skill set (gained as a result of your whole life), backed up by one key achievement.

Or, maybe you dream big and have huge motivation to join the company. Use your custodian cover letter to describe your career ambition - that one that keeps you up at night, dreaming about your future.

Finally, always ensure you've answered why employers should hire precisely you and how your skills would benefit their organization.

Key takeaways

Winning at your job application game starts with a clear and concise custodian cover letter that:

• Has single-spaced paragraphs, is wrapped in a one-inch margin, and uses the same font as the custodian resume;
• Is personalized to the recruiter (using their name in the greeting) and the role (focusing on your one key achievement that answers job requirements);
• Includes an introduction that helps you stand out and show what value you'd bring to the company;
• Substitutes your lack of experience with an outside-of-work success, that has taught you valuable skills;
• Ends with a call for follow-up or hints at how you'd improve the organization, team, or role.

Cover letter examples by industry

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Custodian Cover Letter Examples

Custodians are in charge for cleaning, maintenance, and security in a building. Typical cleaning duties of a Custodian include: sweeping, dusting, vacuuming, mopping, cleaning restrooms, and completing special cleaning projects. Other responsibilities of these employees are making inspections, handling maintenance, identifying needs for repairs, collaborating with other departments, replenishing cleaning supplies, and adhering to health and safety regulations.

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Use our extensive library of professional cover letter examples as practical starting guides. You’ll also find ready-made content with our helpful Cover Letter Builder — simply click, customize and download.

Find More Janitorial Cover Letter Examples

See more janitorial cover letter examples

Free Custodian cover letter example

Dear Mr. Headrick:

When I learned of Thermo’s need for a new Custodian, I was eager to submit the attached resume. As an experienced and personable professional with nine years of solid experience performing a broad range of building maintenance and upkeep duties, I am prepared to surpass your expectations.

As a physically fit worker and a motivational team leader, I am highly skilled in managing all facet of building custodianship, including cleaning, maintenance/repair, and heavy equipment usage. My excellent time management skills—combined with my ability to move efficiently to complete tasks on or ahead of schedule—prepares me to make a strong contribution to your team in this position.

The following demonstrate my qualifications for this opportunity:

Performing a variety of custodian responsibilities’such as cleaning kitchen and bathrooms, removing trash and debris, setting up for special events, and operating large cleaning machines—in consecutive custodian positions with Harbringer Systems in Tucson and Beekeeper Elementary School in Phoenix.

Delegated tasks and coordinated work schedules across all personnel for optimal efficiency.

Maintaining regulatory compliance with safety policies and procedures pertaining to chemical usage.

Excelling within physically demanding environments while ensuring accurate completion of necessary tasks.

With my experience in providing superior custodian service, I am ready to provide outstanding building maintenance and upkeep for the customers served by Thermo Building Services. I look forward to discussing the position with you further. Thank you very much.

Lester Olcott

Include These Custodian Skills

• Physical fitness
• Cleaning experience and knowledge of cleaning chemicals
• Stamina and resilience
• Teamworking abilities
• Working without supervision
• Effective communication
• Attention to details
• Being able to follow instructions

Janitorial Resume Examples

See more janitorial resume samples.

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5 Custodian Cover Letter Examples Landing Jobs in 2024

• Custodian Cover Letter
• Custodian Cover Letters By Experience
• Custodian Cover Letters By Role
• Write Your Custodian Cover Letter

As a custodian, you have an incomparable eye for detail, and juggling multiple tasks simultaneously is second nature. You’re not just responsible for keeping things clean—oftentimes, your responsibilities range from sanitation to repairs and inventory management.

With such a vast range of daily tasks, creating a cover letter and complementary custodian resume that adequately cover your particular background can be challenging. How do you decide what to discuss when your role is so diverse?

We’re here to help you select the right qualities to highlight. With our custodian cover letter examples and tips, coupled with our free AI cover letter generator you’ll land more interviews and get the job you want!

Custodian Cover Letter Example

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Copy this text for your Custodian cover letter!

123 Fictional Avenue Houston, TX 77001 (123) 456-7890

December 12, 2023

Olivia Jones Memorial Hermann Health System 123 Fictional Lane Houston, TX 77001

Dear Ms. Jones:

When news broke of Memorial Hermann Health System’s remarkable 11th rank among large companies in the Houston Chronicle’s Top Workplaces 2023, it rekindled my desire to pursue a custodian role at your esteemed establishment. My OSHA certification and dedication to health and safety align seamlessly with your institution’s unwavering commitment to quality healthcare, further fueling my desire to contribute to your organization as your custodian.

At Houston Methodist, I led a custodial team responsible for managing an inventory of sanitation supplies for over 40 hospital departments. We minimized stockouts by incorporating an efficient inventory management system using Oracle’s NetSuite software, ensuring an uninterrupted supply chain and facilitating a 26% annual cost savings.

Moving on at Houston Community College, I was entrusted with building maintenance for an occupancy of 2,300+ students. Remarkably, I implemented robust occupational health and safety standards, reducing workplace hazards by 33%. I drew on my proficiency in CleanTelligent software to streamline janitorial tasks, which, in turn, improved the efficiency of routine inspections by 22%.

My stint at Baylor College of Medicine involved extensive chemical handling, a critical skill in biomolecular labs. Using LabSolutions Management Software to dispose of and manage chemicals safely, I averted potential risks and improved safety standards. As a result, we witnessed a 32% decrease in chemical-related incidents during my tenure.

I’m thrilled to bring this custodial expertise and adaptability to Memorial Hermann Health System. Your organization’s reputation as the metro area’s top-ranked hospital emphasizes my enthusiasm to contribute to your goals. Thank you for considering my application; I would be excited to discuss further how my skills could meet Memorial Hermann’s needs.

Olga Ivanova

Enclosures Resume Transcript OSHA Certification

Why this cover letter works

• Simply browse the company website’s news page and pick one outstanding achievement. It could be recognition as a top employer in the region or an award for an outstanding project. Or even a groundbreaking innovation in the industry. Whichever the case, spotlight it in your piece for an added dash of pizzazz and enthusiasm.

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Relax! We’ll do the heavy lifting to write your cover letter in seconds.

Custodian No Experience Cover Letter Example

Copy this text for your Custodian No Experience cover letter!

123 Fictional Avenue Phoenix, AZ 85001 (123) 456-7890

Noah Brown Arizona State University 123 Fictional Avenue Phoenix, AZ 85001

Dear Mr. Brown:

As an enthusiast of creating clean and inviting spaces, I’m thrilled by the chance to elevate Arizona State University’s cleanliness standards as a janitorial trainee. I’m confident in employing my experience in floor care techniques, chemical handling, and waste management, all honed from experiences during my past roles and academic learning.

I volunteered at CBN Building Maintenance, where I handled the maintenance of a 1,694-square-foot building and fostered a 17% reduction in cleaning time, utilizing efficient floor care techniques and appropriate chemicals. In addition, I had the privilege of collaborating with fellow team members to develop an environmentally friendly cleaning method that improved chemical dilution ratios by 27%.

While taking a course in environmental science and waste management at GateWay Community College, I contributed to a project promoting sustainable waste management practices within our community. This experience launched a fruitful collaboration with local businesses and helped reduce waste going to landfills by 12%.

Recently, I supported my uncle’s plumbing business in Phoenix, AZ, for over six months. During this period, I successfully implemented and maintained inventory management systems for cleaning tools and supplies, which significantly improved accessibility and reduced misplacement by 23%.

I’m thrilled by the prospect of bringing my skills and commitment to cleanliness to Arizona State University’s janitorial team. I look forward to discussing how my experience in floor care techniques, chemical handling, waste management, and tool maintenance can contribute to maintaining the university’s high standards. Thank you for considering my application.

Isabella Rossi

• If seeking inspiration, see how Isabella’s custodian no experience cover letter narrates mastering inventory management when helping her uncle in his plumbing business. Moments like this can be as punchy as professional experiences.

School Custodian Cover Letter Example

Copy this text for your School Custodian cover letter!

123 Fictional Avenue Philadelphia, PA 19101 (123) 456-7890

Ava Davis Temple University 123 Fictional Lane Philadelphia, PA 19101

Dear Ms. Davis:

My first experience with Temple University occurred during a tour around the beautifully maintained Philadelphia campus. As I observed the pristine conditions, I whispered to myself that I’d one day work there. Today, this vision compels me to apply for the school custodian position. While with the Community College of Philadelphia, I helped reduce the number of accidents by 37% by executing top-tier safety protocols and conducting regular drills. In addition, I’m well-versed in using safety software like EHS, which has facilitated my understanding and implementation of safety standards at multiple levels.

Taking center stage in my former role at Central High School was maintaining waste management protocols. Overseeing a 2,300+ student institution, I facilitated multiple systematic waste recycling programs, leading to a 17% reduction in overall waste.

Drawing upon my basic plumbing skills, I worked with a team of three junior custodians to ensure the optimal operation of Chestnut Hill Hospital’s plumbing system. Our contribution helped curb water waste by approximately 21%. I believe these skills will also be instrumental in maintaining the pristine condition of Temple University.

Having proven my commitment to facility maintenance, I readily anticipate contributing to Temple University. I look forward to discussing how my qualifications could contribute to your team.

Miguel Fernandez

• You want to recount that previous workplace where you excelled in enforcing safety protocols. Infusing numbers here (cue reducing the number of accidents by maybe 37%) goes a long way to make your narration believable and impactful. Even better, talk about your proficiency in using safety software like EHS to enhance efficiency in implementing safety standards.

Building Custodian Cover Letter Example

Copy this text for your Building Custodian cover letter!

August 21, 2024

Isabella Martinez General Motors 123 Fictional Lane Detroit, MI 48127

Dear Ms. Martinez:

Driving cleanliness and operational excellence aligns seamlessly with General Motors’ commitment to innovation and efficiency. Having witnessed firsthand the importance of a well-maintained environment, I understand how crucial it is to ensure that spaces are clean, safe, and efficiently managed. With three years of experience in custodial services, I’m eager to bring my skills and dedication to General Motors and support the high standards of your facilities.

My tenure at Hackensack Meridian Health Plan was groundbreaking, ushering in a QR code system to monitor cleaning supplies in real-time and trimming inventory inaccuracies to a slim 2%. I also harnessed technology platforms like EZOfficeInventory, InspectAll, and Monday.com, elevating staff responsibility and harmonizing workflows.

My stint at Great Lakes Financial Group was marked by my initiation of predictive maintenance using ServiceChannel analytics. This proactive approach led to a dramatic decrease in unexpected equipment downtime. By predicting and addressing maintenance issues before they could escalate, we saved over 102 hours per year that would have been lost to equipment failures, translating to a quarterly cost saving of $4,082.

My role at Marriott International underlined a dedication to pristine cleanliness and hygiene, fortified by the Kaivac CleanCheck system and its exhaustive checklists. This initiative boosted room readiness by 16%, ensuring that all safety issues were promptly addressed with the help of the maintenance team. The position honed my skills in conducting thorough inspections, rapid problem reporting, and consistently meeting the pinnacle of cleanliness and guest contentment.

With my background in efficiently managing facilities and implementing innovative solutions to common maintenance challenges, I believe I can be a valuable asset to your team. I look forward to discussing how my efforts can help maintain the high standards General Motors is known for. Thank you for considering my application.

Enclosures: Resume Application Transcript

• Why not kick things off with a little charm instead? It could be as simple as complimenting the company’s ambitions and detailing how well you mesh with their culture. Samuel, for instance, goes with “driving cleanliness and operational excellence aligns seamlessly with General Motors’ commitment to innovation and efficiency.”

Janitorial Custodian Cover Letter Example

Copy this text for your Janitorial Custodian cover letter!

123 Fictional Avenue Denver, CO 80201 (123) 456-7890

Emily Lewis UCHealth 123 Fictional Lane Denver, CO 80201

Dear Ms. Lewis:

As a janitorial custodian at UCHealth, my goal is to ensure a clean, safe, and welcoming environment for every patient. Your success stories about maintaining high standards of cleanliness and safety convinced me that your hospital upholds the values of equity, safety, and integrity.

As the head custodian at Cherry Creek School District, I supervised a team of nine custodial staff, ensuring a sanitized space for nearly a thousand students and faculty members. I introduced Fishbowl Inventory for streamlined inventory management, which led to a 22% reduction in supply costs, and CleanTelligent for enhanced cleaning schedules, increasing our cleanliness ratings by 29%. In addition, developing a preventive maintenance program using Fiix demonstrated proactive management of equipment.

My budget management and team communication skills were further refined at ABM Industries. By implementing Microsoft Excel and Google Docs, we witnessed a 26% decrease in operational expenses and a 21% enhancement in task efficiency. I also harnessed iAuditor for regular safety inspections, fostering a 12% drop in workplace accidents.

Moreover, while at Honeywell, I upheld strict sanitation standards and managed facility spaces using IBM TRIRIGA, achieving a substantial 37% savings in operational costs. Not to mention I employed EnergyCAP to reduce utility expenses by 53%, demonstrating my ability to integrate technical solutions with strategic decision-making.

Confident that my extensive experience and proactive approach in custodial and facility management would make me a valuable addition to the UCHealth team, I look forward to our conversation about my qualifications. Thank you.

Nathan Brown

• Something like “As a janitorial custodian at UCHealth, my goal is to ensure a clean, safe, and welcoming environment for every patient” makes for a great example here. You get your point across, and the potential employers see your goals are in sync with their needs, nudging them a step closer to giving you that interview call.

Related cover letter examples

• Custodian Resume
• Housekeeping
• Property Manager
• Maintenance Technician

How to Write a Custodian Cover Letter That Gets You the Job

Whether you have loads of work experience in custodial roles or you’re just starting , you’re probably aware that the term “custodian” is often used for a variety of different roles. In some jobs, you might work in a huge facility, such as a school or a hospital, with a team of other custodians. In others, you’ll be the lone wolf in charge of a whole building.

To show employers that you fully grasp what the job is all about, the key is to study each job description carefully. Then, get familiar with the company or institution you want to work for to find a connection that shows you care.

Start strong with a customized greeting and intro

Unfortunately, hiring managers often skim or, worse yet, use AI-based systems to scan job applications. The good thing is that if you’re able to grab their attention right away with your custodian cover letter, your chances of landing the job increase exponentially.

Start by addressing the recipient by name. To do this, research the facility or company you’re applying to, be it through LinkedIn, its website, or a quick phone call. Next, personalize your intro.

Use this one short paragraph to draw a connection to the company and showcase how your background makes you a solid candidate. For instance, mention how your previous role in a massive hospital prepared you for the demands of keeping a medical facility running smoothly.

This opener does the opposite of what you’d want. It’s generic, meaning the cover letter will likely be discarded immediately.

I need a job and I saw that you’re hiring. I hope you can give me a chance.

This opener is a dream come true. There’s no stronger connection to an employer than showing that you’ve previously dreamed of working there!

My first experience with Temple University occurred during a tour around the beautifully maintained Philadelphia campus. As I observed the pristine conditions, I whispered to myself that I’d one day work there. Today, this vision compels me to apply for the school custodian position.

Show off your dedication in the body paragraphs

The role of a custodian covers a lot of ground—often literally! You must follow various sanitation standards, efficiently manage cleaning supplies and other resources, and even contribute to repairs. 

With such a long list of tasks to tend to, it’s important to use your cover letter to highlight the ones that are most relevant to a given role. Pick some of your most impactful achievements that align with the job, and add some metrics to make them pop.

As an example, if the job description highlights the need for minor repairs, talk about how, in a past role, you completed an average of 30 repairs per week, increasing facility uptime by 29%.

This is how you get a new job!

Get yourself hired with a strong closer

The final paragraph at the end of your custodian cover letter is just as important as that strong opener we discussed above. This is where you can drive home that you’re the right candidate for the job.

The best way to do this is to find a connection between you, your job skills , and the company. For example, if you’re applying to work at a company known for its eco-friendly approach, that’s a great hook! 

Mention how you want to apply your experience in green cleaning initiatives, your care for the environment, and how important the company’s mission is to you. 

Sign off with a sincere “thank you for your consideration.” People skills are crucial in the role of a custodian, so showing that you’re respectful will go a long way!

This next signoff isn’t too great. The goal is to make yourself look like an expert instead of downplaying your strengths.

I don’t have any experience in cleaning and this is my first job but I’ll try to learn if you show me.

This candidate did a wonderful job of highlighting what they can bring to the role.

They’ll love it!

Custodian cover letter mistakes to avoid.

• Each building has its quirks, and any facility you encounter could have specialized equipment you’ll need to know how to maintain. In other words, it pays to be thorough! Make sure you demonstrate this same level of thoroughness and genuine interest in the job role: Put in the effort to find out who you’re writing to, and they’ll be way more likely to remember you!
• You might worry about the risk of your cover letter sounding too mechanical at first, but a little context goes a long way! Look for your most compelling points and bolster your impact with metrics and a few choice details. Improve your credibility with quantifiable data like how much money you saved your employer on cleaning supplies thanks to your skills with inventory management—or by what percentage customer satisfaction went up thanks to your impeccable maintenance. And a few contextual elements like why you felt compelled to go beyond the call of duty make for a more memorable success story!
• While technically you’re applying for the job because you want to, you’ll need to write your cover letter and resume with the company’s perspective and desires in mind. Researching businesses and organizations to learn more about their backgrounds will help you gain insight regarding obstacles they’re currently facing that you could align yourself with.

The good thing about custodial roles is that they often don’t require much work experience . Talk about anything you might have done that shows you value cleanliness, time management, and dedication, such as volunteering at an animal shelter.

First of all, let the job description be your guide! Beyond that, it’s a good idea to discuss your knowledge of equipment, such as industrial floor cleaners and carpet extractors, or your ability to carry out various repairs. Add in some budget and inventory management as a huge perk!

You can! Add them to your custodian resume and cover letter as enclosures. Some of the best ones to highlight include the OSHA Certification, CIMS Certification, and the Environmental Cleaning Certification.

Custodian Cover Letter Example

Written by Mark DeGrasso

May 5, 2023.

If you’re applying for a custodian position, a well-crafted cover letter can make all the difference in helping you stand out among other applicants. Not only does it give you a chance to showcase your skills and experience, but it also demonstrates your professionalism and commitment to the job. In this article, we will cover everything you need to know about writing an effective custodian cover letter. From what employers look for to common mistakes to avoid, we’ve got you covered.

As a custodian, you play a vital role in ensuring that buildings and facilities are clean, safe, and well-maintained. Your work may involve cleaning and sanitizing restrooms, classrooms, offices, and common areas, as well as performing minor repairs and maintenance tasks. A custodian cover letter is your opportunity to showcase your skills and experience in this important role.When crafting your cover letter, it’s important to keep in mind what employers are looking for in a custodian. Beyond the basic requirements of the job, such as physical stamina and attention to detail, employers want to see that you are a team player who is committed to providing excellent service. To demonstrate this, you may want to mention any experience you have working with a team or collaborating with others to achieve common goals.Another important aspect of your cover letter is demonstrating your knowledge of the company and its values. This shows that you are not just looking for any job, but that you are specifically interested in working for this organization. You may want to research the company’s history, mission statement, and recent projects to get a better sense of what they are all about.In addition to highlighting your skills and experience, it’s also important to provide specific examples of your successes in similar positions. This can help to demonstrate your value as a candidate and show that you have a track record of delivering high-quality work. For example, you may want to mention any awards or recognition you have received for your work, or describe a particularly challenging project you completed successfully.Finally, it’s important to show that you are passionate about the job and committed to doing your best. This can be conveyed through your enthusiasm for the work, your willingness to go above and beyond what is expected, and your eagerness to learn and grow in the position. By demonstrating these qualities in your cover letter, you can make a strong case for why you are the ideal candidate for the job.

Essential Components of a Custodian Cover Letter

Are you interested in applying for a custodian position? If so, it’s important to have a well-written cover letter that showcases your skills and experience. A successful custodian cover letter should contain the following essential components:

• A clear and concise introduction: Your introduction should state why you are applying for the position and how you found out about it. This is your chance to make a good first impression and grab the employer’s attention.
• A summary of your relevant skills and experience: In this section, you should highlight your custodial experience, including any certifications or training you have received. Be sure to mention any relevant skills, such as the ability to operate cleaning equipment or knowledge of cleaning chemicals and their proper use.
• A discussion of how you have contributed to the success of previous employers: Use this section to provide specific examples of how you have made a positive impact in your previous custodial roles. For example, you could mention how you implemented a new cleaning schedule that resulted in a cleaner and more organized facility.
• A statement of why you are interested in the job and how it aligns with your career goals: This section is your opportunity to show the employer that you are genuinely interested in the position and that it aligns with your long-term career goals. Perhaps you are interested in working for a company that values cleanliness and order, or you see this position as a stepping stone to a more senior role in the future.
• A call to action: It’s important to end your cover letter with a call to action that encourages the employer to contact you for an interview. Let them know that you are excited about the opportunity to discuss your qualifications in more detail.
• A professional closing: In your closing, be sure to include your contact information and thank the employer for considering your application. This is your chance to leave a lasting impression and make it clear that you are a professional and courteous candidate.

By including all of these essential components in your custodian cover letter, you can increase your chances of landing an interview and ultimately securing the job. Good luck!

Common Mistakes To Avoid When Writing a Custodian Cover Letter

When applying for a custodian position, it is essential to write a cover letter that stands out from other applicants. However, many job seekers make common mistakes that can hurt their chances of getting hired. Here are some things to avoid:

• Using generic language: Avoid using generic language or repeating information from your resume. Instead, focus on highlighting your unique skills and experiences that make you the best candidate for the job.
• Not tailoring the letter: One of the biggest mistakes you can make is not tailoring your cover letter to the specific employer or job. Take the time to research the company and the position you are applying for. Use this information to show how your skills and experiences align with the company’s values and needs.
• Failing to proofread: Always proofread your cover letter for errors or typos. A cover letter with mistakes can give the impression that you are careless or not detail-oriented, which is not a good impression to make.
• Overemphasizing duties: While it’s important to mention your custodial duties, don’t overemphasize them. Instead, focus on your accomplishments and how you went above and beyond your duties to make a positive impact.
• Not demonstrating passion: Finally, make sure to demonstrate your passion or enthusiasm for the job. Show the employer that you are excited about the opportunity to work as a custodian and that you are committed to providing excellent service.

By avoiding these common mistakes and focusing on your unique skills and experiences, you can write a custodian cover letter that stands out and increases your chances of getting hired.

For example, you could mention specific instances where you went above and beyond your duties to make a positive impact. Perhaps you implemented a new cleaning system that improved efficiency and saved the company money. Or maybe you took the initiative to organize a recycling program that helped the company become more environmentally friendly.

Additionally, you could discuss your passion for the job and how you enjoy working in a fast-paced environment. You could mention how you take pride in keeping the facilities clean and safe for employees and visitors. By demonstrating your enthusiasm for the job, you can show the employer that you are committed to providing excellent service.

Final Steps On Writing Your Custodian Cover Letter

Congratulations on taking the final steps towards submitting your custodian cover letter! This document is an essential part of your job application and can make all the difference in whether or not you are selected for an interview.

Before submitting your cover letter, it’s important to take a few additional steps to ensure that it’s as strong as possible. Here are some tips to help you:

• Carefully read the job posting: Make sure that you have a clear understanding of the specific requirements and qualifications for the custodian position you are applying for. Tailor your cover letter to highlight how your skills and experience align with what the employer is looking for.
• Proofread your letter: It’s essential to proofread your letter multiple times to ensure there are no errors or typos. One small mistake can make a big difference in how your application is perceived.
• Get feedback: Have a friend or mentor read your letter and provide feedback. It can be helpful to get an outside perspective on your writing and ensure that your message is clear.
• Include your contact information: Make sure to include all relevant contact information, including your email address and phone number. This will make it easy for the employer to get in touch with you if they want to schedule an interview.
• Mention your references: If you have any references available, it’s a good idea to mention them in your cover letter. Make sure that these are people you’re confident will give you a good review and that you have their permission to use them as references.

By following these final steps, you can ensure that your custodian cover letter is a strong representation of your skills and experience. Best of luck with your job application!

Example Custodian Cover Letter

Dear Hiring Manager,

I am writing to express my interest in the custodian position at your esteemed school. I am confident that my experience and skills make me a suitable candidate for this position. I have over five years of experience in custodial work, and I have developed a deep understanding of best practices for cleaning and maintaining a school environment.

As a custodian at XYZ Elementary School, I was responsible for ensuring that the building was clean and orderly at all times. I was in charge of cleaning classrooms, hallways, restrooms, and other areas of the school. I also helped with setting up and breaking down classrooms for events and meetings. I am familiar with all types of custodial equipment and supplies, and I can operate them efficiently.

One of my greatest strengths is my ability to work with young children. I understand the specific cleaning needs that come with them. I am patient and friendly, and I always make sure to create a safe and clean environment for children to learn and play in. I have experience working with children with special needs, and I am comfortable adapting to their unique cleaning needs.

During my time at XYZ, I implemented several new cleaning procedures that resulted in a significant decrease in maintenance costs and an increase in overall cleanliness. I introduced a new system for cleaning carpets and floors that reduced the time and effort required to keep them clean. I also started using eco-friendly cleaning products that were safer for children and the environment. As a result of these changes, I received several commendations from teachers and administrators for my hard work and dedication to the job.

I am excited to continue my career in custodial work at your school. I believe that my skills and experience make me a strong candidate for the position. I am a hard worker, and I take pride in my work. I am reliable and punctual, and I always complete my tasks on time. I am a team player, and I am always willing to help out my colleagues when needed.

Thank you for considering my application. I look forward to speaking with you more about how I can contribute to the success of your team.

Custodian Cover Letter FAQ

What should i include in my cover letter for a custodian position.

When applying for a custodian position, it is important to include all relevant skills and experience that make you a good fit for the job. In your cover letter, you should highlight your attention to detail, ability to work independently, and experience with cleaning and maintenance tasks. It is also important to include a statement about why you are interested in the job and what you can bring to the position.

For example, you might mention that you have a passion for keeping buildings clean and well-maintained, and that you take pride in your work. You might also highlight specific examples of how you have succeeded in similar positions, such as reducing cleaning time by implementing more efficient processes or receiving positive feedback from supervisors for your attention to detail.

Finally, you should end your cover letter with a call to action that encourages the employer to contact you for an interview. Thank the employer for considering your application and express your enthusiasm for the opportunity to work with them.

How long should my custodian cover letter be?

Your custodian cover letter should be no longer than one page. While it can be tempting to include every detail of your experience, it is important to keep your letter concise and focused on the most important information. Use bullet points or short paragraphs to break up the text and make it easier to read.

What are some common mistakes to avoid when writing a custodian cover letter?

When writing a custodian cover letter, there are several common mistakes to avoid. One of the biggest mistakes is using generic language that could apply to any job, rather than tailoring your letter to the specific employer or job. Make sure to read the job posting carefully and use keywords from the posting in your letter.

Another mistake to avoid is failing to proofread your letter for errors or typos. A letter with spelling or grammatical errors can make a bad impression on the employer and suggest that you are not detail-oriented. Make sure to proofread your letter multiple times and have a friend or mentor read it over as well.

Finally, it is important to demonstrate your passion or enthusiasm for the job. Custodian positions can be physically demanding and require a lot of hard work, so it is important to show that you are excited about the opportunity to work in this field. Avoid overemphasizing your duties and instead focus on your accomplishments and what you can bring to the position.

What should I do before submitting my custodian cover letter?

Before submitting your custodian cover letter, there are several things you should do to ensure that it is the best it can be. First, make sure to read the job posting carefully and tailor your letter to the specific requirements and qualifications. Highlight your relevant skills and experience and use keywords from the posting in your letter.

Next, proofread your letter multiple times to catch any errors or typos. It can also be helpful to have a friend or mentor read your letter and provide feedback. They may be able to catch mistakes that you missed or suggest ways to improve your letter.

Finally, make sure to include all relevant contact information, such as your phone number and email address, and mention if you have any references available. Thank the employer for considering your application and express your enthusiasm for the opportunity to work with them.

Table of Contents

Competent Custodian Cover Letter Example

Writing a Custodian cover letter is your introduction to the hiring manager. In order to stand out companies want you to present your relevant work history and skills according to the job you are applying for. Whether you're seeking an entry-level position or have been in your career for a few years, exposing your relevant achievements in your cover letter can allow you to stand out and get that job interview.

Our cover letter examples are written by certified cover letter writers and is a great representation of what hiring managers are looking for in a Custodian cover letter resume. Use this example for reference as you create your own cover letter or use this easy cover letter builder that will guide you through every step of your building your resume in just a few minutes.

Here is the Competent Custodian Cover Letter Example:

Dear Mr. Rodriguez,

I am applying for a Custodian position with your company and this letter is my introduction to you. I know that my skills in maintenance and all custodial duties would make me an asset to C&S Wholesale Grocers.

The following is a summary of my qualifications and skills that can be viewed in complete form on my attached resume:

• I have been working as a custodian for over 6 years and have a clean criminal record and letters of recommendation that I can provide upon request.

• My skills go beyond simple cleaning as I can also unclog drains, install carpet, paint and help with the interior and exterior maintenance of the building.

• When it comes to handling those who have an issue in their area, I am quick, courteous and willing to help out in way that I can to make sure the area is clean and well maintained.

I know that a custodian is a vital part of any business, school or apartment building. For this reason, I know that I would be an asset to C&S Wholesale Grocers and that I would make a difference in the look and maintenance of the building.

I feel it would be beneficial to both for us to have a face to face discussion so I can further expand on my history and qualifications. I can be reached at (555)-555-5555 or emailed at [email]

Ramona Lange

Encl: Resume

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A professional cover letter is the first step toward your new job!

Custodian Cover Letter Examples

A great custodian cover letter can help you stand out from the competition when applying for a job. Be sure to tailor your letter to the specific requirements listed in the job description, and highlight your most relevant or exceptional qualifications. The following custodian cover letter example can give you some ideas on how to write your own letter.

or download as PDF

Cover Letter Example (Text)

Constina Inkel

(111) 785-6015

[email protected]

Dear Ms. Nedrick,

I am writing to express my interest in the Custodian position at BNY Mellon, as advertised. With a solid background in facility maintenance and cleaning, honed over five years of dedicated service at State Street Corporation, I am excited about the opportunity to bring my strong work ethic and attention to detail to your esteemed company.

Throughout my tenure at State Street Corporation, I have developed a comprehensive understanding of the various aspects of custodial work, including the importance of maintaining a sanitary and well-kept environment. My responsibilities ranged from daily cleaning tasks to coordinating larger maintenance projects, all of which were completed with the utmost care and efficiency. I have always taken pride in ensuring that every corner of the facilities I manage reflects the high standards of the company, understanding that a clean and orderly workplace is crucial for both employee productivity and the overall image of the business.

In addition to my hands-on experience, I have consistently demonstrated an ability to work well independently as well as part of a team. I am accustomed to adapting to the dynamic needs of a busy workplace and am skilled at managing my time effectively to meet tight deadlines. My previous supervisors have commended me for my proactive approach to problem-solving and my ability to anticipate needs before they arise.

Moreover, I am familiar with the latest cleaning techniques and have experience with a variety of cleaning equipment and products, ensuring both effectiveness and safety in all my practices. I am also committed to ongoing learning and improvement, and I am eager to participate in any training programs that BNY Mellon may offer to further enhance my skills.

I am enthusiastic about the chance to contribute to BNY Mellon and am confident that my background in custodial services will allow me to be a valuable asset to your team. I look forward to the possibility of discussing how my experience and skills align with the needs of your company.

Thank you for considering my application. I hope to bring my dedication, reliability, and high standards of cleanliness to BNY Mellon.

Warm regards,

Related Cover Letter Examples

• Head Custodian
• Lead Custodian

Custodian Cover Letter Example

Custodian is a person who works in an organization or an institution for keeping the area, surface, or property clean. Custodian plays a number of tasks in the duties like cleaning outdoor areas or indoor areas.

Go through the Custodian Cover Letter sample and get insight into the job responsibility and understand how impressive a cover letter can be. Several of the responsibilities the custodian must take care of like sweeping, washing, mowing grass, and shoveling snow.

• Cover Letters
• Maintenance & Repair

What to Include in a Custodian Cover Letter?

Roles and responsibilities.

Job Responsibilities of Custodian:

• Maintain the schedules and calendar records of the cleaning area.
• Keep checking and maintaining supplies .
• Regular coordination with the team.
• Should be able to manage day-to-day responsibilities.
• Knowledge of cleaning methods and procedures.
• Good understanding of cleaning tools.
• Make records and notify the manager regarding the need for repairs.
• Performs all cleaning duties.
• Understanding and Knowledge of cleaning chemical solutions .
• Ability to lift heavy objects.

Education & Skills

Skills Required in a Custodian job:

• Must have: Problem-solving skills.
• Extremely interactive and polite.
• Multitasking is a must-have skill.
• Detailed oriented.
• Time-management.
• Taking Ownership.
• Ability to do multiple tasks.
• Excellent Management skills.
• Excellent organizational skills.
• Excellent cleaning and housekeeping skills.
• Expertise in using all cleaning equipment and tools.
• Excellent knowledge of safety rules.
• Teamwork skills.
• Must be physically fit, to stand or do work for long hours.
• Flexible with shifts and working hours.
• Good communication skills.
• Ability to perform repetitive tasks on daily basis.

Qualifications Required in a Custodian job:

• Must have High School Diploma.
• Must have a minimum of 2+ years of previous experience working as a custodian.
• Basic knowledge of maths to make records.
• Have some experience in repairing work.

Custodian Cover Letter Example (Text Version)

Dear Mr./Mrs.,

This is regarding the job opening for the position of Custodian. I have the required skill sets, certification, and experience to fit in this job role. With a total experience of …… years in one of the reputed firms or companies of the city I have gained a lot of skills and knowledge, hence, I believe I can do my best in this job role.

In the past few years, I have learned a lot, which has helped me solve a lot of issues in my previous organization. I have expertise in

• Planning and executing strategies to maintain or resolve the issues.
• Self-motivational and detail-oriented.
• Expertise in handling all kinds of works.
• Leadership skills.
• Good understanding of handling all the cleaning equipment and tools.
• Good understanding of collecting the trash and making them recycle.

I would like to Thank you in Advance for showing interest in my resume. Hoping for a positive response from your side.

Looking forward to hearing from you soon.

Sincerely, [Your Name]

Check out this cover letter to learn more about enhancing your profile and updating your resume as per the latest standards and enhance your chance to get shortlisted by the leading companies. An effectively written cover letter helps the recruiters to get a quick brief of your qualifications, skills, and experience also, it gets your application to stand out from the crowd. Also, check out the Custodian Resume Sample here to know how to write an impressive resume.

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Custodian Cover Letter Template

Land your dream job & learn practical tricks for your cover letter with our free, downloadable Custodian cover letter template. Make a copy of this cover letter example as it is or rewrite it directly in our job-landing cover letter creator.

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Custodian Cover Letter Template (Full Text Version)

Michaela Valerio

Dear Hiring Managers,

I am writing to express my interest in the Custodian position at McQueen Services, Inc. as advertised on LinkedIn.com. After reviewing the job requirements, I am confident that my skills and experience make me a strong candidate for this role, and I believe I can make a valuable contribution to your organization.

During my time at Hillcroft Services, I successfully handled various cleaning duties, supervised new employees, and implemented process improvements to enhance efficiency and reduce costs. My attention to detail, strong work ethic, and ability to work well independently or in a team setting have consistently allowed me to excel in my role. I was recognized as Employee of the Month for my dedication and performance.

In addition to my professional experience, I am a native Spanish speaker with proficiency in English and basic knowledge of German. I possess excellent physical fitness, communication, and organizational skills, making me well-equipped to meet the demands of the Custodian position.

I have attached my updated CV for your review and am available for any further questions regarding my qualifications. I can be reached at 555-555-5555 or via email at [email protected]. Thank you for considering my application. I look forward to the opportunity to discuss how my skills align with the needs of McQueen Services, Inc.

Milan Šaržík, CPRW

Milan’s work-life has been centered around job search for the past three years. He is a Certified Professional Résumé Writer (CPRW™) as well as an active member of the Professional Association of Résumé Writers & Careers Coaches (PARWCC™). Milan holds a record for creating the most career document samples for our help center – until today, he has written more than 500 resumes and cover letters for positions across various industries. On top of that, Milan has completed studies at multiple well-known institutions, including Harvard University, University of Glasgow, and Frankfurt School of Finance and Management.

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CUSTODIAN I

How to apply.

A cover letter is required for consideration for this position and should be attached as the first page of your resume. The cover letter should address your specific interest in the position and outline skills and experience that directly relate to this position.

Job Summary

The Custodian I performs all custodial duties using our team cleaning system, including the use of a backpack vacuum. The basic custodial duties include cleaning restrooms, picking up debris on floors, cleaning offices and all areas of the building.

This position operates equipment used for routine maintenance work including but not limited to power washers, upholstery and carpet spot cleaning machines, and counter rotating brush carpet pile lifters.

Custodial Services provides cleaning services to University of Michigan administrative and academic buildings on the Ann Arbor campus. We service over 13 million square feet of floor space in over 250 buildings. Building Services employs over 400 people consisting of custodial, pest management, support, administrative and managerial staff.

Our mission is to maintain the facilities to provide a sanitary, safe and pleasant environment for the University of Michigan’s students, faculty, staff and guests.

Why Work at Michigan?

Being part of something greater, of serving a larger mission of discovery and care that's the heart of what drives people to work at Michigan. In some way, great or small, every person here helps to advance this world-class institution. It's adding a purpose to your profession. Work at Michigan and become a victor for the greater good.

In addition to a career filled with purpose and opportunity, The University of Michigan offers a comprehensive benefits package to help you stay well, protect yourself and your family, and plan for a secure future. Benefits include:

• Generous time off
• A retirement plan that provides two-for-one matching contributions with immediate vesting
• Many choices for comprehensive health insurance
• Life insurance
• Long-term disability coverage
• Paid maternity and parental leave
• Flexible spending accounts for healthcare and dependent care expenses

Required Qualifications*

• Must have a high school diploma or GED.
• Ability to effectively communicate with and follow instructions from co-workers, supervisors, customers, and facility managers.
• Ability to wear a backpack vacuum for up to 8 hours a day.
• Ability to effectively clean/maintain areas that are located in various positions, including several feet off the floor, close to the floor, and under/around obstacles.
• Must be able to remove snow from building entranceways using shovels and other tools.
• Must be able to perform all duties in the job classification with or without a reasonable accommodation.

Work Schedule

Various shifts are available. 

Additional Information

Facilities and Operations seeks to recruit and retain a diverse workforce as a reflection of our commitment to serve the diverse people of Michigan, to sustain the excellence of the university, and to offer our students richly varied disciplines, perspectives and ways of knowing and learning.

F&O is a positive organization dedicated to the principles of being respectful, collaborative, solutions-based, and proactive.

Union Affiliation

This position is covered under the collective bargaining agreement between the U-M and the AFSCME union, which contains and settles all matters with respect to wages, benefits, hours and other terms and conditions of employment.

Background Screening

The University of Michigan conducts background checks on all job candidates upon acceptance of a contingent offer and may use a third party administrator to conduct background checks.  Background checks are performed in compliance with the Fair Credit Reporting Act.

U-M EEO/AA Statement

The University of Michigan is an equal opportunity/affirmative action employer.

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Resumes & Cover Letters – August 27 at 6:00-7:00PM in BRNG 2280 (West Lafayette)

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Note : This seminar is geared toward first-year students.  Space is limited, so availability is first come, first serve.

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Job Posting: Custodian of Records

California Victim Compensation Board

$3,749.00 - $6,093.00 per Month

Final Filing Date: 9/5/2024

Job Description and Duties

Under the general direction of the Attorney Supervisor, and Staff Services Manager I, the Staff Services Analyst (SSA) is responsible for obtaining Board restitution orders, assisting in preparing legal affidavits for restitution hearings, and responding to subpoenas and other requests for information served on the California Victim Compensation Board (CalVCB).

This position provides hybrid telework opportunities, with employees required to work in-person at least two days per week.

This position is designated under the Conflict of Interest Code. The position is responsible for making or participating in the making of governmental decisions that may potentially have a material effect on personal financial interests. The appointee is required to complete Form 700 within 30 days of appointment and once per year. Failure to comply with the Conflict of Interest Code requirements may void the appointment.

You will find additional information about the job in the Duty Statement .

Minimum Requirements

• STAFF SERVICES ANALYST

Additional Documents

• Job Application Package Checklist
• Duty Statement

Position Details

Department information.

The California Victim Compensation Board (CalVCB) is a state program dedicated to provide financial assistance to victims of crime and help them restore their lives. At CalVCB, we work to reduce the impact of crime of victims’ lives. We reimburse crime-related expenses, connect victims with services and support, and do all we can to inform and empower victims.

The CalVCB is a special funded department under the direction of the Government Operations Agency.  If your goal is to make a difference in a small, compassionate agency, this is the job for you.  We value diversity and inclusion, facilitate, and support employee recognition, and actively promote career development.  If you are interested in becoming part of a diverse workforce where you have a sense of accomplishment and purpose, CalVCB invites you to apply for this employment opportunity.  

Our Mission: CalVCB is a trusted partner in providing restorative financial assistance to victims of crime.

Our Vision: CalVCB helps victims of crime restore their lives.

Diversity, Equity, and Inclusion (DEI) Statement:  CalVCB is committed to recruiting and retaining a talented and skilled workforce that reflects the diversity of California, and to creating a work environment in which all employees are valued, included, and empowered.

LinkedIn: https://www.linkedin.com/company/calvcb/

Special Requirements

A completed and detailed State application must be received in the Human Resources Unit or postmarked by the final filing date and include the following:

• On the Examination/Employment Application (STD. 678) enter the Job Control Number and Position Title in the “Examination(s) or Job Title(s) For Which You Are Applying” Section.
• If you are applying using list eligibility please ensure you have taken the exam or have verified your past exam is still active.
• Cover Letters, Resumes, Statement of Qualifications, etc. DO NOT replace the required Examination/Employment Application STD. 678.
• For experience/education to qualify during the application screening process, and to ensure that minimum qualifications can be determined, applicants MUST include all employment history on the Employment Application (STD 678), including detailed job descriptions/duties, hours worked per week, and start/end dates (MM/DD/YYYY).  Application packages without this information may be disqualified and/or will experience delayed processing times and your eligibility for this position may be impacted.
• Do not include your Social Security Number, method of eligibility, or LEAP information in your application package.
• If you are using education to meet the minimum qualifications, please include a copy of your unofficial transcripts for verification. Foreign transcripts must be accompanied by an academic credential evaluation. Please utilize the following link to view approved agencies: Foreign Transcript Evaluation (CL-635) (ca.gov)

Application Instructions

Completed applications and all required documents must be received or postmarked by the Final Filing Date in order to be considered. Dates printed on Mobile Bar Codes, such as the Quick Response (QR) Codes available at the USPS, are not considered Postmark dates for the purpose of determining timely filing of an application.

Who May Apply

How To Apply

Address for Mailing Application Packages

You may submit your application and any applicable or required documents to:

Address for Drop-Off Application Packages

You may drop off your application and any applicable or required documents at:

Required Application Package Documents

The following items are required to be submitted with your application. Applicants who do not submit the required items timely may not be considered for this job:

• Current version of the State Examination/Employment Application STD Form 678 (when not applying electronically), or the Electronic State Employment Application through your Applicant Account at www.CalCareers.ca.gov. All Experience and Education relating to the Minimum Qualifications listed on the Classification Specification should be included to demonstrate how you meet the Minimum Qualifications for the position.
• Resume is optional. It may be included, but is not required.

A Supplemental Application is required at the time of your application submittal. Please see the “Supplemental Application” section of this job advertisement for detailed instructions for the Supplemental Application submission.

Desirable Qualifications

• Demonstrated ability to act independently with open-mindedness, flexibility, tact and good judgement.
• Ability to effectively handle stress and deadlines in a fast-paced work environment.
• Ability to proble m-solve and use critical and creative thinking to effectively perform work.
• Display good interaction skills and the ability to deal professionally, congenially and in a personable manner with the public, other governmental entities, and staff at all levels.
• Communicate successfully, verbally and in writing, in a diverse community as well as with individuals from varied backgrounds.
• Understand, follow and enforce all safety rules and procedures.
• Be supportive of management and coworkers.

CalVCB employees are eligible for a number of benefits. Health benefits and leave programs are available for most permanent, full-time employees and some permanent, part-time employees. Benefit eligibility may depend on the length of service and may be subject to collective bargaining agreements, which are contracts negotiated between the State of California and employee organizations that define employees' wages, hours, and conditions of employment.

Some added benefits CalVCB offers include:

• Flexible Work Hours
• Generous healthcare benefits - Health, Dental, and Vision Insurance
• 11 Paid Holidays
• Retirement and Savings Plans
• Group Legal Services
• Employee Assistance Program
• Ongoing training and development
• Short-Term Disability Program
• Convenient transportation options, including light-rail and pre-tax parking
• Nearby restaurants

For more details about employee benefits, visit the California Department of Human Resources website .

Contact Information

The Human Resources Contact is available to answer questions regarding the position or application process.

Please direct requests for Reasonable Accommodations to the interview scheduler at the time the interview is being scheduled. You may direct any additional questions regarding Reasonable Accommodations or Equal Employment Opportunity for this position(s) to the Department's EEO Office.

CalVCB is located at 400 R Street in downtown Sacramento, blocks from the light rail and public transportation and within walking distance to restaurants, Sacramento River levee bike trail, the State Capitol, farmer’s markets and the Golden 1 Arena. Our building has easy access to I-5, Highway 50 and Highway 80.  

Statement of Qualifications

The Statement of Qualifications (SOQ) is a narrative discussion regarding how the applicant’s education, training, experience, and skills meet the criteria outlined below. In addition, the SOQ serves as documentation of each applicant’s ability to present information clearly and concisely in writing. Please address how you possess each SOQ criteria, numerically in the same order outlined below, using specific examples of your education, training, and experience.

The SOQ must be typed, single spaced, no smaller than a 12-point font, and no more than two (2) pages in length. You must provide direct responses to each of the numbered items listed below.

Applications received without an SOQ, those that do not follow the instructions in this section, or answer the specific SOQ criteria below will not be considered. Cover letters and resumes do not take the place of SOQ. The SOQ must be submitted along with the STD 678.

• Please describe your experience in handling a high-volume caseload with competing priorities and deadlines. 
• Please provide an example of how you have advised or provided information to others on a policy or procedure.

Equal Opportunity Employer

The State of California is an equal opportunity employer to all, regardless of age, ancestry, color, disability (mental and physical), exercising the right to family care and medical leave, gender, gender expression, gender identity, genetic information, marital status, medical condition, military or veteran status, national origin, political affiliation, race, religious creed, sex (includes pregnancy, childbirth, breastfeeding and related medical conditions), and sexual orientation.

It is an objective of the State of California to achieve a drug-free work place. Any applicant for state employment will be expected to behave in accordance with this objective because the use of illegal drugs is inconsistent with the law of the State, the rules governing Civil Service, and the special trust placed in public servants.

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Business Proposal Cover Letter

Proposal maker.

The cover letter of a business proposal is as important as the proposal itself. And it is quite distressing to know that some people do not put the right amount of time and effort in making a cover letter. It is in fact very critical to just see the cover letter as additional work in creating the whole business proposal.

Proponents of business proposals spend countless days and nights perfecting the business proposal but only spend a couple of minutes making a cover letter. Not only does it shout neglect, it can also be interpreted as being unprepared. Remember that the cover letter covers the proposal, it is the first piece of the proposal that the investor sees.

The cover letter directly addresses the person in charge of reviewing your business proposal. It is your chance to blow away and convince the investor to take a chance with your proposal. Neglecting its importance will greatly affect the chances of achieving the intended success of the business proposal. You may also see email cover letter examples.

Importance of a Cover Letter in the Business Proposal

The cover letter of the business proposal is one of the most important parts of the business proposal itself. It has been proven that in general, three parts of the business proposal are examined meticulously; the cover letter/i ntroduction/ executive summary , the costs and the timescales.

The cover letter has a strong correlation with the executive summary of the proposal. Therefore, the cover letter is the stripped down version of the executive summary. It only presents the key points on the major topics of the business proposal. It stands independently on its own; when the investor is unable to read the business proposal as a whole or even the executive summary, the cover letter can still present the major keys of the whole business proposal. You may also see business proposal letter examples.

Your cover letter is your chance to have a personal word with the investor and prepare him/her for what’s in-store. It should state that there is in fact a business proposal attached with the letter and that you are applying for a business loan or to start your own business. It also states the benefits the investor will gain when they invest in your business and it helps you make the investors believe that there is a good return of investment in your business. You may also like application letter examples & samples.

It does not merely introduce what the business proposal is all about, in fact it clearly summarizes the major points made in the executive summary. It carefully distills the message you are trying to relay in your business proposal. And since it is a summary of a summary, it does not need to be lengthy. So long as the major points have been thoroughly discussed and presented, your cover letter is doing just fine. You may also check out professional cover letter examples.

As mentioned before, it also acts as the cover of your proposal. Therefore, it should display your passion, eagerness and desire to fully pursue and work for the intended project. As it aims to convince the investors, important details that greatly affect the whole proposal must be included in the cover letter. You might be interested in business letter examples.

Business Proposal Cover Letter Template

• Google Docs

Size: 87 KB

Business Funding Proposal Cover Letter Template

Size: 70 KB

Business Proposal Cover Letter Example

Size: 167 KB

Are you on the lookout for a Nonprofit Cover Letter Examples template? Then, checkout this template now. It not only comes with high quality design but you can also use it in any way you want. The editable and customizable option will make it easier to choose your template design in an efficient way.

Structure of the Cover Letter

Aside from all the necessary parts like the address, greetings, closings, etc. it is important to know the major structure of a cover letter for your business proposal.

1. Introduction

It is the most important part of you letter. It is the hook and it should immediately capture the reader’s attention. You can start it broadly but not too broad that you’ll need to dive into so much detail. However, it is always a better option to be direct and straight to the point. You may also see appointment letter examples & samples.

You introduction must briefly introduce you as the proponent and should carefully explain your purpose and ideas. Shock them with your unique ideas and urge them read more of the letter and the business proposal. It should be captivating and spark interest in your proposal. It is important to clearly but briefly the purpose and goals of your proposal in your letter .

For example,  “This letter is intended to formally propose septic tank cleaning services for the Name of Apartment Complex. We have been successfully the number one septic tank draining and cleaning service provider in more than 10 apartment complexes in CITY, for the past 25 years and would be happy to give testimonials from our customers. We respond 24/7 to all emergency requirements and make sure the septic tanks in every apartment is working efficiently.” You may also like complaint letter examples & samples.

The body of your letter should be direct and avoid indecision. It must clearly explain and justify the purpose of your business proposal. ‘Maybes’ and ‘Ifs’ have no place in your letter since nothing breaks trust faster than indecision and being unsure. You have to prove that you are worth every penny that the investor might invest in your proposal. You may also check out reference letter examples.

It communicates how qualified you are as the proponent in implementing the proposal. The body should provide evidence of your qualifications and the study you have conducted in the feasibility of the proposed subject. It should be clear to the investors that you have given your proposal enough thought, study and research so that can trust your vision. You might be interested in employee reference letter samples .

Eliminate the possibility of doubt. The investor must fully understand your objectives and how you plan to achieve them. Always highlight your qualifications but avoid sounding conceited. For example you can describe how adequate you are in the field, how well trained your team is or how advance your equipment are. This will let the investor know that you or your company are entirely capable of doubling what they invest. You may also see new hire welcome letter examples.

3. Conclusion

In the conclusion, always invite them to read the business proposal as a whole. It’s always a welcomed lead-on to encourage the reader to read the rest of your proposal since you have provided a well-researched and well-written proposal that supports your claims. You may also like official resignation letter examples.

Always aim to encourage them to take a chance on reading and understanding the rest of your proposal since it is the main purpose of your cover letter. Most importantly, include your contact information in the closing of your letter so they know when and where to reach you whenever they need further discussion on the matter. You may also check out termination letter examples & samples.

Foundation Proposal Cover Letter Example

Size: 295 KB

Editable Business Proposal Cover Letter Example

Size: 60 KB

How to Write a Business Proposal Cover Letter

1. Should you decide to use an electronic format or even yet a video and go paperless, it is also acceptable. However, if you want to pursue the traditional way, the cover letter of your business proposal must be in a business or professional format. It must follow the structure of basic business letter .

You can start with the basic format before the actual content. The header of your letter should include the name of your company, your address, and your contact information. You can then add the name of the recipient along with his/her designation and their company’s contact information. Do not forget the date in your letter. Then, address the recipient with his/her title, for example, Mr. Ms. Mrs. Engr., etc. After so, choose the right closing for your letter like ‘Sincerely’ or ‘Respectfully.’ At this point your letter should look like this:

2. Depending on the nature the proposal, it can either be solicited or unsolicited, the requirement for the proposal or the problem to be addressed must be discussed. If the proposal is solicited, ask yourself why the investor has sought out your products or services, or what problems do they have that you can easily solve. In this way, you can start the introduction of your letter accordingly. For example in a solicited proposal you can start by saying: “As we discussed in our last meeting…” and then immediately state the issue/requirement in the same single sentence. You may also see how to write a personal letter with examples .

If you are submitting an unsolicited business proposal, start your letter immediately with a hook. You need to truly shock your readers so they can be encouraged to read more. Stating a pertinent question always works or monetary consequences of a problem to evoke strong emotions. For example, “How would you like to increase your sales by 50% in the next 6-months while lowering your marketing expenses?” or “An average company loses $1,000 every day on electrical wastage! Our solution eliminates that electrical waste.” You may also like notice letter examples .

3. Advertise what you can bring to the table. Tell your readers that you have conducted studies to help prove that you can be a big asset to the company. Talk about the analysis you conduct to help figure out the problem and the solutions you can and will provide. State the results of those studies that back up your claims. It can be presented in a bullet point format following an sentence or two about the analysis. The list should clearly explain the goals you try to achieve through your product and//or services. You may also check out recommendation letter examples & samples .

For example:

“We will analyze/have analyzed (as may be applicable) the complete operation of your company and we have found that through the use of our service, your company will:

• Increase brand awareness
• Increase marketing ROI by over 50%
• Rationalize your pre-sales and post-sales process
• Acquire new client segments including the untapped local client base, and lower your new client acquisition costs by over 30%”

4. In this step, it is important to realize that this doesn’t mean highlighting the features of your product or services. This is when and where you clearly explain the benefits the investor will have from your proposal. You should clearly state what the investor will receive upon purchasing your products and/or services. For example, “By using this approach to the whole operation process, we can help your company increase revenue by over 50% while at the same time creating an excellent environment for your future products.” You may also see vehicle expense reimbursement policy letter .

It is also optional to include you qualifications as the proponent. You can mention why and how you or yur company is the best option to handle the issue over the others.

5. Finally, as the conclusion of your letter or video, you have to tell the recipient what you want him/her to do next. This is a blatant but very much necessary to do so since this is the call-to-action part of your letter. This can be encouraging the recipient to read the rest of the proposal or urging him/her to get in touch in order to discuss the proposal in person. In this case, you have to include your relevant contact information so the recipient can easily get in touch. You may also like how to write a job resignation letter .

By the end of all of these steps, your letter will look like this:

Size: 256 KB

In conclusion, a cover letter for a business proposal is a vital part of the whole. It introduces not only you as the proponent but also the main purpose and the goal of the proposal as well. It briefly explains the major points made in the content and the whole proposal and prepares the reader for what he/she is about to read. You may also see how to write an official letter .

We hope we were able to clearly explain the importance and how to write your own cover letter for you business proposal.

Text prompt

• Instructive
• Professional

Generate a proposal for a new school recycling program

Compose a proposal for a school field trip to a science museum.

Hospital Custodian Cover Letter Sample

A hospital custodian cover letter accompanies your resume and serves as your professional introduction.

Whether you are seeking an entry-level position or are mid-way in your career, always highlight your relevant skills in your cover letter.

The recruiters want to know what you can do for them. Your resume summarizes your past experiences, but a cover letter focuses on the future.

In short, your Hospital Custodian cover letter is your final shot at earning an interview.

Here is a sample cover letter for the hospital custodian job.

Hospital Custodian Cover Letter Example

Lucas Walker 677 South Hemisphere Ave Newark NJ 89000 (003) 222-1111 lucas_ 1 @ email . com

June 29, 2022

Mr. Harris Willington HR Manager Newark General Hospital Newark NJ 89000

Dear Mr. Willington:

Your recent job listing for a Hospital Custodian position caught my attention because my profile is an exact match for your job requirements.

As a seasoned hospital custodian with more than a decade of relevant experience, I offer exceptional skills in:

• Cleaning and sanitization of hospital rooms
• Maintaining clean-up carts
• Disinfecting and cleaning hospital washrooms
• Safely disposing of infectious waste as per OSHA guidelines
• Shift checklist and supplies inventory maintenance

Staying committed to one profession for as long as 11 years teaches a lot. Over the years I believe the job descriptions you have mentioned in your advertisement have become a part of daily routine. I assure you that if hired, your hospital will benefit from my expertise and experience. I assure you that maintaining hygiene and meeting cleanliness standards will become a non-issue for you the day you entrust me with this job.

If you read my enclosed resume you will instantly see that my profile exactly fits your requirements. Known for my professionalism and excellent interpersonal skills I have also been training Hospital Janitors in the past. My previous employers have always benefited from my smart solutions to problems and cost-effective organization and usage of cleaning supplies and equipment.

I offer all these benefits and more to your hospital. Please give me a call at (003) 524-9565 to set up an interview date so we can discuss the prospect further.

Thank you for your time and consideration.

Lucas Walker

• Hospital Custodian Resume Sample
• School Custodian Cover Letter Sample
• How to Write a Resume for Custodian Position? Complete Guidance
• Custodian Cover Letter Example

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Proposed Rule

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Unsafe and Unsound Banking Practices: Brokered Deposits Restrictions

A Proposed Rule by the Federal Deposit Insurance Corporation on 08/23/2024

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This document has been published in the Federal Register . Use the PDF linked in the document sidebar for the official electronic format.

• Document Details Published Content - Document Details Agency Federal Deposit Insurance Corporation CFR 12 CFR 303 12 CFR 337 Document Citation 89 FR 68244 Document Number 2024-18214 Document Type Proposed Rule Pages 68244-68272 (29 pages) Publication Date 08/23/2024 RIN 3064-AF99 Published Content - Document Details
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This table of contents is a navigational tool, processed from the headings within the legal text of Federal Register documents. This repetition of headings to form internal navigation links has no substantive legal effect.

FOR FURTHER INFORMATION CONTACT:

Supplementary information:, i. introduction and policy objectives, ii. background, a. brokered deposits—a history of concerns and related research, brokered deposits and troubled institutions, brokered deposits in bank failures 2007-2017, brokered deposits—historical research and changes in law and regulation, b. current statutory and regulatory framework, deposit broker definition in the 2020 final rule, exclusive deposit placement arrangements in the 2020 final rule, the primary purpose exception in the 2020 final rule, the reciprocal deposits limited exception, c. developments post-2020 final rule, call report brokered deposits data, expansion of certain third-party arrangements that deliver deposits to idis, d. need for rulemaking, iii. discussion of the proposed rule, a. deposit broker definition, engaged in the business of placing and facilitating, deposit allocation, b. exclusive deposit placement arrangement, c. primary purpose exception analysis, application process under the primary purpose exception, 1. eligible applicants for the primary purpose exception process, 2. proposed additional factors for primary purpose exception application, d. designated exceptions, 1. 25 percent test designated exception, proposed broker-dealer sweep primary purpose exception, 2. enabling transactions designated exception, 3. other designated business exceptions, e. agent institution status for reciprocal deposits, iv. alternatives, a. no designated exception for sweep deposits, b. designated exception for sweep deposits to affiliated idis, v. expected effects, potential effects on idis, potential effects on less than well-capitalized idis, potential costs to idis of the proposed rule, potential benefits of the proposed rule, potential effects on consumers, potential effects on third parties that may or may not be deposit brokers, reporting compliance costs, vi. administrative law matters, a. regulatory flexibility act, reasons why this action is being considered, policy objectives, legal basis, description of the rule, small entities affected, expected effects, all small, fdic-insured institutions, potential costs to small, fdic-insured institutions, potential benefits to small, fdic-insured institutions, less than well-capitalized institutions, nonbank subsidiaries of small, fdic-insured institutions that may or may not be deposit brokers, third parties that may or may not be deposit brokers, reporting requirements, other statutes and federal rules, b. paperwork reduction act, c. plain language, d. riegle community development and regulatory improvement act of 1994, vii. request for comments, deposit broker definition, primary purpose exception analysis, designated exceptions, reciprocal deposits, alternatives, appendix 1: sweep deposits and brokered deposit reporting, call report, december 31, 2023, list of subjects, 12 cfr part 303, 12 cfr part 337, authority and issuance, part 303—filing procedures, part 337—unsafe and unsound banking practices.

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Federal Deposit Insurance Corporation

• 12 CFR Parts 303 and 337
• RIN 3064-AF99

Federal Deposit Insurance Corporation.

Notice of proposed rulemaking.

The Federal Deposit Insurance Corporation (FDIC) is inviting comment on proposed revisions to its regulations relating to the brokered deposits restrictions that apply to less than well-capitalized insured depository institutions. The proposed rule would revise the “deposit broker” definition and would amend the analysis of the “primary purpose” exception to the “deposit broker” definition. The proposed rule would also amend two of the designated business relationships under the primary purpose exception and make changes to the notice and application process for the primary purpose exception. In addition, the proposed rule would clarify when an insured depository institution can regain status as an “agent institution” under the limited exception for a capped amount of reciprocal deposits.

Comments must be received by the FDIC no later than October 22, 2024.

You may submit comments on this document using any of the following methods:

• Agency Website: https://www.fdic.gov/​resources/​regulations/​federal-register-publications/​ . Follow the instructions for submitting comments on the agency website.
• Email: [email protected] . Include RIN 3064-AF99 in the subject line of the message.
• Mail: James P. Sheesley, Assistant Executive Secretary, Attention: Comments—RIN 3064-AF99, Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC 20429.
• Hand Delivery: Comments may be hand delivered to the guard station at the rear of the 550 17th Street NW Building (located on F Street) on business days between 7 a.m. and 5 p.m.
• Public Inspection: Comments received, including any personal information provided, may be posted without change to https://www.fdic.gov/​resources/​regulations/​federal-register-publications/​ . Commenters should submit only information that the commenter wishes to make available publicly. The FDIC may review, redact, or refrain from posting all or any portion of any comment that it may deem to be inappropriate for publication, such as irrelevant or obscene material. The FDIC may post only a single representative example of identical or substantially identical comments, and in such cases will generally identify the number of identical or substantially identical comments represented by the posted example. All comments that have been redacted, as well as those that have not been posted, that contain comments on the merits of the notice will be retained in the public comment file and will be considered as required under all applicable laws. All comments may be accessible under the Freedom of Information Act.

Division of Risk Management Supervision: Thomas F. Lyons, Associate Director, 202-898-6850, [email protected] ; Karen J. Currie, Chief, 202-898-3981, [email protected] ; Judy E. Gross, Senior Policy Analyst, 202-898-7047, [email protected] .

Legal Division: Vivek Khare, Senior Counsel, 202-898-6847, [email protected] ; Chantal Hernandez, Counsel, 202-898-7388, [email protected] ; Ryan McCarthy, Counsel, 202-898-7301, [email protected] .

The FDIC's mission is to maintain stability and public confidence in the nation's financial system by, among other things, overseeing financial institutions for safety and soundness and insuring deposits. Since the enactment of section 29 of the Federal Deposit Insurance Act (FDI Act), [ 1 ] which prohibits less than well-capitalized  [ 2 ] insured depository institutions  [ 3 ] (IDIs) from accepting brokered deposits, [ 4 ] the FDIC has continued to study the role of brokered deposits in the performance of IDIs, their impact on the safety and soundness of IDIs, and how they affect losses to the Deposit Insurance Fund (DIF) when an IDI fails.

The FDIC has found significant reliance on brokered deposits increases an institution's risk profile, particularly as its financial condition weakens. The FDIC's statistical analyses and other studies have found that an IDI's use of brokered deposits in general is correlated with a higher probability of failure and higher losses to the DIF upon failure. [ 5 ]

On December 15, 2020, the FDIC Board adopted a final rule that established a new framework for analyzing whether certain deposit arrangements qualify as brokered deposits (the 2020 Final Rule). [ 6 ] After the 2020 Final Rule took effect, the FDIC initially observed a significant decline in reported brokered deposits. IDIs reported a nearly $350 billion, or 31.8 percent, decline in brokered deposits between the first and second quarters of 2021 after the 2020 Final Rule became effective, which is the largest quarterly decline since brokered deposit reporting began in 1983. [ 7 ] This significant decline can be interpreted as IDIs reclassifying a considerable amount of deposits from brokered to not brokered, as a result of the 2020 Final Rule.

This is because, in large part, the changes made by the 2020 Final Rule have narrowed the types of deposit-related activities that are considered brokered; in the FDIC's view, this narrowing is problematic because these deposits continue to present the same risks as before the 2020 Final Rule. The 2020 Final Rule also expanded the types of business relationships that are eligible to be excepted from the “deposit broker” definition. For instance, the 2020 Final Rule excluded certain factors, such as the payment of fees, from the “deposit broker” definition that had historically been viewed as relevant to whether a deposit is brokered. The 2020 Final Rule also expanded the scope of the primary purpose exception to the deposit broker definition, which has allowed for a ( print page 68245) significant number of business lines to be excluded from the deposit broker definition. [ 8 ] As a result, this has led to certain deposit arrangements that would have been viewed as brokered prior to the 2020 Final Rule as no longer being classified as brokered, even though such deposits present the same or similar risks as brokered deposits.

Based on the FDIC's experience, the decline in reported brokered deposits is also due, in part, to some IDIs misunderstanding and misreporting deposits under the 2020 Final Rule. Despite the FDIC's efforts in conducting industry outreach and providing clarifying information, [ 9 ] the FDIC has observed a number of challenges with entities understanding certain provisions of the 2020 Final Rule, which has resulted in some level of inaccurate and inconsistent application of the rule. Many of these challenges arise from § 337.6(a)(5)(v)(I)( 1 )( i ) in the rule allowing third parties to provide a notice regarding the 25 percent test primary purpose exception. For example, the FDIC has observed that some IDIs receiving deposits through a sweep arrangement have incorrectly relied upon a third party's 25 percent primary purpose exception notice to not report certain deposits as brokered, without conducting analyses, or without having access to the appropriate documentation to conduct analyses, and despite the involvement of an additional third party that meets the “deposit broker” definition. [ 10 ] In turn, this has resulted in some deposits that meet the “brokered deposit” definition under the 2020 Final Rule not being correctly reported as brokered on IDIs' Consolidated Reports of Condition and Income (Call Reports). [ 11 ]

If left unchanged, this underreporting of brokered deposits could have serious consequences for IDIs and the DIF, which is used to protect depositors of insured banks and to resolve failed banks, as such underreporting impedes the ability to evaluate the extent of reliance on brokered deposits and the effects on an IDI's risk profile for supervisory and deposit insurance pricing purposes. Moreover, the FDIC is concerned that these issues expose IDIs individually and the banking system more broadly to the type of risk the brokered deposit restrictions are intended to address—namely that a less than well-capitalized institution could rely on less stable third-party deposits for rapid growth that may weaken the safety and soundness of IDIs and the banking system and expose the FDIC to increased losses.

Additionally, experiences since the 2020 Final Rule have shown that some of the underlying reasons to narrow the coverage of the rule have proved to be problematic. For example, First Republic Bank, [ 12 ] which failed in May 2023 after contagion effects from the failure of Silicon Valley Bank, experienced a significant run on affiliated sweep deposits, and in particular uninsured affiliated sweep deposits. [ 13 ] This suggests that in the case of First Republic, affiliated sweeps were no more “sticky” than unaffiliated sweeps, contrary to the exemption in § 337.6(a)(5)(iii)(C)( 1 ) for affiliated entities. Moreover, in the case of the failure of crypto company Voyager, [ 14 ] it was not considered a “deposit broker”—and Voyager deposits were not considered brokered—because it had an exclusive deposit placement arrangement with one IDI. Under the 2020 Final Rule, exclusive deposit placement arrangements are excluded from the definition of a “deposit broker” even though Voyager's activities were the same as a “deposit broker,” and the failure of Voyager created the same legal, operational, and liquidity risks for its partner IDI as if it had, say two partner banks, and had been classified as a deposit broker. FDIC staff is concerned that less than well-capitalized IDIs may seek these exclusive deposit placement arrangements as their condition is deteriorating without being subject to the limitations on brokered deposits, even though the risk is the same.

To address these concerns and challenges, the FDIC is proposing amendments that would (1) simplify certain definitions of the 2020 Final Rule to reduce operational challenges and reporting burdens on IDIs; (2) help ensure uniform and consistent reporting of brokered deposits by IDIs; and (3) strengthen the safety and soundness of the banking system by ensuring that less than well-capitalized institutions are restricted from relying on brokered deposits to support risky, rapid growth.

Brokered and high-rate deposits became a concern among bank regulators and Congress before any statutory restrictions were enacted. This concern arose because (1) such deposits could facilitate a bank's rapid growth in risky assets without adequate controls; (2) once problems arose, a problem bank could use such deposits to fund additional risky assets to attempt to “grow out” of its problems, a strategy that ultimately increased the losses to the DIF when the institution failed; and (3) brokered and high-rate deposits were sometimes considered less stable because at that time, deposit brokers (on behalf of customers), or the customers themselves, were often drawn to high rates and prone to leave the bank quickly to obtain a better rate or if they became aware of problems at the bank. [ 15 ]

The FDIC has recognized that “historically, most institutions that use brokered deposits have done so in a prudent manner and appropriately measure, monitor, and control risks associated with brokered deposits.”  [ 16 ] ( print page 68246) However, an IDI's use of brokered deposits often raises its risk profile, which has long been a concern among bank regulators  [ 17 ] and Congress. [ 18 ]

As early as the 1970s, the FDIC noted concerns about brokered deposits, as stated in the FDIC's Division of Bank Supervision Manual: “The use of brokered deposits has been responsible for abuses in banking and has contributed to some bank failures, with consequent losses to the larger depositors, other creditors, and shareholders.”  [ 19 ] For example, in 1982, brokered deposits were found to have been a key cause of the largest payout of insured deposits at that time with the failure of Penn Square Bank. Brokered deposits contributed to Penn Square Bank's rapid deposit growth, which were used to fund high risk loans. About $1 billion of these loans were then sold to Continental Illinois Bank, which then suffered significant deposit withdrawals related to problem loans and required open-bank assistance from the FDIC. [ 20 ]

The FDIC and the DIF were significantly affected by the financial crisis between 2007 and 2017. During this time, excluding Washington Mutual, Inc., 530 IDIs failed and were placed in FDIC receivership and, as of March 31, 2024, the estimated loss to the DIF for these institutions is $71.9 billion. [ 21 ]

Based on Call and Thrift Financial Report data, 47 institutions that failed relied heavily on brokered deposits and each caused an estimated loss to the DIF  [ 22 ] of over $100 million as of December 31, 2017. These 47 institutions held total assets representing 20.9 percent of the $396.9 billion in aggregate total assets of the 530 failed institutions, but accounted for $27.3 billion in estimated losses to the DIF, representing 38 percent of the $71.9 billion in all estimated losses to the DIF for that same period. [ 23 ] For example, the largest of these 47 institutions was IndyMac Bank, F.S.B. (IndyMac), which failed on July 11, 2008. As of March 31, 2024, the estimated loss to the DIF for IndyMac is $12.0 billion, representing 39 percent of IndyMac's $30.7 billion in total assets at failure and approximately 16.7 percent of the total $71.9 billion in estimated losses to the DIF from bank failures between 2007 and 2017. In its last Thrift Financial Report (TFR) filed prior to failure, as of June 30, 2008, IndyMac reported brokered deposits of $5.5 billion, which represented 29.0 percent of the institution's $18.9 billion in total deposits. [ 24 ] In its TFR filed for the third quarter of 2005, approximately 12 quarters before the institution failed, IndyMac reported $1.4 billion in brokered deposits, representing 18.4 percent of its then $7.4 billion in total deposits. This data demonstrates that IndyMac accelerated its use of brokered deposits as its problems mounted. [ 25 ]

Another example is ANB Financial National Association (ANB Financial), which failed on May 9, 2008. As of March 31, 2024, the estimated loss to the DIF for ANB Financial was $1.0 billion, representing 54 percent of the institution's $1.9 billion in total assets at failure. In its Call Report filed prior to failure, i.e., as of March 31, 2008, ANB Financial reported brokered deposits of $1.6 billion, which represented 87.0 percent of the institution's $1.8 billion in total deposits. In the Call Report filed for the second quarter of 2005, approximately 12 quarters before the institution failed, ANB Financial reported $257 million in brokered deposits, representing 50.5 percent of its then $508 million in total deposits. [ 26 ]

In the aftermath of the financial crisis of 2008 and 2009, section 1506 of the Dodd-Frank Wall Street Reform and Consumer Protection Act directed the FDIC to conduct a study of core and brokered deposits, which the FDIC completed in 2011. In the FDIC's Study on Core Deposits and Brokered Deposits, [ 27 ] the FDIC found that higher brokered deposit use was associated with higher probability of bank failure and higher DIF losses, and that, on average, brokered deposits were correlated with higher levels of asset growth, higher levels of nonperforming loans, and a lower proportion of core deposit funding. [ 28 ] For example, the FDIC's study describes the following characteristics of brokered deposits that have posed risks to the DIF: (1) rapid growth—brokered deposits could be gathered quickly and used imprudently to fund risky assets or investments; and (2) less stable nature (described in the study as “volatility”)—brokered deposits might flee if the broker (or the underlying customer) moves funds to another IDI, if the IDI holding the deposit becomes troubled, or if rates or terms are more appealing elsewhere. [ 29 ]

In December 2017, the FDIC published Crisis and Response: An FDIC History, 2008-2013, which showed that failures and CAMELS rating ( print page 68247) downgrades were more concentrated among IDIs that made relatively greater use of wholesale funding sources, which includes brokered deposits. Further, it indicated that significant reliance on wholesale funds could reflect an IDI's decision to pursue aggressive growth, and that if an IDI were under stress, wholesale counterparties may be more inclined to withdraw deposits or demand additional collateral. [ 30 ]

Moreover, the Inspectors General of the Federal banking agencies have prepared reports detailing how brokered deposits were sometimes used by failed banks between 2007 and 2017. [ 31 ] In these reports, brokered deposits were commonly cited as contributing to problems at troubled and failed institutions, and IDIs that failed were typically subject to the brokered deposit restrictions because their capital levels deteriorated to below well capitalized. [ 32 ]

In 2019, the FDIC updated its analysis in the 2011 Study on Core Deposits and Brokered Deposits with data through the end of 2017. [ 33 ] As part of that update, statistical analysis found that brokered deposit use is associated with higher probability of an IDI's failure and higher DIF loss rates. Brokered deposits may elevate an IDI's risk profile in part because they are frequently used as a substitute for IDI's core deposits and, less frequently, for equity, and so from the FDIC's perspective, IDIs that use brokered deposits operate with a higher risk liability structure relative to IDIs that do not use brokered deposits. [ 34 ]

Section 29 of the FDI Act, [ 35 ] imposes restrictions on a less than well-capitalized IDI from accepting funds obtained, directly or indirectly, by or through any deposit broker for deposit into one or more deposit accounts (referred to as brokered deposits). [ 36 ] Section 29 does not directly define the term “brokered deposit.” Section 337.6 of the FDIC's Rules and Regulations implements section 29  [ 37 ] and provides that a “brokered deposit” is a deposit obtained, directly or indirectly, from or through the mediation or assistance of a deposit broker. [ 38 ] Thus, the meaning of the term “brokered deposit” turns upon the definition of “deposit broker.”

Under section 29, a “deposit broker” includes any person engaged in the business of placing third-party deposits, or facilitating the placement of third-party deposits, with IDIs or the business of placing deposits with IDIs for the purpose of selling interests in those deposits to third parties. [ 39 ] An agent or trustee also meets the “deposit broker” definition when establishing a deposit account to facilitate a business arrangement with an IDI to use the proceeds of the account to fund a prearranged loan. [ 40 ]

The “deposit broker” definition is subject to the following nine statutory exceptions:  [ 41 ]

1. An insured depository institution, with respect to funds placed with that depository institution;

2. An employee of an insured depository institution, with respect to funds placed with the employing depository institution;

3. A trust department of an insured depository institution, if the trust in question has not been established for the primary purpose of placing funds with insured depository institutions;

4. The trustee of a pension or other employee benefit plan, with respect to funds of the plan;

5. A person acting as a plan administrator or an investment adviser in connection with a pension plan or other employee benefit plan provided that that person is performing managerial functions with respect to the plan;

6. The trustee of a testamentary account;

7. The trustee of an irrevocable trust (other than one described in 12 U.S.C. 1831f(g)(1)(B) ), as long as the trust in question has not been established for the primary purpose of placing funds with insured depository institutions;

8. A trustee or custodian of a pension or profit-sharing plan qualified under section 401(d) or 403(a) of the Internal Revenue Code of 1986; or

9. An agent or nominee whose primary purpose is not the placement of funds with depository institutions (the “primary purpose exception”).

Section 337.6 includes the statutory exceptions to the “deposit broker” definition plus a tenth exception for an IDI acting as an intermediary or agent of a U.S. Government department or agency for a government sponsored minority or women-owned depository institution program. [ 42 ]

In the 2020 Final Rule, the FDIC amended the brokered deposit regulation to further define circumstances under which a third party is a “deposit broker.” More specifically, the 2020 Final Rule provides a person is engaged in the business of placing deposits if that person receives third-party funds and deposits those funds at more than one IDI. [ 43 ] It also provides that a person is engaged in the business of facilitating the placement of deposits if that person is engaging in any of the following activities with respect to third-party deposits placed at more than one IDI:

• The person has legal authority, contractual or otherwise, to close the account or move the third party's funds to another IDI;
• The person is involved in negotiating or setting rates, fees, terms, or conditions for the deposit account; or
• The person engages in matchmaking activities. [ 44 ]

A person is engaged in “matchmaking activities” if the person proposes deposit allocations at, or between, more than one IDI based upon both the particular deposit objectives of a specific depositor or depositor's agent, and the particular deposit objectives of specific IDIs. [ 45 ] The “matchmaking activities” definition further provides that a proposed deposit allocation is based on the particular objectives of:

• A depositor or depositor's agent when the person has access to specific financial information of the depositor or ( print page 68248) depositor's agent and the proposed deposit allocation is based upon this information; and
• An IDI when the person has access to the target deposit-balance objectives of specific IDIs and the proposed deposit allocation is based upon this information. [ 46 ]

The “matchmaking activities” definition, however, excludes deposits placed by a depositor's agent with an IDI affiliated with the depositor's agent. [ 47 ]

As noted above, the 2020 Final Rule provides that a person is engaged in the business of placing deposits or facilitating the placement of deposits of third parties if that person receives third-party funds and deposits those funds at more than one IDI or if that person is engaged in certain activities with respect to deposits placed at more than one IDI. [ 48 ] The preamble to the 2020 Final Rule specified that any person that has an exclusive deposit placement arrangement with one IDI and is not placing or facilitating the placement of deposits at any other IDI, will not be “engaged in the business” of placing, or facilitating the placement of, deposits at IDIs and therefore will not meet the “deposit broker” definition. [ 49 ]

The 2020 Final Rule provides that the primary purpose exception applies when, with respect to a particular business line, the primary purpose of the agent's or nominee's business relationship with its customers is not the placement of funds with depository institutions. [ 50 ] Moreover, the 2020 Final Rule identifies the following 14 designated business exceptions as meeting the primary purpose exception where, with respect to a particular business line:

1. Less than 25 percent of the total assets that the agent or nominee has under administration for its customers is placed at depository institutions (25 percent test);

2. 100 percent of depositors' funds that the agent or nominee places, or assists in placing, at depository institutions are placed into transactional accounts that do not pay any fees, interest, or other remuneration to the depositor (enabling transactions test);

3. A property management firm places, or assists in placing, customer funds into deposit accounts for the primary purpose of providing property management services;

4. The agent or nominee places, or assists in placing, customer funds into deposit accounts for the primary purpose of providing cross-border clearing services to its customers;

5. The agent or nominee places, or assists in placing, customer funds into deposit accounts for the primary purpose of providing mortgage servicing;

6. A title company places, or assists in placing, customer funds into deposit accounts for the primary purpose of facilitating real estate transactions;

7. A qualified intermediary places, or assists in placing, customer funds into deposit accounts for the primary purpose of facilitating exchanges of properties under section 1031 of the Internal Revenue Code;

8. A broker dealer or futures commission merchant places, or assists in placing, customer funds into deposit accounts in compliance with 17 CFR 240.15c3 through 3(e) or 17 CFR 1.20(a) ;

9. The agent or nominee places, or assists in placing, customer funds into deposit accounts for the primary purpose of posting collateral for customers to secure credit-card loans;

10. The agent or nominee places, or assists in placing, customer funds into deposit accounts for the primary purpose of paying for or reimbursing qualified medical expenses under section 223 of the Internal Revenue Code;

11. The agent or nominee places, or assists in placing, customer funds into deposit accounts for the primary purpose of investing in qualified tuition programs under section 529 of the Internal Revenue Code;

12. The agent or nominee places, or assists in placing, customer funds into deposit accounts to enable participation in the following tax-advantaged programs: Individual retirement accounts under section 408(a) of the Internal Revenue Code, Simple individual retirement accounts under section 408(p) of the Internal Revenue Code, or Roth individual retirement accounts under section 408A of the Internal Revenue Code;

13. A Federal, State, or local agency places, or assists in placing, customer funds into deposit accounts to deliver funds to the beneficiaries of government programs; and

14. The agent or nominee places, or assists in placing, customer funds into deposit accounts pursuant to such other relationships as the FDIC specifically identifies as a designated business relationship that meets the primary purpose exception. [ 51 ]

As noted, the 2020 Final Rule allows the FDIC to identify additional relationships as designated business exceptions to the primary purpose exception. [ 52 ] On January 10, 2022, the FDIC published an additional designated exception for certain non-discretionary custodians engaging in specific arrangements related to the placement of deposits. [ 53 ]

For the 25 percent and enabling transactions test exceptions, a third party or an IDI on behalf of a third party must file a notice with the FDIC for a particular business line. [ 54 ] Under the current process, the FDIC provides immediate email acknowledgement of receipt of the notice filing and the third party that is the subject of the notice may rely upon the applicable designated exception for the particular business line. Notice filers under the 25 percent test must also satisfy quarterly reporting requirements, while notice filers under the enabling transactions test must provide an annual certification. [ 55 ] For the other designated exceptions, no notice, application, or reporting is required.

For agents or nominees that do not meet one of the designated business exceptions, such third parties, or an IDI on behalf of a third party, may apply for a primary purpose exception in accordance with the requirements contained in § 303.243(b). [ 56 ] Moreover, the 2020 Final Rule provides a specific application process for a primary purpose exception to enable transactions with fees, interest, or other remuneration provided to the depositor. [ 57 ]

In 2018, section 29 of the FDI Act was amended as part of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), to allow “agent institutions” to except a capped amount of “reciprocal deposits” ( print page 68249) from treatment as brokered deposits. [ 58 ] Section 29 generally provides that reciprocal deposits are excepted when the total amount of reciprocal deposits held by an agent institution does not exceed the lesser of $5 billion or 20 percent of the total liabilities of the agent institution. [ 59 ]

Reciprocal deposits are defined by statute to mean deposits received by an agent institution through a deposit placement network with the same maturity (if any) and in the same aggregate amount as covered deposits placed by the agent institution in other network member banks. [ 60 ] A “covered deposit” is a deposit that is submitted for placement through a deposit placement network by an agent institution and does not consist of funds that were obtained (directly or indirectly) by a deposit broker before their submission for placement in a deposit placement network. [ 61 ] A “deposit placement network” is a network in which IDIs participate for processing and receipt of reciprocal deposits. [ 62 ]

On December 18, 2018, the FDIC adopted a final rule (the 2018 Reciprocal Deposits Rule), to amend its regulations that implement brokered deposits and interest rate restrictions to conform with the changes to section 29 by EGRRCPA. [ 63 ] Consistent with section 29, the 2018 Reciprocal Deposits Rule defines “agent institution” to mean an IDI that places a covered deposit through a deposit placement network at other IDIs in amounts that are less than or equal to the standard maximum deposit insurance amount, specifying the interest rate to be paid for such amounts, if the IDI:

• As of its most recent annual examination under 12 U.S.C. 1820(d) , was found to have a composite condition of outstanding or good and is well capitalized;
• Has obtained a brokered deposit waiver from the FDIC;  [ 64 ] or
• Does not receive an amount of reciprocal deposits that causes the total amount of reciprocal deposits held by the agent institution to be greater than the average of the total amount of reciprocal deposits held by the agent institution on the last day of each of the four calendar quarters preceding the calendar quarter in which the agent institution was found not to have a composite condition of outstanding or good or was determined to be not well capitalized. [ 65 ]

Under the 2018 Reciprocal Deposits Rule, an “agent institution” can except reciprocal deposits from being classified as brokered deposits up to its applicable statutory caps—the “general cap” or “special cap.” Under the “general cap,” an agent institution may except reciprocal deposits up to the lesser of the following amounts from being classified as brokered deposits: $5 billion or an amount equal to 20 percent of the agent institution's total liabilities. Reciprocal deposits in excess of the general cap, as well as those reciprocal deposits that do not meet section 29's limited exception, may not take advantage of the limited exception and are to be reported as brokered deposits. The “special cap” applies if the IDI either was found to not have a composite condition of outstanding or good when most recently examined under section 10(d) of the FDI Act or is not well capitalized and has not received a waiver from the brokered deposit restrictions under section 29(c). In this case, the IDI may still meet the “agent institution” definition if the IDI does not receive reciprocal deposits that result in its total reciprocal deposits to be in excess of the “special cap.” The “special cap” is the average amount of reciprocal deposits held at the IDI on the last day of each of the four calendar quarters preceding the calendar quarter in which the agent institution was found not to have a composite condition of outstanding or good or was determined to be not well capitalized. If, after the IDI becomes subject to the “special cap,” an IDI receives reciprocal deposits that result in its total reciprocal deposits to be in excess of its special cap, it is no longer an agent institution. If an IDI is not an agent institution, it is not eligible to use the limited exception, and all of its reciprocal deposits should be reported as brokered deposits.

As such, the amount of reciprocal deposits excepted from being considered brokered turns on whether the IDI qualifies as an agent institution and if so, whether the IDI is subject to the special cap.

As stated above, following the April 1, 2021, effective date of the 2020 Final Rule, IDIs reported a significant decrease in brokered deposits in their Call Report filings. As illustrated in chart 1, from March 31, 2021, to June 30, 2021, brokered deposits declined by nearly $350 billion, or 31.8 percent, the largest decline since brokered deposit reporting began in 1983. Brokered deposit balances continued to decline through March 31, 2022, following the extended compliance date of January 1, 2022. The FDIC notes, however, that as of the fourth quarter of 2023, brokered deposits at all IDIs are 22.5 percent higher than the quarter before the 2020 Final Rule took effect (first quarter 2021), despite the considerable amount of deposits that are no longer considered brokered based on the 2020 Final Rule changes. This increase in reported brokered deposits is due to increases in insured brokered deposit balances, including brokered reciprocal deposits. These increases may be driven in part by higher interest rates, which have exacerbated competition for deposit funding, and depositors seeking additional deposit insurance coverage, particularly following the failures that occurred in the first half of 2023.

Since the April 1, 2021, effective date of the 2020 Final Rule, the FDIC has observed the continued expansion of IDI arrangements with third parties to deliver deposit products (particularly those with transactional features) for a variety of IDI objectives, including to expand geographic reach, offer innovative products, and raise deposits. In these arrangements, an IDI typically makes deposit products or services available through an arrangement in which a third party, rather than the IDI, markets, distributes, or otherwise provides access to or assists in the placement of customer deposits at particular IDIs. Depending on the services provided by the third party, and the availability of regulatory exceptions to the “deposit broker” definition ( e.g., the “enabling transactions” test under the primary purpose exception or the exclusive placement arrangement exception), the deposits may or may not be considered brokered.

Recent events, however, underscore the precarious nature of these funding arrangements as they can be highly unstable, with either the third party or the underlying customers moving funds based on market conditions or other factors. These arrangements can also be prone to other forms of disruption such as the potential or actual insolvency of the third party, as recently demonstrated by the bankruptcy of Synapse Financial Technologies, Inc. (Synapse). [ 66 ] Synapse, sometimes referred to as a fintech “middleware” company, was a deposit broker that facilitated the placement of customer deposits for various fintech companies looking for banking services with IDIs. Moreover, the rapid growth with such deposits without corresponding growth in risk management practices can expose IDIs to operational, liquidity, and legal risks.

In certain circumstances, these arrangements are excluded from the brokered deposit definition pursuant to changes implemented by the 2020 Final Rule, even though the arrangements exhibit the same risks as brokered deposits. An example is the failure of Voyager, which was exempted from the brokered deposit definition by virtue of the exclusive deposit placement arrangement exception. Where less than well-capitalized institutions may be able to continue to grow with such deposits, because they are not currently treated as brokered deposits, the FDIC believes that these arrangements have the potential to undermine the safety and soundness of such institutions individually, and financial stability more broadly.

Under the current regulations, less than well-capitalized IDIs have unrestricted access to third-party deposits that are excluded from being classified as brokered because certain provisions in the current rule do not fully consider important safety and soundness considerations. This in turn raises the risk that less than well-capitalized IDIs may rely on less stable third-party deposits for rapid growth that could ultimately expose the DIF to increased losses.

In addition, as discussed above, many IDIs do not correctly apply the definitions in the rule, particularly with respect to the involvement of additional third parties within a deposit placement arrangement. This issue has led to a number of IDIs misreporting brokered deposits as nonbrokered. This is particularly concerning because all IDIs, even well-capitalized IDIs, have an obligation to file Call Reports accurately  [ 67 ] and are responsible for understanding the regulation and how the involvement of third parties within a deposit placement arrangement may, or may not, result in the deposits being brokered. [ 68 ]

With respect to the 2018 Reciprocal Deposits Rule, the rule states how an IDI may meet the “agent institution” ( print page 68251) definition, but does not address how an IDI that no longer meets the definition may regain its status as “agent institution” to qualify for the exception. The FDIC has received several questions from IDIs on this issue since the 2018 Reciprocal Deposits Rule took effect.

To address the issues raised above, the FDIC is proposing a rule that would strengthen its brokered deposit regulations by revising certain provisions to further support the statutory language and purpose of the brokered deposit restrictions, as well as simplifying certain provisions that pose operational challenges. To achieve these objectives, and as discussed in more detail below, the proposed rule would:

• Revise certain provisions of the “deposit broker” definition, including removing the “matchmaking activities” prong and replacing it with a deposit allocation provision;
• Eliminate the exclusive deposit placement arrangement exception to restore the regulations' applicability to a third party that otherwise meets the definition of a “deposit broker,” when that third party is involved with deposits placed at one or more IDIs;
• Amend the analysis underlying the “primary purpose” exception to the “deposit broker” definition, including revising the 25 percent test designated exception and eliminating the enabling transactions designated exception; and
• Update the application and notice processes for the primary purpose exception and limit such processes to IDIs.

As part of the proposal, IDIs relying on an existing approved primary purpose exception application, a 25 percent test designated exception notice, or an enabling transactions designated exception notice or application, would no longer be able to rely on such exceptions. Such IDIs would need to submit a new primary purpose exception application based upon updated criteria or, if applicable, rely upon a new designated business exception that meets the primary purpose exception based upon the proposed changes discussed below. If a deposit placement activity, however, meets one of the designated exceptions that are preserved under the proposal, the IDI may continue to rely upon the primary purpose exception without further action.

Finally, as part of this release, the FDIC is also proposing to clarify when an IDI that has lost “agent status” because it no longer qualifies for the reciprocal deposit exception, can regain status as an “agent institution”.

The FDIC invites comments on all aspects of this proposal, as well comments in response to specific questions in section VII of this document.

The proposed rule would amend the “deposit broker” definition by revising the “engaged in the business of placing deposits” (“placing”) and “engaged in the business of facilitating the placement of deposits” (“facilitating”) prongs. The revised “deposit broker” definition would (1) combine the “placing” and “facilitating” prongs, (2) remove the term “matchmaking activities” and replace it with a deposit allocation provision, and (3) add a new factor related to fees. Specifically, the proposed rule would provide that a person is engaged in the business of placing or facilitating the placement of deposits of third parties if that person engages in one or more of the following activities:

• The person receives third-party funds and deposits those funds at one or more IDIs;
• The person is involved in negotiating or setting rates, fees, terms, or conditions for the deposit account;
• The person proposes or determines deposit allocations at one or more IDIs (including through operating or using an algorithm, or any other program or technology that is functionally similar); or
• The person has a relationship or arrangement with an IDI or customer where the IDI, or the customer, pays the person a fee or provides other remuneration in exchange for or related to the placement of deposits.

Under the 2020 Final Rule, the “placing” and “facilitating” prongs are currently separate provisions under the “deposit broker” definition. Under section 29, a “deposit broker” includes “any person engaged in the business of placing deposits, or facilitating the placement of deposits, of third parties.”  [ 69 ] The proposed rule would combine the “placing” and “facilitating” parts of the deposit broker definition into a single definition of when a third party is “engaged in the business of placing, or facilitating the placement of, deposits of third parties” with a single set of factors. From the FDIC's experience, some IDIs and other stakeholders have been misapplying the current “deposit broker” definition by only looking at one of these two parts of the “deposit broker” definition in determining whether a particular third party meets the definition. For example, an IDI or other stakeholder may correctly determine that a third party's conduct falls outside the “placing” provision under the current rule but may still incorrectly determine that the deposits are not brokered by failing to review whether the same conduct meets the “facilitating” provisions. The FDIC believes this proposed change of combining the “placing” and “facilitating” regulatory provisions would better align the regulatory text with the statutory language, while also making the “deposit broker” definition more straightforward for IDIs and other stakeholders to apply because it would require review of a single set of closely related factors rather than a review of multiple provisions.

The proposal would retain the first two prongs of the current facilitation definition;  [ 70 ] however, it would remove the term “matchmaking activities” and provide that a person who proposes or determines deposit allocations would meet the “deposit broker” definition.

The FDIC has observed a number of IDIs and other stakeholders incorrectly determining that a third-party deposit allocator is not a “deposit broker” by misapplying the current “matchmaking activities” definition. The FDIC provided clarifications through the issuance of Questions and Answers Related to the Brokered Deposits Rule;   [ 71 ] however, the industry continues to misconstrue this provision. Additionally, IDIs have informed the FDIC of the difficulties in obtaining necessary information, such as third-party contracts, to effectively evaluate whether any party in a deposit arrangement, including any additional third party, meets the “matchmaking” definition and thus the “deposit broker” definition. These challenges have resulted in some IDIs misreporting a significant amount of deposits as nonbrokered.

As such, the FDIC believes eliminating the current “matchmaking activities” definition and replacing it with the proposed deposit allocation ( print page 68252) provision would make it more operationally workable for IDIs and other stakeholders while continuing to focus the definition on the specific conduct that indicates a third party is facilitating the placement of customer deposits—proposing or determining deposit allocations of third-party deposits. The proposal would specify that a “deposit broker” includes a person who proposes or determines deposit allocations, including through the operation or use of an algorithm or functionally similar program or technology. The FDIC views this conduct as objectively within the “deposit broker” definition if the algorithm or functionally similar program or technology proposes or determines deposit allocations among IDIs by directing the flow, or facilitating the flow, of third-party funds to be deposited at a particular IDI.

Moreover, unlike the “matchmaking activities” definition under the 2020 Final Rule, the proposed prong related to deposit allocation services would not exclude third parties that provide these services between affiliated entities. As discussed in the preamble to the 2020 Final Rule, the matchmaking activities prong would not include persons that engage in activities that would otherwise satisfy the matchmaking prong if the activities are conducted between an IDI and an affiliated party. [ 72 ] Under the proposed rule, the FDIC would no longer view deposit allocation functions of third parties as administrative in nature merely due to the affiliated relationship between the person placing or facilitating the placement of deposits and the IDI. Rather, recent experience has demonstrated that third parties do propose or determine deposit allocations at both unaffiliated and affiliated IDIs and these deposits, when uninsured, do not seem to act in a more “sticky” manner just because there is an affiliation between a broker and an IDI. Accordingly, the FDIC would treat affiliated and unaffiliated third parties similarly under the proposed deposit allocation prong of the “deposit broker” definition.

Finally, the proposed rule would add that a person is “engaged in the business of placing, or facilitating the placement of, deposits of third parties” if that person has a relationship or arrangement with an IDI or customer where the IDI, or the customer, pays the person a fee or provides other remuneration in exchange for, or related to, the placement of deposits. The statutory definition of “deposit broker” includes any third party that is engaged in the business of placing deposits, or facilitating the placement of deposits, on behalf of third parties ( i.e., a depositor) with IDIs. As such, the FDIC believes that including fees or other remuneration in determining whether a third party meets the “deposit broker” definition is consistent with the statute as the receipt of fees indicates that the third party is engaged in the business of providing deposit placement services or facilitating the placement of deposits. Fees that would be covered under the proposed “deposit broker” definition would include fees for administrative services provided in connection with a deposit placement arrangement.

Moreover, the FDIC had, for the more than 30 years since enactment of section 29 up until the adoption of the 2020 Final Rule, considered fees in analyzing deposit broker relationships, including whether a person receives fees from IDIs based upon the number of accounts opened or the volume of deposits placed. In the past, FDIC generally found that the amount, nature, and purpose of fees paid for the placement of third-party deposits were relevant to the analysis of the relationship among the IDI, depositor, and third-party intermediary. This was because fees paid to a third-party intermediary reflected whether the involvement of the third-party intermediary was to earn fees (engaged in the business) through placing or facilitating the placement of third-party deposits to the IDI. For example, the FDIC often found that fees paid to a third-party intermediary would play a key role in incentivizing referral volume of third-party deposits to the IDI. Since the 2020 Final Rule took effect, the FDIC has continued to observe that third-party intermediaries receive fees or other remuneration in exchange for, or related to, the placement of third-party deposits, including volume-based fees, but may not be defined as a “deposit broker” under the current regulations. Without a consideration of fees or other remuneration, and assuming the third party does not meet one of the other parts of the “deposit broker” definition, a less than well-capitalized IDI could accept third-party deposits that share characteristics with deposits the FDIC has historically observed as constituting a brokered deposit. For example, such third-party deposits may be more likely to leave the IDI if another IDI were to offer more favorable terms or pay a higher fee, putting stress on the IDI to replace the withdrawn funds on reasonable terms in a timely manner.

Accordingly, the FDIC believes that fees and other remuneration are important considerations when determining whether a person is a “deposit broker” and explicitly including this factor within the definition would be appropriate to further align the regulation with section 29's statutory purpose of restricting less than well-capitalized IDIs' access to brokered deposits. [ 73 ]

Passive Listing Services. Under the proposed rule, it is the FDIC's view that a passive listing service that only advertises information on interest rates offered by IDIs on deposit products would not meet the “deposit broker” definition. It is the FDIC's understanding that such passive listing services do not receive or deposit third-party funds at one or more IDIs nor have the legal authority to close a deposit account or move third party's funds to another IDI. Any funds to be invested in deposit accounts are remitted directly by the depositor to the IDI and not, directly or indirectly, by or through the passive listing service. In addition, such passive listing services are not involved in negotiating or setting rates, fees, terms, or conditions for the deposit account. Further, passive listing services do not propose, allocate, facilitate, or determine deposit allocations. Rather, the passive listing services are simply providing information on the interest rates offered by various IDIs but not directing depositors to a particular IDI. Lastly, the FDIC believes that any fees paid to passive listing services are not in exchange for or related to the placement of deposits. Instead, passive listing services receive subscription fees paid by subscribers for information on the rates gathered by the listing service and listing fees paid by IDIs for the opportunity to list or “post” the IDIs' rates.

Under the FDI Act, the term “deposit broker” is defined, in relevant part, to include “any person engaged in the business of placing deposits, or facilitating the placement of deposits, of third parties with insured depository institutions . . . .”  [ 74 ] In the 31 years between when Congress adopted the brokered deposit restrictions in 1989, ( print page 68253) until the 2020 Final Rule, the FDIC had never construed the reference to “insured depository institutions” in the deposit broker definition to exclude deposits to a single IDI. Call Report instructions for reporting brokered deposits had never excluded deposits where a third party was involved with deposits at only one IDI. This prior approach was consistent with the general statutory interpretation rule that provides that words importing the plural include the singular, unless the statutory context indicates otherwise. [ 75 ]

The 2020 Final Rule amended the FDIC's regulations so that the brokered deposit restrictions do not apply where a third party that otherwise meets the definition of deposit broker has an exclusive deposit placement arrangement at only one IDI. [ 76 ]

Under this change, an IDI can rely for 100 percent of its deposits on an unaffiliated third party without any of those deposits considered brokered. The IDI can fall below well capitalized and still rely on those third-party placed deposits for 100 percent of its funding without any of those deposits being considered brokered, which provides an avenue for less than well-capitalized IDIs to obtain and retain brokered deposits that appears to conflict with intent of the statutory prohibition. An IDI can form multiple “exclusive” third party relationships to fund itself without any of those deposits considered brokered. Thus, the current regulation exposes the banking system to the kind of risk the brokered deposit restrictions were intended to address.

Further, there has never been any dispute that the brokered deposit restrictions are intended to apply to brokered certificates of deposit (CDs). While the 2020 Final Rule makes clear that a brokered CD is not eligible for a primary purpose exception, a market participant has pointed out to the FDIC that, because of the exclusion, the plain meaning of the definitions of “engaged in the business of placing deposits” and “engaged in the business of facilitating the placement of deposits” could be read to exclude a third party that arranges the issuance of a brokered CD for only one IDI.

For these reasons, and to mitigate any unintended effects of the interpretation as related to the statute's purpose and its application to brokered CDs, the FDIC is proposing to revise the brokered deposit regulations to restore their applicability to any third party that meets the definition of deposit broker, including those involved in placing deposits at only one IDI.

The proposed rule would revise the analysis for determining when an agent or nominee meets the primary purpose exception to the “deposit broker” definition. Currently, the statute and regulation state that the term “deposit broker” does not include an agent or nominee whose primary purpose is not the placement of funds with IDIs. [ 77 ] In connection with this provision, the preamble to the 2020 Final Rule provided that the primary purpose exception would apply when the agent's or nominee's business relationship with its customers is not the placement of funds with IDIs. [ 78 ]

Accordingly, the current regulation focuses the primary purpose exception analysis on the third party's business relationship with its customers. While that is an important part of analyzing the exception, the FDIC believes that the relationship between the IDI and third party is also important in determining the purpose motivating the placement of third-party deposits and if the primary purpose is or is not the placement of funds with IDIs.

The statutory definition of the “primary purpose exception” excludes an agent or nominee whose primary purpose is not the placement of third-party funds with IDIs from being considered a “deposit broker.”  [ 79 ] Consistent with the statutory language, the focus of the exception is on the role of the agent or nominee (or third party) and whether that third party places customer deposits at an IDI as a secondary purpose in furtherance of some other “primary purpose.” Understanding the intent of the third party in placing those deposits at a particular IDI or IDIs is necessary in determining whether the deposit placement activity is primary. As such, in understanding why the third party is placing deposits on behalf of customers at particular IDIs, consideration should be given to both the customer-third party relationship and the third party-IDI relationship. This is because the primary purpose of a customer's business relationship with a third party may be distinct from the intention of the third party in placing those customer funds at particular IDIs.

For example, a third party that meets the primary purpose exception under the current rule may also be steering its customers to particular IDIs in an effort to maximize its own fees for the placement of customer deposits. The current rule, however, does not consider this latter purpose in analyzing whether the third party meets the primary purpose exception.

Accordingly, the proposal provides that the primary purpose exception to the “deposit broker” definition would apply when an agent or nominee whose primary purpose in placing customer deposits at IDIs is for a substantial purpose other than to provide a deposit-placement service or FDIC deposit insurance with respect to particular business lines. [ 80 ]

The proposed interpretation of the primary purpose exception would be similar to how the FDIC historically interpreted the exception before 2020. Prior to the 2020 Final Rule, the FDIC through long-standing staff advisory opinions and published FAQs interpreted the primary purpose exception to apply when the intent of the third party, in placing deposits or facilitating the placement of deposits, was to promote some other goal ( i.e., other than the goal of placing deposits for others). [ 81 ] As part of its analysis, the FDIC considered the relationship between the third party and the IDI, including whether fees were paid to the third party, in determining whether the third party's primary intent, or primary purpose, was the placement of deposits. For instance, the FDIC stated, through the published FAQs, that the primary purpose exception would not apply when the intent of the third party was to earn fees through the placement of deposits. [ 82 ]

The FDIC believes that restoring this aspect of the primary purpose exception analysis is necessary to fully consider the intent driving the placement of third-party deposits at an IDI. As detailed below, the proposal would provide additional factors to consider, including fees and other remuneration provided to the third party, in determining whether the intent of the third party in placing deposits at an IDI is for a substantial purpose other than to provide a deposit-placement service or FDIC deposit insurance. ( print page 68254)

The proposed rule would also update the primary purpose application process under § 303.243(b). The 2020 Final Rule allows a third party or an IDI on behalf of a third party to submit a primary purpose exception application. From the FDIC's experience, some third parties have provided insufficient information for the FDIC to process an application, such as failing to provide required information on all parties within a deposit arrangement, including the receiving IDIs. Moreover, the FDIC has observed some IDIs misunderstand the primary purpose exception application approvals provided to third-party applicants, as the IDI was not the applicant and the approval does not apply to its particular deposit placement activity with the third party; these misunderstandings have contributed to problems with IDIs filing accurate Call Reports.

For these reasons, the FDIC proposes to no longer allow third parties to apply for a primary purpose exception. As proposed, each IDI wishing to rely on a primary purpose exception would be required to submit an application for the specific deposit placement arrangement that it has with the third party involved. This would provide the FDIC the opportunity to review the specific facts and circumstances surrounding the deposit placement activity between the individual IDI applicant and the third party in determining whether a primary purpose exception should be approved.

Under the 2020 Final Rule, applicants that seek a primary purpose exception, other than applications for primary purpose exception to enable transactions with fees, interest, or other remuneration, must include, to the extent applicable, the following information:

• A description of the deposit placement arrangements between the third party and IDIs for the particular business line, including the services provided by any relevant third parties;
• A description of the particular business line;
• A description of the primary purpose of the particular business line;
• The total amount of customer assets under management by the third party, with respect to the particular business line;
• The total amount of deposits placed by the third party at all IDIs, including the amounts placed with the applicant, if the applicant is an IDI, with respect to the particular business line;
• Revenue generated from the third party's activities related to the placement, or facilitating the placement, of deposits, with respect to the particular business line;
• Revenue generated from the third party's activities not related to the placement, or facilitating the placement, of deposits, with respect to the particular business line;
• A description of the marketing activities provided by the third party, with respect to the particular business line;
• The reasons the third party meets the primary purpose exception;
• Any other information the applicant deems relevant; and
• Any other information that the FDIC requires to initiate its review and render the application complete. [ 83 ]

The proposed rule would add new factors to be considered as part of the primary purpose exception application. Specifically, the proposed rule would amend § 303.243(b)(4)(ii) to include consideration of whether:

• The IDI, or customer, pays fees or other remuneration to the agent or nominee for deposits placed with the IDI and the amount of such fees or other remuneration, including how the amount of fees or other remuneration is calculated;
• The agent or nominee has discretion to choose the IDI(s) at which customer deposits are or will be placed; and
• The agent or nominee is mandated by law to disburse funds to customer deposit accounts.

The proposed rule would also require IDIs to provide copies of contracts relating to the deposit placement arrangement, including all third-party contracts, to supplement the IDI's description of the deposit placement arrangement that is currently required under the 2020 Final Rule. These new factors would supplement the factors that were provided under the 2020 Final Rule. [ 84 ] The FDIC believes consideration of these factors, in conjunction with the existing factors, is necessary to fully consider the purpose of the placement of third-party deposits at an IDI and whether the third party is eligible for a primary purpose exception. Below, the FDIC discusses how the new factors would be viewed as part of its analysis, but notes that approval of a primary purpose exception application would be based on the consideration of all applicable factors and any additional information provided by the applicant.

Fees. By including the amount of fees or other remuneration, and how the amount is determined, that an IDI or customer pays to the agent or nominee for deposits placed with the IDI, the FDIC would obtain relevant information to help determine whether the third-party intermediary is placing deposits for a substantial purpose other than to provide a deposit-placement service or FDIC deposit insurance. The FDIC would balance the information on fees with the other factors in determining whether the primary purpose exception should be approved.

Discretion. A third party with discretion to choose the IDI(s) to place customer deposits may base their deposit placement decisions on factors such as interest rate competition or fees generated, and may be more likely to move customer funds to other IDIs in a way that makes the deposits less stable. Whether a third party has discretion, however, would be viewed in conjunction with the other factors in determining whether the primary purpose exception is applicable.

Legal obligation. In contrast, a third party disbursing funds mandated by law is discharging its legal obligation and may be less likely to move customers deposits to other IDIs. For example, a third party disbursing customer funds as part of court-mandated settlements could support a finding that the primary purpose in placing customer deposits at IDIs is for a substantial purpose other than to provide a deposit-placement service or FDIC deposit insurance. The FDIC, however, would balance this consideration with the other factors, such as the payment of fees, in determining the third party's primary purpose in placing deposits.

Accordingly, the FDIC believes consideration of these proposed factors, in conjunction with the existing application factors, [ 85 ] would be necessary in analyzing applications under the proposed revised primary purpose exception analysis. Furthermore, under the proposal, primary purpose exception applications previously approved pursuant to the 2020 Final Rule would be revoked. As a result, IDIs and third parties relying on previously approved applications would no longer be able to do so under the proposed rule. IDIs would be required to submit a new application to seek a primary purpose exception and report the associated deposits as brokered, ( print page 68255) until and unless an application is approved.

The proposed rule would amend the 25 percent test and eliminate the enabling transactions test designated exception. In contrast to the other designated business exceptions, based on the FDIC's experience, these exceptions are overly broad and cover a variety of different business lines rather than a narrow set of business lines intended by the FDIC's bright-line designated exceptions. Further, the FDIC would likely find that the current 25 percent and enabling transactions tests would not meet the primary purpose exception under the proposed analysis in that the primary purpose of these arrangements in placing customer deposits at IDIs would often not be for a substantial purpose other than to provide a deposit-placement service or FDIC deposit insurance. Moreover, the current notice process does not allow the FDIC to review submissions before an entity can invoke the exception, and many of the submissions have been incomplete, inaccurate, or vague. For these reasons, and as discussed in more detail below, the FDIC is amending the 25 percent test and eliminating the enabling transactions test in a manner that aligns with the proposed updated analysis of the primary purpose exception.

The 2020 Final Rule provides that the primary purpose of an agent's or nominee's business relationship with its customers will not be considered to be the placement of funds at a depository institution, if less than 25 percent of the total assets that the agent or nominee has under administration for its customers, in a particular business line, is placed at IDIs. [ 86 ] Third parties relying on the 25 percent test or an IDI on its behalf must file a notice with the FDIC. [ 87 ]

Before 2005, all sweeps from broker-dealers were defined as brokered deposits because the broker-dealer was placing third-party (customer) funds at IDIs. Between 2005 and 2020, FDIC staff interpreted the primary purpose exception to apply to a broker-dealer that swept customer funds to an affiliated IDI if the activity was conducted within certain parameters. Among the parameters were that (1) swept deposits did not exceed 10 percent of the affiliate's assets and (2) related fees paid by the IDI to the broker-dealer were “flat” fees ( i.e., a “per account” or “per customer” fee) as payment for recordkeeping or administrative services and not payment for placing deposits.

Under the 2020 Final Rule, a broker-dealer that sweeps customer funds to IDIs meets the “deposit broker” definition but is eligible for the primary purpose exception where less than 25 percent of that broker-dealer's total assets under administration for its customers is placed at IDIs. [ 88 ] The presence of a broker-dealer operating under a primary purpose exception, regardless of whether or not the broker-dealer is affiliated with the IDI receiving the deposits, will not, in and of itself, permit an IDI to report such deposits as nonbrokered. As described above, the 2020 Final Rule included in the “deposit broker” definition a “matchmaking services” prong intended to cover third-party deposit allocation service providers when an additional third party is used to place deposits between a broker-dealer and an IDI that is unaffiliated with the broker-dealer. [ 89 ]

Since the implementation of the 2020 Final Rule, the FDIC has encountered a number of challenges with notice filings submitted under the 25 percent test and with reporting associated with sweep deposits. The challenges became more apparent since the new reporting items related to sweep deposits were added to the Call Report shortly after the 2020 Final Rule became effective. [ 90 ] The FDIC anticipated that most unaffiliated sweep deposits would be classified as brokered deposits because of the understanding that most broker-dealers, even those with valid primary purpose exceptions, outsourced their deposit allocation functions to an intervening third party providing “matchmaking activities” and these additional third parties would thus meet the “deposit broker” definition. This has resulted in a large number of unaffiliated sweep deposits being misreported as nonbrokered. [ 91 ] Approximately 27 percent of all IDIs reported a non-zero amount for total sweep deposits that are not brokered deposits as of December 31, 2023. For additional Call Report information, see the tables in appendix 1 to this document.

Reporting Issues with the 25 percent test. Since the 2020 Final Rule became effective, the FDIC has observed several reasons for this misreporting. An IDI must conduct a detailed analysis to accurately determine the status of all third parties involved in a sweep deposit program. The analysis may include a review of the agreements between the broker-dealer and any additional third party within the deposit placement arrangement, including third parties with which an IDI may not have a direct contractual relationship. [ 92 ] The FDIC acknowledges that there may be challenges that IDIs and regulators face in conducting due diligence with respect to these agreements, particularly in situations when the IDI is not a party to the agreements between the broker dealers and the additional third parties. Additionally, as explained above, the FDIC has observed a number of IDIs and other stakeholders misunderstanding the current “matchmaking activities” definition. This indicates that the “matchmaking activities” definition has not been uniformly understood across the industry. This lack of understanding has likely contributed to IDIs overreporting sweep deposits as not brokered when these deposits should be considered brokered.

The proposed rule would revise the current “25 percent test” designated exception and its notice process to (1) align with the proposed analysis of the primary purpose exception and (2) ensure that the FDIC and the IDI can properly determine whether any additional third parties meet the “deposit broker” definition before the exception can be invoked. In order to more clearly describe the business arrangements intended to qualify for this primary purpose exception, the proposed rule would revise the “25 percent test” and rename it as the “Broker-Dealer Sweep Exception” (BDSE).

As proposed, subject to the additional conditions below, the BDSE would be available only to a broker-dealer or investment adviser registered with the Securities and Exchange Commission and only if less than 10 percent of the total assets that the broker-dealer or investment adviser, as agent or nominee, has under management for its customers, in a particular business line, is placed into non-maturity accounts at ( print page 68256) one or more IDIs, without regard to whether the broker-dealer or investment adviser and depository institutions are affiliated.

The FDIC is proposing the BDSE because a third party that places less than 25 percent of its customer's assets under administration in a bank account does not, by itself, demonstrate that the deposit-placement activity is for a goal other than to provide deposit insurance or a deposit placement service. Rather, placing less than 10 percent of customer funds at IDIs would be more indicative that the primary purpose for broker dealers and investment advisers in placing customer funds at IDIs is to temporarily safe-keep customer free cash balances ( e.g., uninvested funds) that are awaiting reinvestment. The FDIC views the 10 percent threshold as evidence that a de-minimis amount of customer funds are placed into deposit accounts for the primary purpose of re-investment rather than to provide a deposit placement service or deposit insurance. Further, lowering the threshold to 10 percent may reduce potential risks to safety and soundness and to the DIF by providing more transparency regarding the characteristics of the deposits so placed. Despite the business relationship between the IDI and the third party placing those deposits, the latter may well have a fiduciary duty and other incentives to transfer those deposits if the IDI is perceived to be weak.

In addition, the proposal would amend one of the key measures used as part of this designated exception from “customer assets under administration” to “customer assets under management.” From the FDIC's experience with the 2020 Final Rule, “customer assets under administration” is a more appropriate measure when including a broader group of business relationships and business lines, whereas “assets under management” would be appropriate under the proposed rule to accurately reflect the scope of the types of services provided by broker dealers and investment advisers. The proposed rule would define “assets under management” to mean securities portfolios and cash balances with respect to which an investment adviser or broker-dealer provides continuous and regular supervisory or management services.

Prior notice requirement for the BDSE when no additional third parties are involved. In order to ensure accurate and uniform reporting by depository institutions receiving sweep deposits from broker-dealers, the proposed rule would allow an IDI to file a designated exception notice for the BDSE on behalf of broker-dealers that place deposits at the IDI only if no additional third party (including any affiliate) is involved in the sweep program.

Under the proposed rule, an IDI would be required to provide a written notice with the following information:

• A description of the deposit placement arrangement between the IDI and the broker-dealer or investment adviser for the particular business line;
• The registration and contact information for the broker-dealer or investment adviser;
• The total amount of customer assets under management by the broker-dealer or investment adviser;
• The total amount of deposits placed by the broker-dealer or investment adviser on behalf of its customers at all IDIs; and
• A certification that no additional third parties are involved in the deposit placement arrangement.

IDIs would be able to rely on the BDSE if the FDIC has not provided a written disapproval within 90 days from submission. The FDIC, within its discretion, could extend the time period for an additional 90 days to provide a written notice of disapproval to the IDI. Further, the FDIC would be able to request additional information at any time after receipt of a written notice. Submissions that fail to include the required information would be considered incomplete and disapproved. Moreover, notice filers with an effective notice would be required to provide quarterly updates within 30 days of the quarter end, with monthly figures for the quarter, to demonstrate continuous compliance with the exception. Lastly, the proposed rule provides that the FDIC would be able to revoke an effective BDSE notice within 15 days of providing the IDI written notice if:

• The broker-dealer or investment adviser no longer meets the criteria to rely on the BDSE;
• An additional third party is involved in the business line;
• The notice or subsequent reporting is inaccurate; or
• The notice filer fails to submit one or more required reports.

The FDIC believes the BDSE notice requirement would be helpful in ensuring the parties who meet the exception can rely on it. The FDIC also believes this notice process would be more operationally workable than the current 25 percent test notice process as the required information would be tailored to specific information to which the receiving IDI should have access or be able to obtain from the broker-dealer or investment adviser.

Application process for sweep arrangements that use additional third parties. In an effort to ensure that the FDIC has the ability to properly scrutinize the role of additional third parties as part of sweep programs, the proposal would create an application process for IDIs that wish to invoke the BDSE when additional third parties are involved in the arrangement. As provided above, the notice process is not available for sweep programs that use additional third parties. The application process would review whether the broker-dealer or investment adviser meets the criteria under the BDSE and it would review whether any additional third party involved in the deposit placement arrangement meets the “deposit broker” definition. If the additional third party meets the “deposit broker” definition, then the FDIC would deny the application and the deposits being placed through the sweep program would be brokered notwithstanding the broker-dealer itself qualifying for a primary purpose exception. The proposed rule would require an application regardless of whether the sweep arrangement involves IDI-affiliated parties. The FDIC believes treating affiliated and unaffiliated relationships the same when an additional third party is involved would help ensure consistent and equitable treatment of sweep deposits across the industry.

The proposed rule would amend § 303.243(b) to describe a new primary purpose exception application process for sweep arrangements that use additional third parties. Specifically, an IDI, on behalf of a broker dealer or investment adviser that places less than 10 percent of customer funds under management into IDIs through the use of an additional third party, would be required to provide the following as part of an application:

• A description of the deposit placement arrangement between the IDI, the broker-dealer or investment adviser, and the additional third party, including the services provided by the additional third party, for the particular business line, and copies of contracts relating to the deposit placement arrangement, including all third party contracts;
• The total amount of deposits placed by the broker-dealer or investment adviser on behalf of its customers at all IDIs;
• Information on whether the additional third party places or facilitates the placement of deposits at IDIs; ( print page 68257)
• Information on whether the additional third party has legal authority, contractual or otherwise, to close the account or move the third party's funds to another IDI;
• Information on fees and the amount of fees paid from any source to the additional third party with respect to its services provided as part of the deposit placement arrangement;
• Information on whether the additional third party has discretion to choose the IDIs at which customer deposits are or will be placed; and
• Any other information that the FDIC requires to initiate its review and render the application complete.

Moreover, the FDIC would be able to request additional information from the applicant at any time during processing of the application.

The proposed rule provides that within 120 days of receiving a complete application, the FDIC would issue a written determination, but the FDIC could extend its review by 120 additional days, with notice. If necessary, the FDIC could further extend its review period, which is more likely when an application involves complex or novel arrangements or issues. If the FDIC receives an incomplete application, the FDIC would, as soon as possible, notify the applicant and explain what is needed to render the application complete. The FDIC would also be able to request additional information at any time during the processing of the filing.

The FDIC would approve an application under this provision if the FDIC finds that the applicant demonstrates that, with respect to the IDI and the particular business line, the (1) broker-dealer or investment adviser meets the criteria for the BDSE and (2) the additional third party involved in the deposit placement arrangement is not a “deposit broker” as defined under the proposed rule.

Prior to the 2020 Final Rule, the FDIC did not distinguish between acting with the purpose of placing deposits for other parties and acting with the purpose of enabling other parties to use deposits to make purchases. The 2020 Final Rule distinguished these two purposes and created a primary purpose exception for third parties that place deposits to allow their customers to enable transactions. IDIs receiving deposits from deposit brokers relying on this exception do not report these deposits as brokered; however, as described below, many of these deposits would not satisfy the proposed primary purpose exception analysis.

A third party qualifies for the current enabling transactions primary purpose exception by either submitting an application or submitting a notice. In a deposit placement arrangement where interest, fees, or other remunerations are provided to the depositor, the agent or nominee must receive prior approval before relying on the enabling transactions primary purpose exception by submitting an application to the FDIC. [ 93 ] Under the enabling transactions test, where 100 percent of customer funds that have been placed at depository institutions, with respect to a particular business line, are placed into transaction accounts, and no fees, interest, or other remuneration is provided to the depositor, the agent or nominee may file a notice with the FDIC to rely on the enabling transactions designated exception. [ 94 ]

The current enabling transactions test would not satisfy the proposed primary purpose exception because placing deposits into accounts with transactional features would not, by itself, prove that the substantial purpose of the deposit placement arrangement is for a purpose other than providing deposit insurance or a deposit-placement service. The FDIC believes that there is no relevant difference between an agent or nominee's purpose in placing deposits to enable transactions and placing deposits to access a deposit account and deposit insurance.

For these reasons, the FDIC is proposing to eliminate the enabling transactions test and the corresponding notice process. As proposed, IDIs that currently rely on a primary purpose of enabling transactions under the notice process could file an application under the general primary purpose exception application process under current § 303.243(b)(4)(ii) (subject to the amendments under the proposed rule), if they believe that the primary purpose in placing customer deposits at IDIs is for a substantial purpose other than to provide a deposit-placement service or FDIC deposit insurance with respect to the particular business line. As discussed above, only IDIs would be permitted to file an application under the proposed rule.

The proposed rule would also eliminate the application process for the enabling transactions exception where interest, fees, or other remuneration is provided to depositors under § 303.243(b)(4)(i). Applications previously approved under this provision would be rescinded. IDIs would be able to submit a new application to seek a primary purpose exception if they believe that the business line may be eligible for the general primary purpose exception.

Under the 2020 Final Rule, the FDIC identified other designated business exceptions that meet the primary purpose exception in addition to the 25 percent and enabling transactions tests discussed above. The proposed rule would retain the remaining designated business exceptions listed in the 2020 Final Rule, as well as the additional designated exception for non-discretionary custodians engaged in the placement of deposits. While the primary purpose interpretation under the proposed rule differs from the interpretation contained in the 2020 Final Rule, the outcome of whether these specific arrangements meet the primary purpose exception would not necessarily change if evaluated under the proposed revised interpretation based on the FDIC's current understanding of these specific arrangements.

The FDIC believes the remaining existing designated business exceptions are narrowly tailored to address specific business lines or functions and would satisfy the proposed primary purpose exception analysis in that the primary purpose of these arrangements in placing customer deposits at IDIs is for a substantial purpose other than to provide a deposit-placement service or FDIC deposit insurance. However, the FDIC will continue to monitor these specific arrangements, and if any changes indicate that the primary purpose of any of these arrangements is to provide a deposit-placement service or FDIC deposit insurance, the FDIC would revise the designated exceptions through the notice and comment process.

As discussed above, the amount of reciprocal deposits an IDI can except from being considered brokered under the limited exception turns on whether the IDI qualifies as an agent institution and if so, whether the IDI is subject to the special cap. An IDI that meets the agent institution definition can lose its agent institution status due to no longer meeting the qualifying provisions under section 29 and the 2018 Reciprocal Deposits Rule. Section 29 and the 2018 Reciprocal Deposits Rule do not clarify ( print page 68258) how and when an IDI might regain agent institution status after losing such status. As a result, the FDIC has received numerous questions about this issue.

An IDI that is an agent institution may lose that status, and thereby lose the ability to use the exception. For example, if a well-capitalized IDI with a composite condition of outstanding or good has its CAMELS composite condition downgraded below outstanding or good at its most recent examination conducted under section 10(d) for the FDI Act, it becomes subject to a special cap. If the IDI subsequently receives reciprocal deposits that results in its total reciprocal deposits exceeding its special cap, it is no longer an agent institution. Thus, the IDI no longer qualifies for the limited exception and must report all its reciprocal deposits as brokered deposits.

In response to questions raised, and in recognition that the current statute and regulation do not provide clarity on this issue, the FDIC proposes to add a new § 337.6(e)(3) to provide a path for an IDI to regain agent institution status. An IDI that lost its agent institution status would be eligible to regain its agent institution status as follows:

• If the IDI is well capitalized, the date the IDI is notified that its CAMELS composite condition is rated outstanding or good at its most recent examination under 12 U.S.C. 1820(d) ;
• If the IDI is well-rated, the date the IDI is notified, or is deemed to have notice, that it is well capitalized under regulations implementing section 38 of the FDI Act issued by the appropriate Federal banking agency for that institution;
• The date the FDIC grants a brokered deposit waiver; or
• On the last day of the third consecutive calendar quarter during which the IDI did not at any time receive reciprocal deposits that caused its total reciprocal deposits to exceed its special cap.

To illustrate, if as the result of an examination, a well-capitalized IDI that had had a CAMELS composite rating of “3” receives written notice, including, for example, a transmittal letter, informing it that it had received an upgrade to a composite rating of “2” the IDI would regain its agent institution status as of the date of the written notice under the proposal. If the FDIC grants a brokered deposit waiver to an adequately capitalized IDI, the IDI would regain agent institution status on the date the FDIC grants the waiver. If the IDI does not fit into either of these categories and lost its agent institution status during the fourth quarter of 2024 but can demonstrate that it did not receive any reciprocal deposits that caused its total reciprocal deposits to exceed its special cap at any time during the first, second, or third quarters of 2025, it would regain agent institution status on the last day of the third quarter of 2025.

As part of this proposal, the FDIC is also inviting comment on the following alternatives that are under consideration.

As discussed above, the proposed rule would provide a BDSE that would be available to a broker-dealer or investment adviser that places or facilitates the placement of less than 10 percent of the total assets that it has under management for its customers at one or more IDIs, and no additional third parties are involved in the deposit placement arrangement. Further the proposed rule would provide a specific application process for sweep arrangements that involve an additional third party.

The FDIC is considering whether a designated business exception for sweep deposits should instead be rescinded. Under this alternative, IDIs would be required to report all sweep deposits as brokered because the broker-deal or investment adviser would meet the “deposit broker” definition since it would be placing or facilitating the placement of the third-party deposits. IDIs receiving sweep deposits, however, could apply for the general primary purpose exception. Whether a broker-dealer or an investment adviser would meet the primary purpose exception under this alternative would not be based on a de-minimis amount of customer funds placed at one or more IDIs. Rather, an IDI would be required to submit the required information listed under the general primary purpose exception application process as described in the proposed rule to demonstrate that the deposit-placement activity of the sweep arrangement, including those with an additional third party, is for a substantial purpose other than to provide deposit insurance or a deposit placement service.

The FDIC is also considering whether instead to change the BDSE to apply to a broker-dealer or investment adviser that sweeps customer funds to an affiliated IDI and meets other certain parameters. Under this alternative, a broker-dealer or investment adviser would meet the designated business exception if:

• The broker-dealer or investment adviser places or facilitates the placement of swept funds into non-maturity accounts at an affiliated IDI, and the amount of swept funds are less than 10 percent of the total assets that the broker-dealer or investment adviser has under management for its customers; and
• The related fees paid by the IDI to the broker-dealer or investment adviser are “flat fees” ( i.e., a “per account” or “per customer” fee) as payment for recordkeeping or administrative services and not payment for placing deposits.

This alternative would be similar to the FDIC's treatment of affiliated sweep deposit arrangements prior to the 2020 Final Rule. Under this alternative, the exception would not apply to deposit arrangements where swept funds are placed at unaffiliated IDIs.

As previously stated, the proposed rule would strengthen the FDIC's brokered deposit regulations by revising certain provisions to further support the statutory language and purpose of the brokered deposit restrictions, and clarifying and streamlining provisions that the FDIC observes have posed interpretive challenges. In summary, the proposed rule would (1) streamline and update certain provisions of the “deposit broker” definition; (2) eliminate the exclusive placement arrangement exception and restore the regulations' applicability to cases where a third party, that otherwise meets the definition of deposit broker, is involved with placing deposits at one or more IDIs; (3) amend the “primary purpose” exception to the “deposit broker” definition, including revising the “25 percent test” designated exception to a 10 percent test exception (and narrowing the scope of firms to which the exception may apply) and eliminating the “enabling transactions” designated exception; (4) update the primary purpose exception application and notice processes and make it so that only IDIs may submit an application and/or a notice on behalf of a third party; and (5) clarify how an IDI that loses its “agent institution” status regains that status.

The proposed rule would apply to all IDIs and affect any IDI that currently holds brokered deposits, or holds deposits that could be reclassified as brokered under the proposed rule, including IDIs that are less than well capitalized. As of March 31, 2024, there are 4,577 FDIC-insured depository ( print page 68259) institutions (IDIs) holding approximately $24.06 trillion in assets and $17.60 trillion in total domestic deposits. Additionally, of the 4,577 IDIs, 2,131 report holding $1.34 trillion in brokered deposits. Based on IDIs' reported capital ratios as of the same date, seven IDIs (0.15 percent) were considered less than well capitalized, which is 0.37 percentage points below the average percentage of IDIs considered to be less than well capitalized based on reported capital ratios over the ten-year period ending March 31, 2024 (0.52 percent). [ 95 ]

One likely aggregate effect of the proposed changes is that some deposits currently not reported as brokered would be reported as brokered deposits if the proposal is adopted. This may potentially affect IDIs, consumers, and nonbank firms that may be considered “deposit brokers” under the proposal.

The proposed rule would revise the “deposit broker” definition and would amend the analysis of the “primary purpose” exception to the “deposit broker” definition. The FDIC believes that under the proposed rule fewer entities are likely to be exempt from the definition of deposit broker than is the case currently. Additionally, to the extent such entities continue to place funds at IDIs, the amount of deposits at IDIs considered brokered under the proposed rule is likely to increase. The FDIC does not have the data necessary to estimate the amount of deposits that would be reclassified as brokered under the proposed rule. However, at the end of the first quarter during which the 2020 Final Rule was in effect—April through June of 2021—IDIs reported almost $350 billion fewer brokered deposits than in the previous quarter, a reduction in reported brokered deposits of more than 30 percent. [ 96 ] Therefore the FDIC believes a material amount of deposits could be reclassified as brokered.

The remainder of this subsection considers first the proposed rule's potential effects on less than well-capitalized IDIs specifically, then discusses costs to IDIs more broadly (including those that may be less than well capitalized), and an overview of the proposed rule's expected effects on the number of applications and notices (collectively, filings) sent to the FDIC. This subsection concludes with a discussion of the proposed rule's potential benefits. The subsection “Reporting Compliance Costs” of this document provides more detailed estimates on the expected effects of the proposed rule on the number of filings sent to the FDIC, and the expected dollar cost associated with those filings.

The acceptance of brokered deposits is subject to statutory and regulatory restrictions for banks that are not well capitalized. Adequately capitalized banks may not accept brokered deposits without an approved waiver from the FDIC, and banks that are less than adequately capitalized may not accept them at all. As a result, adequately capitalized and undercapitalized banks generally hold fewer brokered deposits. To the extent less than well-capitalized IDIs are able to rely on deposits that share the characteristics of brokered deposits (such as volatility) but are not currently reported as brokered, such IDIs can operate using a riskier liability structure than one reliant on more stable funding sources, thereby potentially increasing the risk of loss to the DIF. By generally increasing the scope of deposits that are considered brokered, the proposed rule limits the ability of less than well-capitalized banks to rely on potentially less stable third-party deposits that are currently reported as nonbrokered but would be reported as brokered under the proposed rule.

Based on IDIs' reported capital ratios as of March 31, 2024, there are seven less than well-capitalized IDIs, one of which reports holding some volume of brokered deposits. [ 97 ] These seven IDIs together report $1.1 billion in total assets, $1.0 billion in domestic deposits, and $137.0 million in brokered deposits. [ 98 ] Five of the less than well-capitalized IDIs are adequately capitalized as of March 31, 2024, one is undercapitalized, and one is significantly undercapitalized. [ 99 ]

As mentioned above, adequately capitalized banks may not accept brokered deposits without an approved waiver from the FDIC, and because the FDIC believes the proposed rule is likely to increase the amount of deposits considered brokered, it may increase the number of waiver applications the FDIC receives from adequately capitalized IDIs. This potential effect of the proposed rule is difficult to estimate because, as mentioned above, not only does the FDIC not possess the data necessary to estimate the amount of deposits that would be reclassified as brokered at specific banks under the proposed rule, but also the number of adequately capitalized banks depends on other factors, such as economic conditions and asset quality.

The FDIC believes that if the proposed rule was adopted affected IDIs, including well-capitalized and less than well-capitalized IDIs, may incur some costs. First, the proposed rule may lead some IDIs to restructure their liabilities. Second, the proposed rule may affect certain regulatory ratios required to be calculated by some large IDIs. Third, affected IDIs may be incentivized to make changes to their organizational structure. Fourth, affected IDIs may need to make changes to internal systems, policies, or procedures that pertain to brokered deposits. Fifth, the proposed rule is expected to affect the number of filings that IDIs send to the FDIC. Finally, the proposed rule may affect some IDIs' FDIC deposit insurance assessments. Each of these potential costs is discussed below in turn.

IDIs affected by the proposed rule may incur costs associated with making changes to the structure of their liabilities. As discussed above, there was a drop in reported brokered deposits immediately after the effective date of the 2020 Final Rule. The FDIC believes that the changes in the proposed rule are likely to result in a greater proportion of nonbrokered deposits being reclassified as brokered. To the extent affected IDIs are currently operating at their desired ratios of brokered deposits to total liabilities and the proposed rule increases the amount of deposits considered brokered, some affected IDIs may find that, at least initially, the proposed rule may cause them to have a greater than desired share of brokered deposits to liabilities. The FDIC does not have the data to ( print page 68260) estimate the amount of deposits that would be reclassified as brokered by the proposed rule at particular IDIs, nor how many IDIs, if any, might make changes to the structure of their liabilities.

For some large IDIs, brokered deposits can affect the calculation of certain regulatory ratios, such as the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). The FDIC does not have the data to estimate the amount of deposits that would be reclassified as brokered by the proposed rule at individual IDIs, and thus cannot estimate how many IDIs, if any, may incur costs associated with maintaining compliance with, or maintaining management buffers relative to, these regulatory ratios because of the proposed rule.

It is possible that some IDIs may choose to make changes to the organizational structure of their institutions if the proposed rule is adopted. In particular, IDIs that rely on the current exclusive placement exception to obtain nonbrokered deposits from affiliates may be incentivized to stop using these deposits or perhaps change their organizational structure as a result of the proposed rule. The FDIC does not have the information to estimate any such changes or attendant costs.

The FDIC believes that if the proposed rule was adopted, IDIs affected may incur some costs associated with making changes to their internal systems, policies, and procedures associated with deposit brokering activities and arrangements (especially those involving third parties). The FDIC does not have the data to be able to reliably estimate the costs associated with these changes, but expects that they are likely to be modest. Further, the FDIC believes that some of these costs may be ameliorated because the proposed rule is similar to the regulatory framework that existed prior to the 2020 Final Rule, therefore some affected entities may have experience with some of those policies and procedures.

Several aspects of the proposed rule may impact the number of filings that IDIs submit to the FDIC. First, as mentioned previously, the proposed rule may increase the number of brokered deposit waiver applications the FDIC receives from adequately capitalized IDIs. Second, the proposed rule eliminates the “enabling transactions” exception (including its attendant notice), and the FDIC believes that many entities that currently rely on this exception may work with IDIs to file PPE applications. Third, the proposed rule replaces the current “25 percent test” notice exception with two similar but distinct exceptions: the BDSE requiring a notice, for arrangements involving only an IDI and broker-dealer, and the BDSE requiring an application, for arrangements involving an IDI, broker-dealer, and additional third-party. The FDIC believes the BDSE notice will be more operationally workable than the current “25 percent test” notice process, as the information required to complete the BDSE notice would be tailored to specific information the receiving IDI should have access to or be able to obtain from the broker-dealer. Finally, concurrent with the finalization of the proposed rule, the FDIC would rescind notices and applications approved under the 2020 Final Rule, and would eliminate the ability of non-IDIs to file applications or notices. Therefore, the FDIC expects that the proposed rule could result in a significant increase in PPE applications from IDIs, especially in the period immediately following the effective date if the proposed rule were adopted. IDIs may incur costs associated with such submissions, including costs associated with gathering more information from third parties as part of the application process. See the “Reporting Compliance Costs” subsection of this document for a more detailed discussion of the potential effects of the proposed rule on the number and types of filings sent to the FDIC.

The proposed rule could also affect FDIC deposit insurance assessments. Under the FDIC's assessment regulations, IDIs with a significant concentration of brokered deposits may pay higher quarterly assessments, depending on other factors. [ 100 ] To the extent that deposits currently considered nonbrokered would be considered brokered deposits under the proposed rule, an IDI's assessment may increase. The FDIC does not have the information necessary to estimate the proposed rule's expected effects on deposit insurance assessments because it does not possess the data necessary to estimate the amount of deposits that would be reclassified as brokered at particular IDIs under the proposed rule.

The FDIC believes that the proposed rule would pose two primary benefits. First, the proposed rule would clarify certain concepts for affected IDIs. Second, the FDIC believes the proposed rule would improve the safety and soundness of the banking system. The benefits of improved safety and soundness are difficult to quantify, but such benefits are likely to accrue to the public and to all IDIs, not just those that are less than well capitalized. The FDIC discusses these potential benefits below in turn.

The FDIC believes that the proposed rule would improve the safety and soundness of the banking system, as well as covered IDIs. To the extent the proposed rule's changes would better identify deposits that are currently not reported as brokered but share the risk characteristics of brokered deposits, the FDIC believes that the proposal would enhance the ability of the FDIC to ensure the safety and soundness of the banking system. In particular, the rule would limit the ability for a less than well-capitalized institution to rely on a risky funding source and improve clarity so that reliance on brokered deposits, regardless of capitalization, would be correctly reflected in an institution's regulatory reporting, deposit insurance assessments, and regulatory ratios.

As discussed above, the FDIC has found significant reliance on brokered deposits increases an institution's risk profile, particularly as its financial condition weakens. The FDIC's statistical analyses and other studies have found that the use of brokered deposits by IDIs in general is associated with a higher probability of failure and higher losses to the DIF upon failure. The use of brokered deposits by IDIs is correlated with (1) higher levels of asset growth, (2) higher levels of nonperforming loans, and (3) a lower proportion of core deposit  [ 101 ] funding. [ 102 ] As previously described, 47 institutions that failed between 2007 and 2017 relied heavily on brokered deposits and each caused an estimated loss to the DIF of over $100 million as of December 31, 2017. While these 47 institutions held total assets representing nearly 21 percent of the aggregate total assets of the 530 institutions that failed over this period, their losses represented 38 percent of all estimated losses to the DIF for the same ( print page 68261) period. More recently, First Republic Bank, which failed in May of 2023, saw rapid growth in reported brokered deposits in the quarters leading up to its failure. [ 103 ]

The FDIC also believes that the proposed rule would benefit covered IDIs by clarifying certain practices and concepts. For example, the proposed rule includes a provision to clarify how an IDI may regain its “agent institution” status after losing it. The FDIC also believes that the proposed rule would benefit IDIs by promoting accurate reporting and understanding of the regulation and how the involvement of third parties within a deposit placement arrangement may, or may not, result in the deposits being brokered. Based on the FDIC's experience, the initial decline in brokered deposits following the effective date of the 2020 Final Rule was due, in part, to some IDIs misunderstanding and misreporting a significant amount of deposits as nonbrokered. The FDIC believes that increased clarity should reduce costs for affected IDIs and ensure more accurate reporting.

The proposed rule may affect consumers that utilize brokered deposits, deposit placement services or arrangements. To the extent that consumers utilize deposits currently, or in future periods, which are not classified as brokered, but would be as a result of the adoption of the proposed rule, they might experience changes in interest rates on those funds, or costs associated with placing those funds with different entities. The FDIC does not have the information necessary to estimate such changes, and therefore, discusses these effects qualitatively.

If adopted, the proposed rule may pose costs or benefits to consumers by incentivizing them to place their funds with different entities. To the extent that some entities cease offering, or change the terms of, certain services because of a desire to avoid the placement of deposits considered brokered under the proposal, or because IDIs would prefer not to accept deposits considered brokered under the proposal, certain deposit placement arrangements may change. In particular, consumers may change their relationships with certain third-party providers or third-party providers may change their relationships with certain IDIs. Further, to the extent that consumers consider other fund management options, such as money market mutual funds, as substitutes for certain brokered deposits, consumers may change fund placement arrangements. Finally, consumers considering using deposit placement services may also benefit from the increased clarity in the proposed rule on what is and is not considered brokered.

The proposed rule may affect third parties directly or indirectly involved in the provision of brokered deposit products. To the extent that third parties are involved in the provision of deposits currently not designated as brokered, but would be if the proposed rule was adopted, such third parties may incur costs associated with making changes to systems, policies, and procedures. To the extent that third parties may have previously relied on exceptions that existed under 2020 Final Rule but no longer will exist under the proposed rule—such as the “enabling transactions” exception—they may experience costs associated with transitioning their business models (including potentially revising fees, changing revenue structures, etc.) to reflect the new rule.

Third parties may also incur costs associated with the submission of filings to the FDIC by affiliated IDIs on their behalf for deposit placement arrangements. As mentioned previously, the proposed rule rescinds existing primary purpose exceptions and notices granted under the 2020 Final Rule and restricts the application and notice process to IDIs. Therefore, to the extent that third parties who previously applied and received approval for a primary purpose exception wish to continue offering their services to covered IDIs, they may incur costs associated with providing information to those IDIs to support applications and notices to the FDIC. Finally, as the proposed rule's criteria for determining whether an entity is exempt from being considered a deposit broker are generally stricter than the criteria in the 2020 Final Rule, more third parties are likely to be considered deposit brokers under the proposed rule.

The FDIC believes the proposed rule, if adopted, would likely affect the number of applications and notices (collectively, filings) that IDIs submit to the FDIC for a number of reasons. First, the FDIC believes that the proposed rule may increase the share of filings made up of applications because the proposed rule would eliminate the “enabling transactions” notice exception. Based on the FDIC's supervisory experience, many “enabling transactions” notice filers will file PPE applications through IDIs, therefore the proposed rule may result in an increase in filings overall as more deposits are likely to be considered brokered under the proposed rule. Second, the proposed rule would replace the current “25 percent test” notice exception with two similar but distinct exceptions: the BDSE requiring a notice, for arrangements involving only an IDI and broker-dealer, and the BDSE requiring an application, for arrangements involving an IDI, broker-dealer, and an additional third party. Third, the FDIC believes that the proposed rule is likely to result in an increase in filings, at least initially, because the proposed rule would rescind approved applications and notices filed under the 2020 Final Rule. Finally, because the FDIC believes the proposed rule is likely to increase the amount of deposits classified as brokered, the FDIC believes the proposed rule may increase the likelihood that an adequately capitalized IDI submits a waiver application to accept brokered deposits to the FDIC. The FDIC does not have the information necessary to quantify the potential changes in filings that are likely to occur if the proposed rule was adopted. Therefore, to quantify the effect of the proposed rule on filing activity, the FDIC made certain assumptions it deemed reasonable based on its experience with administering the 2020 Final Rule, described below, and relied on the number of filings it received under the 2020 Final Rule as proxies for the number of filings it would receive under the proposed rule.

The proposed rule would likely increase the number of PPE applications received by the FDIC. As mentioned above, the proposed rule would eliminate the “enabling transactions” exception and the FDIC believes that many entities that relied on that exception may work with IDIs that file PPE applications. Thus, in addition to the 12 PPE applications that the FDIC received in the roughly three years since the effective date of the 2020 Final Rule (April 1, 2021, to March 15, 2024), [ 104 ] the FDIC believes it may receive an additional 77 PPE applications, based on the number of “enabling transactions” notices received over the same time period, [ 105 ] for an estimated total of 89 PPE applications. Of the 89 PPE applications, the FDIC estimates 21 ( print page 68262) unique filers of applications based on the number received during the three-year period since the effective date of the 2020 Final Rule, or 4.238 PPE applications per applicant and 7 applicants  [ 106 ] per year. FDIC staff estimate that each PPE application requires 10 labor hours to complete, and 15 minutes of labor per quarter to fulfill associated reporting requirements if the application is approved. Therefore, if the FDIC were to approve all estimated PPE applications received each year under the proposed rule, the estimated associated labor hours would be 330, representing 300 hours  [ 107 ] to complete the applications and 30 hours  [ 108 ] of annual reporting burden. [ 109 ]

The proposed rule would likely change the number of notices received by the FDIC. As mentioned previously, the proposed rule would eliminate the “enabling transactions” exception and its attendant notice if adopted. Further, the proposed rule would replace the “25 percent test” exception by the BDSE. When only an IDI and broker-dealer are involved, the BDSE requires a notice. The FDIC believes a reasonable proxy for the number of BDSE notices under the proposed rule is the number of “25 percent test” exception notices the FDIC received under the 2020 Final Rule for which it did not identify a potential third party, [ 110 ] as the information required for each type of notice is similar. Over the roughly three years since the effective date of the 2020 Final Rule, the FDIC received 24 such notices from 22 notificants, or seven notificants per year and 1.091 notices per notificant. FDIC staff estimate that each BDSE notice would take three hours of labor to complete, and 30 minutes of labor per quarter to satisfy reporting requirements. Thus, assuming the FDIC approves of all eight BDSE notices it is estimated to receive each year, the FDIC estimates that entities would incur 40 labor hours; 24 hours  [ 111 ] to complete the notices and 16 hours  [ 112 ] for annual reporting. [ 113 ]

The proposed rule would adopt a new application process for arrangements between an IDI and a broker-dealer in which a third party is involved in the sweep of funds from the broker-dealer to the IDI (BDSE application). The FDIC believes a reasonable proxy for the number of BDSE applications is the number of “25 percent test” exception notices the FDIC received over the roughly three-year period since the effective date of the 2020 Final Rule for which the FDIC believed a third party may be involved, as such arrangements are not eligible for the BDSE notice. The FDIC received 33 “25 percent test” exception notices from 29 unique notificants that it identified as potentially involving a third party over the roughly three-year period since the effective date of the 2020 Final Rule, [ 114 ] or 10 notificants per year and 1.138 notices per notificant. FDIC staff believe the new BDSE application combines elements of the PPE application with reporting requirements of the BDSE notice, and therefore estimates that each BDSE application would take 10 hours of labor to complete, and 30 minutes of labor per quarter to satisfy reporting requirements. Thus, if the FDIC approved all 10 applications it receives each year, the FDIC estimates that entities would incur 133 labor hours; 110 hours  [ 115 ] to complete the applications and 23 hours  [ 116 ] to comply with the annual reporting requirements. [ 117 ]

Based on the discussion above, the FDIC estimates that the proposed rule would impose 503 labor hours per year associated with reporting requirements if adopted; 434 labor hours to complete applications and notices and 69 labor hours of to satisfy reporting obligations associated with approved applications and notices. [ 118 ] Based on the FDIC's estimation of which occupations are associated with filing applications or notices and fulfilling their associated reporting requirements, the FDIC estimates an hourly cost of compensation of $101.07, [ 119 ] and thus estimates $50,838 in total annual reporting costs associated with the proposed rule.

The Regulatory Flexibility Act (RFA) generally requires an agency, in connection with a proposed rule, to prepare and make available for public comment an initial regulatory flexibility analysis that describes the impact of the proposed rule on small entities. However, an initial regulatory flexibility analysis is not required if the agency certifies that the proposed rule will not, if promulgated, have a significant economic impact on a substantial ( print page 68263) number of small entities. [ 120 ] The Small Business Administration (SBA) has defined “small entities” to include banking organizations with total assets of less than or equal to $850 million. [ 121 ] Generally, the FDIC considers a significant economic impact to be a quantified effect in excess of 5 percent of total annual salaries and benefits or 2.5 percent of total noninterest expenses. The FDIC believes that effects in excess of one or more of these thresholds typically represent significant economic impacts for FDIC-supervised institutions.

The FDIC does not believe that the rule would have a significant economic effect on a substantial number of small entities. However, some expected effects of the rule are difficult to assess or accurately quantify given current information. Therefore, the FDIC has included an initial regulatory flexibility analysis in this section.

As stated previously, the FDIC has found significant reliance on brokered deposits increases an institution's risk profile, particularly as its financial condition weakens. Adoption of the 2020 Final Rule led to certain deposit arrangements that were viewed as brokered prior to the 2020 Final Rule as no longer being classified as brokered, even though the FDIC believes such deposits present similar risks as brokered deposits and could pose serious consequences for IDIs and the DIF. Additionally, the FDIC has observed a number of challenges with entities understanding certain provisions of the 2020 Final Rule, which has resulted in inaccurate and inconsistent application of the rule. Finally, the FDIC wishes to better align certain of its brokered deposit regulations with the statutory language and purpose of section 29 of the FDI Act.

As mentioned above, the FDIC's proposal would clarify and revise certain of its brokered deposit regulations to better support the statutory language and purpose of the brokered deposit restrictions. Additionally, the FDIC seeks to revise the notice and application processes for certain primary purpose exceptions, and eliminate certain existing exceptions, with the objective of increasing industry safety and soundness and decreasing the frequency of misreporting of brokered deposits as nonbrokered. For further discussion of the policy objectives of the proposed rule please refer to section I of this document.

The FDIC is proposing to adopt this rule under authorities granted by section 29 of the FDI Act. The law defines key terms such as “deposit broker” and, among other things, restricts adequately capitalized IDIs from accepting funds obtained, directly or indirectly, by or through any deposit broker for deposit into one or more deposit accounts (referred to as brokered deposits) without a waiver, and prohibits less than adequately capitalized banks from obtaining such funds altogether. For a more detailed discussion of the proposed rule's legal basis please refer to sections II and III of this document.

In summary, the proposed rule would (1) streamline and update certain provisions of the “deposit broker” definition; (2) eliminate the exclusive placement arrangement exception and restore the regulations' applicability to cases where a third party, that otherwise meets the definition of deposit broker, is involved with placing deposits at one or more IDIs; (3) amend the “primary purpose” exception to the “deposit broker” definition, including revising the 25 percent test designated exception to a 10 percent test exception (and narrowing the scope of firms to which the exception may apply) and eliminating the enabling transactions designated exception; (4) update the primary purpose exception application and notice processes and make it so that only IDIs may submit an application and/or a notice on behalf of a third party; and (5) clarify how an IDI that loses its “agent institution” status regains that status. For a more detailed description of the proposed rule, please refer to section III of this document.

As of the quarter ending March 31, 2024, the FDIC insures 4,577 depository institutions; of these, 3,259 are “small entities” by the terms of the RFA. [ 122 ] Additionally, of the 3,259 small, FDIC-insured institutions, 1,237 report holding some volume of brokered deposits. Finally, of the 3,259 small FDIC-insured institutions, 6 are less than well-capitalized based on their reported capital ratios, and none of the 6 report holding brokered deposits. [ 123 ]

There are five categories of effects of the proposed rule on small, FDIC-insured institutions: effects applicable to potentially any small IDI; effects applicable to small, less than well-capitalized institutions; effects applicable to nonbank subsidiaries or affiliates of small institutions that may or may not be deemed deposit brokers under the proposed rule; effects applicable to third parties that may or may not be deemed deposit brokers under the proposed rule; and reporting requirements for small, covered IDIs. Also, the proposed rule may affect certain consumers; however, “natural persons” are not small entities for purposes of the RFA. Therefore, these potential effects are not discussed in this initial regulatory flexibility analysis. [ 124 ] For a discussion of the proposed rule's potential effects on consumers, see section V of this document, above.

If adopted, the proposed rule could directly affect the 1,237 small IDIs that currently report positive amounts of brokered deposits. In addition, the proposed rule could affect all 3,259 small IDIs regarding the types of deposits they choose to accept in the future. The proposed rule would revise the “deposit broker” definition and ( print page 68264) would amend the analysis of the “primary purpose” exception to the “deposit broker” definition. The FDIC believes that under the proposed rule fewer entities would likely be exempt from the definition of deposit broker than currently, and to the extent such entities continue to place funds at IDIs, the amount of deposits at IDIs considered brokered under the proposed rule is likely to increase. The FDIC does not have data to be able to reliably estimate the amount of deposits that would be re-classified as brokered under the proposed rule. However, at the end of the first quarter during which the 2020 Final Rule was in effect—April through June of 2021—small IDIs reported only $276 million fewer brokered deposits than in the previous quarter on a merger-adjusted basis, a reduction in reported brokered deposits of less than three percent. [ 125 ] Therefore, the FDIC believes the amount of deposits reclassified as brokered at small IDIs under the proposed rule is likely to be modest, at least in the aggregate.

The remainder of the discussion in this subsection is divided into potential costs to small IDIs associated with the proposed rule, followed by potential benefits to small IDIs.

Small IDIs affected by the proposed rule may incur costs if they choose to alter the composition of their liabilities as a result of the proposed rule. As discussed above, adoption of the 2020 Final Rule led to certain deposit arrangements that were viewed as brokered prior to the 2020 Final Rule as no longer being classified as brokered. The FDIC believes that the changes in the proposed rule are likely to result in a greater proportion of nonbrokered deposits being reclassified as brokered. To the extent affected IDIs are currently operating at their desired ratios of brokered deposits to total liabilities and the proposed rule increases the amount of deposits considered brokered, some affected IDIs may find that the proposed rule causes them to have a greater than desired share of brokered deposits to liabilities. The FDIC does not have the data to be able to estimate how many institutions might choose to change the composition of their liabilities because of the proposed rule or by how much, in part because the FDIC does not possess the information necessary to estimate for particular banks the amount of deposits, if any, that would be reclassified as brokered by the proposed rule.

If the proposed rule is adopted, it is possible that some small IDIs may choose to make changes to the organizational structure of their institutions. In particular, small IDIs that rely on the current exclusive placement exception to obtain nonbrokered deposits from affiliates may be incentivized to stop using such deposits and perhaps change their organizational structure as a result of the proposed rule.

Small IDIs affected by the proposed rule may also incur some costs associated with changes to their internal systems, policies, and procedures associated with deposit brokering activities and deposit placement arrangements (especially those involving third parties). However, the FDIC believes that some of these costs may be ameliorated because the proposed rule is very similar to the regulatory framework that existed prior to the 2020 Final Rule; therefore, some affected entities may have experience with some of those policies and procedures.

The FDIC also believes the proposed rule may affect the number of applications and notices (collectively, filings) that small IDIs may submit to the FDIC. The effect of the proposed rule on filings submitted by small IDIs is discussed below in the “Reporting Compliance Costs” section of this RFA analysis.

Finally, the proposed rule could also affect FDIC deposit insurance assessments at certain small IDIs. Under the FDIC's assessment regulations, IDIs with a significant concentration of brokered deposits may pay higher quarterly assessments, depending on other factors. [ 126 ] To the extent that deposits currently defined as nonbrokered would be considered brokered deposits under the proposed rule, a small IDI's assessment may increase. The FDIC does not have the information necessary to estimate the proposed rule's expected effects on deposit insurance assessments because it does not possess the data necessary to estimate the amount of deposits that would be reclassified as brokered at particular small IDIs under the proposed rule.

The FDIC believes a primary benefit of the proposed rule is that it would improve the safety and soundness of the banking system, including covered IDIs. As discussed in more detail in section II.A. of this document, “Brokered Deposits—A History of Concerns and Related Research,” and in the “Expected Effects” analysis in section V of this document, the FDIC's own analyses as well as other studies have found that IDI use of brokered deposits in general is associated with a higher probability of failure and higher losses to the DIF upon failure. IDI use of brokered deposits is correlated with (1) higher levels of asset growth, (2) higher levels of nonperforming loans, and (3) a lower proportion of core deposit  [ 127 ] funding. [ 128 ] Thus, to the extent the proposed rule's changes would better identify deposits that are currently not reported as brokered but share the characteristics of brokered deposits, the proposal would enhance the ability of the FDIC to ensure the safety and soundness of the banking system by limiting the ability for a less than well-capitalized small institution to rely on a risky funding source and improve clarity so that reliance on brokered deposits, regardless of capitalization, is correctly reflected in an institution's regulatory reporting and deposit insurance assessments.

Another potential benefit to small IDIs of the proposed rule is the clarification of certain concepts and practices, and by promoting accurate reporting and understanding of the regulation and how the involvement of third parties within a deposit placement arrangement may, or may not, result in the deposits being brokered. For example, the proposed rule includes a provision to clarify how an IDI may regain its “agent institution” status after losing it. The FDIC believes that increased clarity should reduce costs for covered small IDIs and ensure more accurate reporting. As previously described, based on the FDIC's experience, the initial decline in brokered deposits following the effective date of the 2020 Final Rule was due, in part, to some IDIs ( print page 68265) misunderstanding and misreporting a significant amount of deposits as nonbrokered.

The acceptance of brokered deposits is subject to statutory and regulatory restrictions for banks that are not well capitalized. Adequately capitalized banks may not accept brokered deposits without a waiver from the FDIC, and banks that are less than adequately capitalized may not accept them at all. As a result, adequately capitalized and undercapitalized banks generally hold fewer brokered deposits. To the extent less than well-capitalized IDIs are able to rely on deposits that share the characteristics of brokered deposits (such as volatility) but are not currently reported as brokered, such IDIs can operate using a riskier liability structure than one reliant on more stable funding sources, thereby potentially increasing the risk of loss to the DIF. By generally increasing the scope of deposits that are considered brokered, the proposed rule would limit the ability of less than well-capitalized small banks to rely on potentially less stable third-party deposits that are currently reported as nonbrokered but would be reported as brokered under the proposed rule.

Based on IDIs' reported capital ratios as of March 31, 2024, there are six small, less than well-capitalized IDIs, none of which report holding any brokered deposits. [ 129 ] These six IDIs together report $441 million in total assets and $402 million in domestic deposits. [ 130 ] Five of the six less than well-capitalized IDIs are adequately capitalized as of March 31, 2024, and one is undercapitalized. [ 131 ]

As mentioned above, adequately capitalized banks may not accept brokered deposits without a waiver from the FDIC, and the proposed rule would generally increase the scope of deposits that are considered brokered. Thus, one potential effect of the proposed rule may be to increase the number of brokered deposit waiver applications submitted to the FDIC by adequately capitalized small banks. This potential effect of the proposed rule is difficult to estimate because, as mentioned above, not only does the FDIC not possess the data necessary to estimate the amount of deposits that would be reclassified as brokered at specific small banks under the proposed rule, but also the number of adequately capitalized small banks depends on other factors, such as economic conditions.

The proposed rule could affect nonbank subsidiaries of small IDIs, in particular, nonbank subsidiaries of small IDIs that may not be considered deposit brokers under the 2020 Final Rule, but may be considered deposit brokers under the proposed rule. Additionally, under the 2020 Final Rule nonbanks may avail themselves of the notice or application process in order to seek certain primary purpose exceptions. However, under the proposed rule only IDIs may submit notices or applications with respect to primary purpose exceptions. In addition, to the extent a nonbank subsidiary of a small bank relies on the 2020 Final Rule's exclusive placement arrangement exception to place deposits solely at its parent IDI, the proposed removal of this exception could affect the subsidiary and its parent IDI.

As discussed in “Expected Effects,” section V of this document, the proposed rule may affect third parties directly or indirectly involved with the provision of deposit products. The FDIC does not have information on the number or size of potentially affected third parties; however, the FDIC believes it is likely that some affected third parties may be small entities.

First, concurrent with the finalization of the proposed rule, the FDIC would rescind existing primary purpose exceptions and notices granted under the 2020 Final Rule, and the proposed rule would restrict the application and notice process to IDIs. Therefore, to the extent that small third parties who previously applied and received approval for a primary purpose exception wish to continue offering their services to IDIs, they may incur costs associated with providing information to those IDIs to support applications and notices to the FDIC.

Second, to the extent that small third parties are directly or indirectly involved with the provision of deposits not currently designated as brokered deposits, but that would be if the proposed rule were adopted, such small third parties may incur costs associated with complying with the requirements in the proposed rule. Such costs would include, but would not be limited to (1) costs associated with making changes to systems, policies, and procedures involved in the provision of brokered deposits; (2) costs associated with the submission of filings to the FDIC by affiliated IDIs on their deposit placement arrangements; and (3) other costs associated with transitioning their business models to incorporate the provision of brokered deposits (including potential changes to fees, revenue structures, etc.).

Third, small third parties who are engaged in the provision of deposits that are considered brokered may incur costs associated with making changes to systems, policies, and procedures to comply with the requirements in the proposed rule. Also, such small third parties may experience changes to fee and revenue structures as a result of the requirements in the proposed rule.

Finally, as the proposed rule's criteria for determining whether an entity is a deposit broker are generally stricter than the criteria in the 2020 Final Rule, more small third parties could be considered deposit brokers under the proposed rule.

The FDIC believes the proposed rule would likely affect the number of applications and notices (collectively, filings) that IDIs submit to the FDIC for the reasons discussed in the “Reporting Compliance Costs” section of the “Expected Effects” analysis in section V of this document, above. Briefly, the FDIC believes the proposed rule would likely affect the number of filings because it eliminates the “enabling transactions” exception, and the FDIC's supervisory experience suggests many “enabling transactions” notice filers would file PPE applications through IDIs. Second, the proposed rule would replace the current “25 percent test” notice exception with two similar but distinct exceptions: the BDSE requiring a notice, for arrangements involving only an IDI and broker-dealer, and the BDSE requiring an application, for arrangements involving an IDI, broker-dealer, and an additional third party. Third, the FDIC believes that the proposed rule would likely result in an increase in filings, at least initially, because the proposed rule would rescind approved applications and notices filed under the 2020 Final Rule. Finally, because the FDIC believes the proposed rule would likely increase the amount of deposits classified as brokered, the FDIC believes the ( print page 68266) proposed rule may increase the likelihood that an adequately capitalized IDI submits a waiver application to accept brokered deposits to the FDIC.

While the FDIC does not have the information necessary to quantify the potential changes in filings by small IDIs that are likely to occur if the proposed rule is adopted, based on the number of filings received during the roughly three-year period since the 2020 Final Rule became effective, the FDIC believes the effect is likely to be modest. During the aforementioned period, five small IDIs (out of 29 total IDIs and 46 other entities) submitted a total of only six filings out of 147.

The FDIC has not identified any likely duplication, overlap, and/or potential conflict between this proposed rule and any other Federal rule.

The FDIC invites comments on all aspects of the supporting information provided in this RFA section. In particular, would this proposed rule have any significant effects on small entities that the FDIC has not identified?

Certain provisions of the proposed rule contain “collections of information” within the meaning of the Paperwork Reduction Act (PRA) of 1995 ( 44 U.S.C. 3501 through 3521 ). In accordance with the requirements of the PRA, the FDIC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The information collections contained in the proposed rule have been submitted to OMB for review and approval by the FDIC under section 3507(d) of the PRA ( 44 U.S.C. 3507(d) ) and § 1320.11 of OMB's implementing regulations ( 5 CFR part 1320 ). The FDIC proposes to extend for three years, with revision, the following information collection:

Title of Information Collection: Reporting and Recordkeeping Requirements for Brokered Deposits.

OMB Control Number: 3064-0099.

Respondents: Insured state nonmember banks and state savings associations.

Current Actions: The proposed rule revises the currently-approved information collection as follows:

Section 303.243(b)(3), Notice Submission for Primary Purpose Exception Based on Placement of Less Than 10 Percent of Customer Assets Under Management—Implementation. An insured depository institution must notify the FDIC through a written notice that the insured depository institution will rely upon the 10 percent designated business exception described in § 337.6(a)(5)(iv)(I)( 1 )( i ). See line item two of the table below.

Section 303.243(b)(3)(vii), Notice Submission for Primary Purpose Exception Based on the Placement of Less Than 10 Percent of Customer Assets Under Management—Ongoing. Notice filers that submit a notice under the 10 percent test described in § 337.6(a)(5)(iv)(I)( 1 )( i ) must provide to the FDIC quarterly updates of the figures that were provided as part of the notice. This is the corresponding ongoing reporting requirement associated with line item two. See line item five of the table below.

Section 12 CFR 303.243(b)(4)(i) , Application for Primary Purpose Exception Based on 10 Test With Additional 3rd Party—Implementation. Applicants that seek the primary purpose exception where the broker dealer or investment adviser place less than 10 percent of customer funds into insured depository institutions through the use of an additional third party that does not meet the deposit broker definition must file a primary purpose exception application with the FDIC. See line item three of the table below.

Section 12 CFR 303.243(b)(4)(vi) , Reporting for Primary Purpose Exception Based on the Placement of Less Than 10 Percent of Customer Assets Under Management with Additional 3rd Party—Ongoing. Applicants that receive a written approval for the primary purpose exception will provide reporting to the FDIC. This is the corresponding ongoing reporting requirement associated with line item three. See line item six of the table below.

Estimated Annual Burden:

The total estimated annual burden for OMB No. 3064-0099 is 545 hours, an increase of 168 hours from the most recent PRA renewal. [ 132 ]

Comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the FDIC's functions, including whether the information has practical utility; (b) the accuracy of the estimates of the burden of the information collection, including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. All comments will become a matter of public record.

Comments on aspects of this document that may affect reporting, recordkeeping, or disclosure requirements and burden estimates should be sent to the address listed in the ADDRESSES section of this document. Written comments and recommendations for this information collection also should be sent within 30 days of publication of this document to www.reginfo.gov/​public/​do/​PRAMain . Find this particular information collection by selecting “Currently under 30-day Review—Open for Public Comments” or by using the search function.

Section 722 of the Gramm-Leach-Bliley Act requires the agencies to use plain language in all proposed and final rules published after January 1, 2000. The FDIC invites comment on how to make this proposed rule easier to understand.

For example:

• Have the agencies organized the material to inform your needs? If not, how could the agencies present the proposed rule more clearly?
• Are the requirements in the proposed rule clearly stated? If not, how could the proposal be more clearly stated?
• Does the proposed regulation contain technical language or jargon that is not clear? If so, which language requires clarification?
• Would a different format (grouping and order of sections, use of headings, paragraphing) make the proposed regulation easier to understand? If so, what changes would achieve that?
• Is this section format adequate? If not, which of the sections should be changed and how?
• What other changes can the agencies incorporate to make the proposed regulation easier to understand?

Pursuant to section 302(a) of the Riegle Community Development and Regulatory Improvement Act of 1994  [ 133 ] (RCDRIA), in determining the effective date and administrative compliance requirements for new regulations that impose additional reporting, disclosure, or other requirements on IDIs, each Federal banking agency must consider, consistent with principles of safety and soundness and the public interest, any administrative burdens that such regulations would place on affected depository institutions, including small depository institutions, and customers of depository institutions, as well as the benefits of such regulations. In addition, section 302(b) of the RCDRIA requires new regulations and amendments to regulations that impose additional reporting, disclosures, or other new requirements on IDIs generally to take effect on the first day of a calendar quarter that begins on or after the date on which the regulations are published in final form. [ 134 ] The FDIC invites comments that further will inform its consideration of the RCDRIA.

The FDIC invites comment from all members of the public regarding all aspects of the proposal. In particular, the FDIC seeks feedback on the scope of the proposed rule and its requirements, and responses to the following specific questions:

1. Does the FDIC's proposed amendment to the “deposit broker” definition align more closely with the statutory language and purpose of section 29 of the FDI Act? Why or why not?

2. Is the FDIC's proposed change to remove “matchmaking activities” from the “deposit broker” definition and proposal to add a deposit allocation provision appropriate? Why or why not?

3. Is the consideration of fees appropriate when determining whether a person is a “deposit broker”? Are there any additional factors the FDIC should consider adding to the “deposit broker” definition? Please explain and provide data to support your views.

4. Is the proposed updated primary purpose exception analysis appropriate? Why or why not?

5. Are the proposed changes to the primary purpose exception application process appropriate? Is it appropriate to limit the application process to IDIs? Is the proposed process sufficiently clear to allow IDIs to obtain the required information on all third parties within a deposit placement arrangement?

6. Are there any additional factors the primary purpose exception application process should consider?

7. Should previously approved primary purpose exceptions be added to the regulatory list of “designated exceptions” as meeting the primary purpose exception under the proposed rule if they satisfy the proposed primary purpose exception?

8. Should any of the designated exceptions be removed, or new ones added? Please explain.

9. Should the enabling transactions designated exception be amended to include only non-reloadable prepaid card programs, such as gift cards? Please explain.

10. For the proposed BSDE, is the use of “assets under management” appropriate? Is the definition of “assets under management” sufficiently clear under the proposed rule? Is it appropriate to request the total amount of deposits placed by the broker-dealer or investment adviser on behalf of its customers at all IDIs and the total amount of customer assets under management as of the last quarter and as of the date of the notice filing?

11. Given that the limited reciprocal deposits exception is intended for IDIs that are in good condition and well managed, should there be any ability for an IDI to regain “agent status” absent a return to being a well-rated and well-capitalized IDI?

12. Can allowance of regaining “agent status” potentially run counter to the goals of having an IDI focus on addressing its problems because the exception would potentially allow an IDI that is less than well-capitalized and not well-rated to grow its deposits through this avenue?

13. If an IDI could regain “agent status” absent a return to being a well-rated and well-capitalized IDI, is it appropriate to allow the IDI to regain ( print page 68268) “agent status” after the third consecutive calendar quarter during which the IDI did not at any time receive reciprocal deposits that caused its total reciprocal deposits to exceed its special cap? Should it be a shorter or longer time period?

14. Would rescinding a designated exception for sweep deposits be appropriate? Why or why not?

15. Would limiting the BDSE to sweep deposits placed at affiliated IDIs be appropriate? Why or why not?

16. Are there any additional alternatives the FDIC should consider?

• Administrative practice and procedure
• Bank deposit insurance
• Reporting and recordkeeping requirements
• Savings associations

For the reasons stated in the preamble, the FDIC proposes to amend 12 CFR parts 303 and 337 as follows:

1. The authority citation for part 303 continues to read as follows:

Authority: 12 U.S.C. 378 , 1463 , 1467a , 1813 , 1815 , 1817 , 1818 , 1819(a) (Seventh and Tenth), 1820, 1823, 1828, 1831i, 1831e, 1831o, 1831p-1, 1831w, 1831z, 1835a, 1843(l), 3104, 3105, 3108, 3207, 5412; 15 U.S.C. 1601-1607 .

2. Amend § 303.243 by revising paragraph (b) to read as follows:

(b) Primary purpose exception notices and applications —(1) Scope. This section sets forth a process for an insured depository institution to notify the FDIC that it will rely upon the designated exception in § 337.6(a)(5)(iv)(I)( 1 )( i ) of this chapter and sets forth a process for an insured depository institution to apply for the primary purpose exception, as described in § 337.6(a)(5)(iv)(I)( 2 ) of this chapter.

(2) Definitions. For purposes of this paragraph (b):

Applicant means an insured depository institution that applies for a primary purpose exception described in § 337.6(a)(5)(iv)(I)( 2 ) of this chapter with respect to a particular business line between the insured depository institution and a deposit broker.

Notice filer means an insured depository institution that submits a written notice to the appropriate FDIC regional director indicating that the IDI's relationship with a broker-dealer or an investment adviser registered with the U.S. Securities and Exchange Commission qualifies for the designated business exception in § 337.6(a)(5)(iv)(I)( 1 )( i ) of this chapter.

(3) Prior notice requirement for 10 percent of assets under management designated business exception described in § 337.6(a)(5)(iv)(I)(1)(i) of this chapter. An insured depository institution must notify the FDIC through a written notice that the insured depository institution will rely upon the 10 percent designated business exception described in § 337.6(a)(5)(iv)(I)( 1 )( i ) of this chapter. An IDI may rely on the exception 90 days after filing a complete notice if the FDIC has not disapproved the notice. The FDIC, within its discretion, may extend the time period for an additional 90 days, with notice, to review and provide disapproval before the IDI may rely on the exception.

(i) Contents of notice. The notice must include:

(A) A description of the deposit placement arrangement between the insured depository institution and the broker-dealer or investment adviser for the particular business line;

(B) The registration and contact information for the broker-dealer or investment adviser;

(C) The total amount of customer assets under management (as defined in § 337.6(a)(11) of this chapter) by the broker-dealer or investment adviser as of the last quarter and as of the date of the filing;

(D) The total amount of deposits placed by the broker-dealer or investment adviser on behalf of its customers at all depository institutions as of the last quarter and as of the date of the filing; and

(E) A certification that no additional third parties are involved in the deposit placement arrangement.

(ii) Request for additional information for notices. The FDIC may request additional information from the notice filer at any time after receipt of the notice.

(iii) Notice timing. Within 90 days of receipt of a submission under paragraph (b)(3)(i) of this section, the FDIC will inform the notice filer whether the submission is disapproved. The FDIC may extend its review period by an additional 90 days, as necessary, with notice.

(iv) Notice disapproval. Submissions that do not meet the 10 percent designated business exception (as described in § 337.6(a)(5)(iv)(I)( 1 )( i ) of this chapter) will be disapproved. Submissions that fail to include the required information described in ( print page 68270) paragraph (b)(3)(i) of this section are incomplete and will be disapproved.

(v) Additional notice filers identified by the FDIC at a later date. The FDIC may include notice and/or reporting requirements as part of a designated exception identified under § 337.6(a)(5)(iv)(I)( 1 )( xiv ) of this chapter.

(vi) Subsequent notices. A notice filer that previously submitted a notice under this section shall submit a subsequent notice to the FDIC if, at any point, the business line that is the subject of the notice no longer meets the designated business exception that was the subject of its previous notice.

(vii) Ongoing requirements for notice filers. Notice filers that submit a notice under the 10 percent test described in § 337.6(a)(5)(iv)(I)( 1 )( i ) of this chapter must provide to the FDIC quarterly updates of the figures described in paragraph (b)(3)(i) of this section that were provided as part of the notice.

(viii) Revocation of primary purpose exception. The FDIC may, with notice, revoke a primary purpose exception under paragraph (b)(3)(iii) of this section, if:

(A) The broker dealer or investment adviser no longer meets the criteria to rely on the designated exception;

(B) The notice or subsequent reporting is inaccurate; or

(C) The notice filer fails to submit one or more required reports.

(4) Application requirements. An insured depository institution may submit an application to the FDIC seeking a primary purpose exception for business relationships not designated in § 337.6(a)(5)(iv)(I)( 1 ) of this chapter.

(i) For applications for primary purpose exception to place less than 10 percent of customer funds in insured depository institutions with the use of additional third parties that do not meet the deposit broker definition. Applicants that seek the primary purpose exception where the broker dealer or investment adviser place less than 10 percent of customer funds into insured depository institutions through the use of an additional third party that does not meet the deposit broker definition (see § 337.6(a)(5) of this chapter) must include the following information:

(A) A description of the deposit placement arrangement between the insured depository institution, the broker-dealer or investment adviser, and the additional third party, including the services provided by the additional third party, for the particular business line, and copies of contracts relating to the deposit placement arrangement, including all third-party contracts;

(B) The total amount of customer assets under management by the broker-dealer or investment adviser;

(C) The total amount of deposits placed by the broker-dealer or investment adviser on behalf of its customers at all depository institutions;

(D) Information on whether the additional third party places or facilitates the placement of deposits at insured depository institutions, including through operating or using an algorithm, or any other program or technology that is functionally similar;

(E) Information on whether the additional third party has legal authority, contractual or otherwise, to close the account or move the third party's funds to another insured depository institution, including through operating or using an algorithm, or any other program or technology that is functionally similar;

(F) Information on the amount of fees paid to the additional third party from any source with respect to its services provided as part of the deposit placement arrangement;

(G) Information on whether the additional third party has discretion to choose the insured depository institution(s) at which customer deposits are or will be placed; and

(H) Any other information that the FDIC requires to initiate its review and render the application complete.

(ii) Contents of applications for primary purpose exception not covered by paragraph (b)(4)(i) of this section. Applicants that seek the primary purpose exception, other than applications under paragraph (b)(4)(i) of this section, must include, to the extent applicable:

(A) A description of the deposit placement arrangements between the third party and insured depository institutions for the particular business line, including the services provided by any additional third parties, and copies of contracts relating to the deposit placement arrangement, including all third-party contracts;

(B) A description of the particular business line;

(C) A description of the primary purpose of the particular business line;

(D) The total amount of customer assets under management by the third party, with respect to the particular business line;

(E) The total amount of deposits placed by the third party at all insured depository institutions, including the amounts placed with the applicant, with respect to the particular business line. This includes the total amount of term deposits and transactional deposits placed by the third party, but should be exclusive of the amount of brokered CDs, as defined in § 337.6(a)(5)(iv)(I)( 3 ) of this chapter, being placed by that third party;

(F) Information on whether the insured depository institution or customer pays fees or other remuneration to the agent or nominee for deposits placed with the insured depository institution and the amount of such fees or other remuneration, including how the amount of fees or other remuneration is calculated;

(G) Information on whether the agent or nominee has discretion to choose the insured depository institution(s) at which customer deposits are or will be placed;

(H) Information on whether the agent or nominee is mandated by law to disburse funds to customer deposit accounts;

(I) A description of the marketing activities provided by the third party, with respect to the particular business line;

(J) The reasons the third party meets the primary purpose exception;

(K) Any other information the applicant deems relevant; and

(L) Any other information that the FDIC requires to initiate its review and render the application complete.

(iii) Additional information for applications. The FDIC may request additional information from the applicant at any time during processing of the application.

(iv) Application timing. (A) An applicant that submits a complete application under this section will receive a written determination by the FDIC within 120 days of receipt of a complete application.

(B) If an application is submitted that is not complete, the FDIC will notify the applicant and explain what is needed to render the application complete.

(C) The FDIC may extend the 120-day timeframe to complete its review of a complete application, if necessary, with notice to the applicant, for 120 additional days. If necessary, the FDIC may further extend its review period.

(v) Application approvals. The FDIC will approve an application—

(A) Submitted under paragraph (b)(4)(i) of this section if the FDIC finds that the applicant demonstrates that, with respect to the particular business line, the additional third party involved in the deposit placement arrangement is not a deposit broker, as defined in § 337.6(a)(5) of this chapter, and the applicant otherwise qualifies for the 10 percent of assets under management designated business exception described in § 337.6(a)(5)(iv)(I)( 1 )( i ) of this chapter; or ( print page 68271)

(B) Submitted under paragraph (b)(4)(ii) of this section if the FDIC finds that the applicant demonstrates that, with respect to the particular business line under which the third party places or facilitates the placement of deposits, the primary purpose of the third party's business relationship with the insured depository institution is for a substantial purpose other than to provide a deposit-placement service or FDIC deposit insurance for customer funds placed at the insured depository institution.

(vi) Ongoing reporting for applications. (A) The FDIC will describe any reporting requirements, if applicable, as part of its written approval for a primary purpose exception.

(B) Applicants that receive a written approval for the primary purpose exception, will provide reporting to the FDIC and to its primary Federal regulator, if required under this section.

(vii) Requesting additional information, requiring re-application, imposing additional conditions, and withdrawing approvals. At any time after approval of an application for the primary purpose exception, the FDIC may at its discretion, with written notice:

(A) Require additional information from an applicant to ensure that the approval is still appropriate, or for purposes of verifying the accuracy and correctness of the information submitted to the FDIC as part of the application under this section;

(B) Require the applicant to reapply for approval;

(C) Impose additional conditions on an approval; or

(D) Withdraw an approval.

3. The authority for part 337 continues to read as follows:

Authority: 12 U.S.C. 375a(4) , 375b , 1463 , 1464 , 1468 , 1816 , 1818(a) , 1818(b) , 1819 , 1820(d) , 1821(f) , 1828(j)(2) , 1831 , 1831f , 1831g , 5412 .

4. Amend § 337.6 by revising paragraph (a)(5) and adding paragraphs (a)(9) through (11) and (e)(3) to read as follows:

(5) Deposit broker, as used in this section and § 337.7:

(i) Definition. The term deposit broker means:

(A) Any person engaged in the business of placing or facilitating the placement of deposits of third parties with insured depository institutions;

(B) Any person engaged in the business of placing deposits with insured depository institutions for the purpose of selling those deposits or interests in those deposits to third parties; and

(C) An agent or trustee who establishes a deposit account to facilitate a business arrangement with an insured depository institution to use the proceeds of the account to fund a prearranged loan.

(ii) Engaged in the business of placing or facilitating the placement of deposits. A person is engaged in the business of placing or facilitating the placement of deposits of third parties if that person engages in one or more of the following activities:

(A) The person receives third-party funds and deposits those funds at one or more insured depository institutions;

(B) The person has legal authority, contractual or otherwise, to close the account or move funds of the third party to another insured depository institution;

(C) The person is involved in negotiating or setting rates, fees, terms, or conditions for the deposit account;

(D) The person proposes or determines deposit allocations at one or more insured depository institutions (including through operating or using an algorithm, or any other program or technology that is functionally similar); or

(E) The person has a relationship or arrangement with an insured depository institution or customer where the insured depository institution or the customer pays the person a fee or provides other remuneration in exchange for deposits being placed at one or more insured depository institution.

(iii) Anti-evasion. A person that structures a deposit placement arrangement in a way that evades meeting the deposit broker definition in this section, including a structure involving more than one person engaged in activities that result in placing or facilitating the placement of third-party deposits, while still playing an ongoing role in placing or facilitating the placement of third-party deposits or providing any function related to the placement or facilitating the placement of third-party deposits, may, upon a finding by and with written notice from the FDIC, result in the person meeting the deposit broker definition.

(iv) Exceptions to deposit broker definition. The term deposit broker does not include:

(A) An insured depository institution, with respect to funds placed with that depository institution.

(B) An employee of an insured depository institution, with respect to funds placed with the employing depository institution.

(C) A trust department of an insured depository institution, if the trust or other fiduciary relationship in question has not been established for the primary purpose of placing funds with insured depository institutions.

(D) The trustee of a pension or other employee benefit plan, with respect to funds of the plan.

(E) A person acting as a plan administrator or an investment adviser in connection with a pension plan or other employee benefit plan provided that person is performing managerial functions with respect to the plan.

(F) The trustee of a testamentary account.

(G) The trustee of an irrevocable trust (other than one described in paragraph (a)(5)(i)(B) of this section), as long as the trust in question has not been established for the primary purpose of placing funds with insured depository institutions.

(H) A trustee or custodian of a pension or profit-sharing plan qualified under section 401(d) or 403(a) of the Internal Revenue Code of 1986 ( 26 U.S.C. 401(d) or 403(a) ).

(I) An agent or nominee whose primary purpose in placing customer deposits at insured depository institutions is for a substantial purpose other than to provide a deposit-placement service or to obtain FDIC deposit insurance with respect to particular business lines between the individual insured depository institutions and the agent or nominee.

( 1 ) Designated business exceptions that meet the primary purpose exception in this paragraph (a)(5)(iv)(I). Business relationships are designated as meeting the primary purpose exception, subject to § 303.243(b)(3) of this chapter, where, with respect to a particular business line:

( i ) A broker-dealer or investment adviser that places or facilitates the placement of less than 10 percent of the total assets that it has under management for its customers is placed at depository institutions, and no additional third parties are involved in the deposit placement arrangement;

( ii ) A property management firm places, or assists in placing, customer funds into deposit accounts for the primary purpose of providing property management services;

( iii ) The agent or nominee places, or assists in placing, customer funds into deposit accounts for the primary purpose of providing cross-border clearing services to its customers; ( print page 68272)

( iv ) The agent or nominee places, or assists in placing, customer funds into deposit accounts for the primary purpose of providing mortgage servicing;

( v ) A title company places, or assists in placing, customer funds into deposit accounts for the primary purpose of facilitating real estate transactions;

( vi ) A qualified intermediary places, or assists in placing, customer funds into deposit accounts for the primary purpose of facilitating exchanges of properties under section 1031 of the Internal Revenue Code;

( vii ) A broker dealer or futures commission merchant places, or assists in placing, customer funds into deposit accounts in compliance with 17 CFR 240.15c3 through 3(e) or 17 CFR 1.20(a) ;

( viii ) The agent or nominee places, or assists in placing, customer funds into deposit accounts for the primary purpose of posting collateral for customers to secure credit-card loans;

( ix ) The agent or nominee places, or assists in placing, customer funds into deposit accounts for the primary purpose of paying for or reimbursing qualified medical expenses under section 223 of the Internal Revenue Code;

( x ) The agent or nominee places, or assists in placing, customer funds into deposit accounts for the primary purpose of investing in qualified tuition programs under section 529 of the Internal Revenue Code;

( xi ) The agent or nominee places, or assists in placing, customer funds into deposit accounts to enable participation in the following tax-advantaged programs: individual retirement accounts under section 408(a) of the Internal Revenue Code, Simple individual retirement accounts under section 408(p) of the Internal Revenue Code, and Roth individual retirement accounts under section 408A of the Internal Revenue Code;

( xii ) A Federal, State, or local agency places, or assists in placing, customer funds into deposit accounts to deliver funds to the beneficiaries of government programs;

( xiii ) The agent or nominee places customer funds at insured depository institutions, in a custodial capacity, based upon instructions received from a depositor or depositor's agent specific to each insured depository institution and deposit account, and the agent or nominee neither plays any role in determining at which insured depository institution(s) to place any customers' funds, nor negotiates or set rates, terms, fees, or condition, for the deposit account; and

( xiv ) The agent or nominee places, or assists in placing, customer funds into deposit accounts pursuant to such other relationships as the FDIC specifically identifies as a designated business relationship that meets the primary purpose exception.

( 2 ) Approval required for business relationships not designated in paragraph (a)(5)(iv)(I)(1) of this section. An insured depository institution that does not rely on a designated business exception described in this section must receive an approval under the application process in § 303.243(b) of this chapter in order to qualify for the primary purpose exception in this paragraph (a)(5)(iv)(I).

( 3 ) Brokered CD placements not eligible for primary purpose exception under this paragraph (a)(5)(iv)(I). An agent's or nominee's placement of brokered certificates of deposit as described in 12 U.S.C. 1831f(g)(1)(A) will be considered a discrete and independent business line from other deposit placement businesses in which the agent or nominee may be engaged.

( 4 ) Definition of brokered CD. The term brokered CD means a deposit placement arrangement in which a master certificate of deposit is issued by an insured depository institution in the name of the third party that has organized the funding of the certificate of deposit, or in the name of a custodian or a sub-custodian of the third party, and the certificate is funded by individual investors through the third party, with each individual investor receiving an ownership interest in the certificate of deposit, or a similar deposit placement arrangement that the FDIC determines is arranged for a similar purpose.

(J) An insured depository institution acting as an intermediary or agent of a U.S. Government department or agency for a government sponsored minority or women-owned depository institution deposit program.

(v) Inclusion of insured depository institutions engaging in certain activities. Notwithstanding paragraph (a)(5)(iv) of this section, the term deposit broker includes any insured depository institution that is not well-capitalized, and any employee of any such insured depository institution, which engages, directly or indirectly, in the solicitation of deposits by offering rates of interest (with respect to such deposits) which are significantly higher than the prevailing rates of interest on deposits offered by other insured depository institutions in such depository institution's normal market area.

(9) Broker-dealer means a person that is registered with the United States Securities and Exchange Commission as either a broker, a dealer, or both types of entities.

(10) Investment adviser means a person that is registered with the United States Securities and Exchange Commission as an investment adviser.

(11) Assets under management means securities portfolios and cash balances with respect to which an investment adviser or broker-dealer provides continuous and regular supervisory or management services.

(3) Regaining agent institution status. An insured depository institution that has lost its agent institution status for purposes of the limited exception for reciprocal deposits is eligible to regain its agent institution status as follows:

(i)(A) When most recently examined under section 10(d) of the Federal Deposit Insurance Act ( 12 U.S.C. 1820(d) ) was found to have a composite condition of outstanding or good; and

(B) Is well capitalized;

(ii)(A) As of the date the insured depository institution is notified, or is deemed to have notice, that it is well capitalized under regulations implementing section 38 of the FDI Act issued by the appropriate Federal banking agency for that institution; and

(B) Is well-rated;

(iii) Has obtained a waiver pursuant to paragraph (c) of this section; or

(iv)(A) Does not receive an amount of reciprocal deposits that causes the total amount of reciprocal deposits held by the agent institution to be greater than the average of the total amount of reciprocal deposits held by the agent institution on the last day of each of the four calendar quarters preceding the calendar quarter in which the agent institution was found not to have a composite condition of outstanding or good or was determined to be not well capitalized; and

(B) An insured depository institution that is not in compliance with paragraph (e)(2)(i)(C) of this section may regain its status as an agent institution after complying with paragraph (e)(3)(iv)(A) of this section continuously for two successive reporting quarters.

By order of the Board of Directors.

Dated at Washington, DC, on July 30, 2024.

James P. Sheesley,

Assistant Executive Secretary.

1.   12 U.S.C. 1831f .

2.  For purposes of section 29 of the FDI Act and 12 CFR 337.6 of the FDIC's Rules and Regulations, the terms “well capitalized,” “adequately capitalized,” and “undercapitalized” have the same meaning as to each IDI as provided under the regulations implementing section 38 of the FDI Act issued by the appropriate Federal banking agency for that institution. See 12 CFR 337.6(a)(3)(i) .

3.  Insured depository institutions include banks and savings associations insured by the FDIC. See 12 U.S.C. 1813(c)(2) .

4.  The FDIC may, on a case-by-case basis and upon application by an adequately capitalized IDI, waive the restriction. See 12 U.S.C. 1831f(c) .

5.   See FDIC, Study on Core Deposits and Brokered Deposits (July 8, 2011), available at https://www.fdic.gov/​regulations/​reform/​coredeposit-study.pdf . See also 84 FR 2366 , 2369 (Feb. 6, 2019). The FDIC updated its analysis in the 2011 Study on Core Deposits and Brokered Deposits with data through the end of 2017. See id. at 2384-2400 (appendix 2).

6.   See FDIC, Press Release: FDIC Board Approves Final rule on Brokered Deposit and Interest Rate Restrictions (Dec. 15, 2020), available at https://www.fdic.gov/​news/​press-releases/​2020/​pr20136.html . The 2020 Final rule was published in the Federal Register on January 22, 2021. See Unsafe and Unsound Banking Practices: Brokered Deposits and Interest Rate Restrictions Final Rule, 86 FR 6742 (Jan. 22, 2021). See also infra section II.B of this document (discussing the 2020 Final Rule).

7.   See infra section II.C of this document. As of December 31, 2023, reported brokered deposit balances have since increased to $1.35 trillion. See infra section II.C of this document.

8.   See e.g., FDIC, Public Report of Entities Submitting Notices for a Primary Purpose Exception (PPE). As of March 15, 2024, available at https://www.fdic.gov/​resources/​bankers/​brokered-deposits/​public-report-ppes-notices.pdf .

9.  For example, the FDIC maintains a dedicated brokered deposits web page that includes “Questions and Answers Related to Brokered Deposits Rule” and a “Statement of the [FDIC] Regarding Reporting of Sweep Deposits on Call Reports,” among other resources. See FDIC, Banker Resource Center Brokered Deposits, available at https://www.fdic.gov/​resources/​bankers/​brokered-deposits/​ .

10.   See e.g., FDIC, Decision of the Supervision Appeals Review Committee, In the Matter of * * *, Case No. 2022-02 (Apr. 26, 2023), available at https://www.fdic.gov/​resources/​regulations/​appeals-of-material-supervisory-determination/​appeals/​sarc202202.pdf .

11.  “Call Reports” consist of the Consolidated Reports of Condition and Income for a Bank with Domestic and Foreign Offices (FFIEC 031), the Consolidated Reports of Condition and Income for a Bank with Domestic Offices Only (FFIEC 041), and the Consolidated Reports of Condition and Income for a Bank with Domestic Offices Only and Total Assets Less than $5 Billion (FFIEC 051).

12.   See Off. of Inspector Gen., FDIC, Material Loss Review of First Republic Bank, Report No. EVAL-24-03 (Nov. 28, 2023) available at https://www.fdicoig.gov/​sites/​default/​files/​reports/​2023-12/​EVAL-24-03.pdf .

13.  During the quarter leading up to failure, First Republic Bank reported a sharp decline in affiliate sweep deposits that were not fully insured, from $8.3 billion to $1.1 billion from December 31, 2022, to March 31, 2023; they also experienced a decline from $1.9 billion to $1.4 billion in insured affiliated sweep deposits. Over the same period, First Republic Bank reported an increase in fully insured non-affiliate sweep deposits, from $7.3 billion to $8.7 billion.

14.   See In re Voyager Digital Holdings, Inc. et al., No. 22-10943 (Bankr. S.D.N.Y July 6, 2022).

15.  Brokered deposits are not considered core deposits or a stable funding source due to the brokered status and wholesale characteristics. See FDIC RMS Manual of Examination Policies, section 6.1 Liquidity and Funds Management at 6.1-9 (Apr. 2024). Core deposits are not defined by statute. Rather, core deposits are defined for analytical and examination purposes in the Uniform Bank Performance Report (UBPR) as the sum of all transaction accounts, money market deposit accounts (MMDAs), nontransaction other savings deposits (excluding MMDAs), and time deposits of $250,000 and below, less fully insured brokered deposits of $250,000 and less.

16.   See Unsafe and Unsound Banking Practices: Brokered Deposits and Interest Rate Restrictions Advance Notice of Proposed Rulemaking, 84 FR 2366 (Feb. 6, 2019).

17.  The FDIC recognizes that institutions sometimes are concerned that the use of brokered deposits can have other regulatory consequences, or may be viewed negatively by investors or other stakeholders.

18.  Congressional hearings regarding brokered deposits were held between 1984 and 1988, and in 1989, as part of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). See 84 FR 2368 . See also “Problems of the Federal Savings and Loan Insurance Corporation: Hearings Before the Committee on Banking, Housing, and Urban Affairs of the United States Senate,” (part II) 101st Cong., 1st Sess. 230-231 (1989). See also, e.g., Congressional testimony of Senators Graham and Sarbanes on Comprehensive Deposit Insurance Reform and Taxpayer Protection Act of 1991, Proceedings and Debates of the 102nd Cong., 1st Sess., November 21, 1991, 137 Cong. Rec. S17322-01, 1991 WL 243977 (“One of the lessons from the thrift crisis is their ability to gather deposits through brokered deposits and increase the size of the institution and the funds they had available very rapidly without additional capital and, quite frankly, without additional management. Then, to take these funds out and invest them in what turned out to be very risky matters, is certainly a lesson America has to learn and look at.”) (referring to testimony of the President of the Independent Bankers Association provided in April 1990).

19.   See FDIC, Division of Bank Supervision Manual, section L, page 3 (Nov. 1, 1973).

20.   84 FR 2366 , 2367 (Feb. 6, 2019); FDIC, History of the Eighties—Lessons for the Future, Chapters 2 and 9, passim (Dec. 1997), available at https://www.fdic.gov/​bank/​historical/​history/​ ; Phillip L. Zwieg, Belly Up: The Collapse of the Penn Square Bank, Chapter 9 (1985).

21.  The estimated loss data is available at: https://banks.data.fdic.gov/​bankfind-suite/​failures .

22.  Specifically, these failed institutions reported a ratio of brokered to total deposits greater than 10 percent in their last quarter prior to failure or three years prior to failure, and reported annual average asset growth of at least 30 percent during the three years leading to failure, or during the five years leading to failure, or between three and five years prior to failure, and were estimated to cost the DIF over $100 million as of December 31, 2017.

23.  The estimated loss data is as of March 31, 2024, available at: https://banks.data.fdic.gov/​bankfind-suite/​failures .

24.  Of the $5.5 billion in brokered deposits that IndyMac reported on its TFR for June 30, 2008, 98.4 percent were in brokered certificates of deposits documented as master certificates of deposits issued in the name of CEDE & Co, a subsidiary of DTC, as sub-custodian for deposit brokers.

25.   See Off. of Inspector Gen., U.S. Dep't of Treasury, Safety and Soundness: Material Loss Review of IndyMac Bank, FSB (Feb. 26, 2009), available at https://oig.treasury.gov/​sites/​oig/​files/​Documents/​oig09032.pdf .

26.   See Off. of Inspector Gen., U.S. Dep't of Treasury, Safety and Soundness: Material Loss Review of ANB Financial National Association (Nov. 28, 2008), available at https://www.govinfo.gov/​content/​pkg/​GOVPUB-T72-PURL-LPS107594/​pdf/​GOVPUB-T72-PURL-LPS107594.pdf .

27.   See FDIC, Study on Core Deposits and Brokered Deposits (July 8, 2011), available at https://www.fdic.gov/​regulations/​reform/​coredeposit-study.pdf .

28.   See 84 FR 2366 , 2369 (Feb. 6, 2019).

29.  However, the volatility of brokered deposits tends to be mitigated somewhat by deposit insurance, as insured depositors have less incentive to flee a problem situation. See 84 FR 2366 , 2369 (Feb. 6, 2019).

30.  FDIC, Crisis and Response: An FDIC History, 2008-2013 at 121-22 (2017), available at https://www.fdic.gov/​resources/​publications/​crisis-response/​index.html .

31.   See 84 FR 2366 , 2369-70 (Feb. 6, 2019) (citing Safety and Soundness: Analysis of Bank Failures Reviewed by the Department of the Treasury Office of Inspector General, OIG-16-052 (Aug. 15, 2016); Off. of Inspector Gen., FDIC, Follow Up Audit of FDIC Supervision Program Enhancements, Report No. MLR-11-010 (Dec. 2011); Off. of Inspector Gen., Bd. of Governors of the Fed. Rsrv. Sys., Summary Analysis of Failed Bank Reviews (Sept. 2011)).

32.   See 84 FR 2366 , 2369-70 (Feb. 6, 2019).

33.   See 84 FR 2384-2400 (appendix 2).

34.   See 84 FR 2366 , 2385 (Feb. 6, 2019).

35.   12 U.S.C 1831f .

36.   12 U.S.C. 1831f(a) . An “undercapitalized” depository institution is prohibited from accepting deposits from a deposit broker. An “adequately capitalized” insured depository institution may accept deposits from a deposit broker only if it has received a waiver from the FDIC. See 12 U.S.C. 1831f(c) . A waiver may be granted by the FDIC “upon a finding that the acceptance of such deposits does not constitute an unsafe or unsound practice” with respect to that institution. See id. Well-capitalized insured depository institutions are not restricted from accepting deposits from a deposit broker. The statute also restricts a less than well-capitalized institution generally from offering interest rates that significantly exceed the market rates offered in an institution's normal market area. See 12 U.S.C. 1831f .

37.   12 CFR 337.7 implements section 29's interest rate restrictions. The proposed rule would not amend these provisions.

38.   12 CFR 337.6(a)(2) .

39.   12 U.S.C. 1831f(g)(1)(A) .

40.   12 U.S.C. 1831f(g)(1)(B) .

41.   12 U.S.C. 1831f(g)(2) .

42.   See 12 CFR 337.6(a)(5)(v)(J) .

43.   12 CFR 337.6(a)(5)(ii) .

44.   See 12 CFR 337.6(a)(5)(iii) .

45.   See 12 CFR 337.6(a)(5)(iii)(C) ( 1 ).

46.   See id.

47.   See id.

48.   12 CFR 337.6(a)(5)(ii) and (iii) .

49.   See 86 FR 6742 , 6745 (Jan. 22, 2021).

50.   See 12 CFR 337.6(a)(5)(v)(I) .

51.   See 12 CFR 337.6(a)(5)(v)(I) ( 1 ).

52.   See 12 CFR 337.6(a)(5)(v)(I) ( 1 )( xiv ).

53.   See Unsafe and Unsound Banking Practices: Brokered Deposits, 87 FR 1065 (Jan. 10, 2022).

54.   See 12 CFR 303.243(b) . Where customer funds placed at depository institutions are placed into transaction accounts, and fees, interest, or other remuneration are provided to the depositor, an applicant can apply for a primary purpose exception, with respect to the particular business line, according to the requirements listed in 12 CFR 303.243(b)(4)(i) .

55.   See 12 CFR 303.243(b) (3(v).

56.   See 12 CFR 337.6(a)(5)(v)(I) ( 2 ).

57.   See 12 CFR 303.243(b)(4)(i) .

58.   12 U.S.C. 1831f(i)(2)(E) .

59.   12 U.S.C. 1831f(i)(1) .

60.   12 U.S.C. 1828f(i)(2)(E) .

61.   12 U.S.C. 1831f(i)(2)(B) .

62.   12 U.S.C. 1831f(ii)(2)(C) .

63.   See 84 FR 1346 (Feb. 4, 2019). The Reciprocal Deposits Rule was effective March 6, 2019. 12 CFR 337.6(e) implements section 29's limited exception for reciprocal deposits.

64.  The FDIC can only grant brokered deposit waivers for institutions that are classified as adequately capitalized; IDIs that are well capitalized but not well rated or are undercapitalized are not eligible. See 12 U.S.C. 1831f ; 12 CFR 337.6(c) .

65.   12 CFR 337.6(e)(2)(i) .

66.   See In re Synapse Fin. Tech., Inc., No. 1:24-bk-10646-MB (Bankr. C.D. Cal. R. Apr. 22, 2024).

67.  Under section 7 of the FDIC Act, 12 U.S.C. 1817 , IDIs are responsible for filing accurate Call Reports, including reporting accurately the amount of brokered deposits.

68.   See 86 FR 6756 (stating in the preamble to the 2020 Final Rule that “IDIs that receive deposits from agents or nominees that meet the primary purpose exception should be aware of any other third parties involved in the placement of deposits and whether those other third parties meet the deposit broker definition in order to properly complete their . . . [Call Reports], which require reporting of brokered deposits held by IDIs.”).

69.   See 12 U.S.C. 1831f(g)(1)(A) .

70.  The proposed rule would retain 12 CFR 337.6(a)(5)(iii)(A) through (B) .

71.   See FDIC, Questions and Answers Related to Brokered Deposits Rule—As of July 15, 2022, available at https://www.fdic.gov/​resources/​bankers/​brokered-deposits/​brokered-deposits-qa.pdf .

72.   86 FR 6742 , 6747 (Jan. 22, 2021).

73.   See 12 U.S.C. 1831f . Notwithstanding the presence of fees, under the proposed rule, the FDIC could grant a primary purpose exception based on a consideration of factors related to the purpose of placing of deposits. See infra section III.C of this document.

74.   12 U.S.C. 1831f(g)(1) ( emphasis added ).

75.   See 1 U.S.C. 1 .

76.   See 12 CFR 337.6(a)(5)(ii) and (iii) .

77.   12 CFR 337.6(a)(5)(v)(I) .

78.   See 86 FR 6742 , 6750 (Jan. 22, 2021).

79.   See 12 U.S.C. 1831f(g)(2)(I) .

80.  The FDIC would view a third party placing funds for the primary purpose of providing FDIC deposit insurance to third parties as not meeting the statutory exception, as the purpose of providing FDIC insurance coverage is indistinguishable from the placement of deposits.

81.   See FDIC, Frequently Asked Questions Regarding Identifying, Accepting, and Reporting Brokered Deposits, E7 (Nov. 13, 2015) (inactive) available at https://www.fdic.gov/​sites/​default/​files/​2024-03/​fil15051b.pdf .

82.   See id.

83.   See 12 CFR 303.243(b)(4)(ii) .

84.   See 12 CFR 303.243(b)(4)(ii) .

85.   See 12 CFR 303.243(b)(4)(ii) .

86.   See 12 CFR 337.6(a)(5)(v)(I) ( 1 )( i ).

87.   See 12 CFR 303.243(b) .

88.   12 CFR 337.6(a)(5)(v)(I) ( 1 )( i ). To operate under a PPE based on less than 25 percent of the total assets that the agent or nominee has under administration for its customers is placed at depository institutions, a notice was required to be filed with the FDIC. 12 CFR 303.243(b)(3)(i)(A) .

89.   12 CFR 337.6(a)(5)(iii)(C) .

90.   86 FR 27961 (May 24, 2021).

91.  The FDIC has identified a few IDIs that retain these functions in house and are properly reporting unaffiliated sweep deposits as not brokered.

92.   See FDIC, Statement of the [FDIC] Regarding Reporting of Sweep Deposits on Call Reports (July 15, 2022), available at https://www.fdic.gov/​resources/​bankers/​brokered-deposits/​statement-sweep-deposits.pdf .

93.   12 CFR 303.243(b)(4)(i) .

94.   12 CFR 303.243(b)(3)(i)(B) .

95.  FDIC Call Report data, June 30, 2014, through March 31, 2024. For purposes of the analysis presented in the Expected Effects section, an IDI is considered less than well capitalized based on its reported capital ratios. Less than well-capitalized IDIs do not include any quantitatively well capitalized institutions that may have been administratively classified as less than well capitalized. See generally 12 CFR 324.403(d) (FDIC); 12 CFR 208.43(b)(1)(v) (Board of Governors of the Federal Reserve System); 12 CFR 6.4(c)(1)(v) (Office of the Comptroller of the Currency).

96.  FDIC Call Report Data from March 31, 2021, and June 30, 2021.

97.  March 31, 2024 Call Report data. For purposes of estimating the expected effects of the proposed rule, this analysis uses an IDI's reported capital ratios to determine whether that IDI is well capitalized. The determination does not take into account written agreements, orders, capital directives, or prompt corrective action directives issued to specific IDIs. See generally 12 CFR 324.403(d) (FDIC); 12 CFR 208.43(b)(1)(v) (Board of Governors of the Federal Reserve System); 12 CFR 6.4(c)(1)(v) (Office of the Comptroller of the Currency).

98.   Id.

99.   Id.

100.   See 12 CFR part 327 .

101.   See FDIC, Study on Core Deposits and Brokered Deposits (July 8, 2011), available at https://www.fdic.gov/​regulations/​reform/​coredeposit-study.pdf . See also 84 FR 2366 , 2369 (Feb. 6, 2019). The FDIC updated its analysis in the 2011 Study on Core Deposits and Brokered Deposits with data through the end of 2017 (“Updated Study”). “Core deposits” is defined in the updated study as total domestic deposits net of time deposits over the insurance limit and fully insured brokered deposits. See Updated Study at 2384. Prior to 2011, the definition of core deposits included fully insured brokered deposits.

102.   See Updated Study at 2384-2400 (Appendix 2).

103.  First Republic Bank's reported total brokered deposits went from $597 million as of June 30, 2022, to $7.1 billion as of March 31, 2023. See First Republic Bank's Call Report data.

104.  FDIC applications data.

105.   See https://www.fdic.gov/​resources/​bankers/​brokered-deposits/​public-report-ppes-notices.pdf .

106.  Seven applicants equals the quotient of 21 unique PPE filers over three years.

107.  300 hours equals the product of 7 applicants per year, 4.238 applications per applicant, and 10 hours per application. The result is 300 hours because the FDIC rounded the product of the first two numbers. Otherwise, the result would be 297 hours.

108.  Applicants must report quarterly for each business line for which an application is approved. Assuming every application is approved, applicants would submit a total number of quarterly reports per year equal to four multiplied by the number of applications per applicant (4 * 4.238 = 16.952). Thus, the annual reporting burden of PPE applications is estimated as 30 hours, which is the product of 7 applicants per year, 16.952 reports per applicant, and 0.25 hours per report.

109.  330 hours equals 300 hours plus 30 hours.

110.   See the 25 percent notices at https://www.fdic.gov/​resources/​bankers/​brokered-deposits/​public-report-ppes-notices.pdf that are not marked with an asterisk.

111.  24 hours equals the product of 7 notificants per year, 1.091 notices per notificant, and 3 hours per notice. The result is 24 hours because the FDIC's burden calculator rounds the product of the first two numbers. Otherwise, the result would be 23 hours.

112.  Notificants must report quarterly for each business line for which a notification is approved. Assuming every notice is approved, notificants would submit a total number of quarterly reports per year equal to four multiplied by the number of notices per notificant (4 * 1.091 = 4.364). Thus, the annual reporting burden of BDSE notices is estimated as 16 hours, which equals the product of 7 notificants per year, 4.364 reports per notificant, and 0.5 hours per report. The result is 16 hours because the FDIC rounded the product of the first two numbers. Otherwise, the result would be 15 hours.

113.  38 hours equals 24 hours plus 14 hours.

114.   See the 25 percent notices at https://www.fdic.gov/​resources/​bankers/​brokered-deposits/​public-report-ppes-notices.pdf that are marked with an asterisk.

115.  110 hours is the product of 10 applicants per year, 1.138 application per applicant, and 10 hours per application. The result is 110 hours because the FDIC rounded the product of the first two numbers. Otherwise, the result would be 114 hours.

116.  Applicants must report quarterly for each business line for which an application is approved. Assuming every application is approved, applicants would submit a total number of quarterly reports per year equal to four multiplied by the number of applications per applicant (4 * 1.138 = 4.552). Thus, the annual reporting burden of BDSE applications is estimated as 23 hours, which is the product of 10 applicants per year, 4.552 reports per applicant, and 0.5 hours per report.

117.  133 hours equals 110 hours plus 23 hours.

118.  This estimate is 42 fewer hours than the total hours reported in the Paperwork Reduction Act section of this document because it only includes reporting requirements affected by the proposed rulemaking. See section VI.B of this document.

119.  The FDIC used the following Bureau of Labor Statistics (BLS) data sources to estimate an hourly cost of compensation associated with the reporting requirements in the proposed rule: National Industry-Specific Occupational Employment and Wage Estimates (OEWS): Industry: Credit Intermediation and Related Activities (5221 and 5223 only) (May 2023), Employer Cost of Employee Compensation (ECEC) (March 2023), and Employment Cost Index (March 2023 and March 2024). To estimate the average cost of compensation per hour, the FDIC used the 75th percentile hourly wages reported by the BLS OEWS data for the occupations in the Depository Credit Intermediation sector the FDIC judges would be involved in satisfying the proposed rule's reporting requirements. However, the latest OEWS wage data are as of May 2023 and do not include non-wage compensation. To adjust these wages, the FDIC multiplied the OEWS hourly wages by approximately 1.53 to account for non-wage compensation, using the BLS ECEC data as of March 2023 (the latest published release prior to the OEWS wage data). The FDIC then multiplied the resulting compensation rates by approximately 1.04 to account for the change in the seasonally adjusted Employment Cost Index for the Credit Intermediation and Related Activities sector (NAICS Code 522) between March 2023 and March 2024.

120.   5 U.S.C. 601 et seq.

121.  The SBA defines a small banking organization as having $850 million or less in assets, where an organization's “assets are determined by averaging the assets reported on its four quarterly financial statements for the preceding year.” See 13 CFR 121.201 (as amended by 87 FR 69118 , effective December 19, 2022). In its determination, the “SBA counts the receipts, employees, or other measure of size of the concern whose size is at issue and all of its domestic and foreign affiliates.” See 13 CFR 121.103 . Following these regulations, the FDIC uses an insured depository institution's affiliated and acquired assets, averaged over the preceding four quarters, to determine whether the insured depository institution is “small” for the purposes of RFA.

122.  March 31, 2024, Call Report data.

123.   Id. March 31, 2024, Call Report data. For purposes of estimating the expected effects of the proposed rule, this analysis uses an IDI's reported capital ratios to determine whether that IDI is well capitalized. The determination does not take into account written agreements, orders, capital directives, or prompt corrective action directives issued to specific IDIs. See generally 12 CFR 324.403(d) (FDIC); 12 CFR 208.43(b)(1)(v) (Board of Governors of the Federal Reserve System); 12 CFR 6.4(c)(1)(v) (Office of the Comptroller of the Currency).

124.  The RFA applies to small entities, which is defined in 5 U.S.C. 601(6) as having the same meaning as the terms “small business”, “small organization,” and “small governmental jurisdiction” defined in paragraphs (3), (4) and (5) of” 5 U.S.C. 601 . As such, a rule or information collection that affects only natural persons does not affect any small entities.

125.  FDIC Call Report Data from March 31, 2021, and June 30, 2021. IDIs reporting during the aforementioned periods were merger-adjusted to March 31, 2024, and categorized as “small entities” or not based on the definition of “small entity” in effect as of March 31, 2024, in order to facilitate comparison with the small entities that may be affected by the proposed rule.

126.   See 12 CFR part 327 .

127.  “Core deposits” is defined in the updated study as total domestic deposits net of time deposits over the insurance limit and fully insured brokered deposits. See Updated Study at 2385. Prior to 2011, the definition of core deposits included insured brokered deposits. See Updated Study at 2384.

128.   See FDIC, Study on Core Deposits and Brokered Deposits (July 8, 2011), available at https://www.fdic.gov/​regulations/​reform/​coredeposit-study.pdf . See also 84 FR 2366 , 2369 (Feb. 6, 2019). See also Updated Study at 2384-2400 (appendix 2).

129.  March 31, 2024, Call Report data. For purposes of estimating the expected effects of the proposed rule, this analysis uses an IDI's reported capital ratios to determine whether that IDI is well capitalized. The determination does not take into account written agreements, orders, capital directives, or prompt corrective action directives issued to specific IDIs. See generally 12 CFR 324.403(d) (FDIC); 12 CFR 208.43(b)(1)(v) (Board of Governors of the Federal Reserve System); 12 CFR 6.4(c)(1)(v) (Office of the Comptroller of the Currency).

130.   Id.

131.   Id.

132.   See FDIC Application for Waiver of Prohibition on Acceptance of Brokered Deposits Information Collection Request, OMB No. 3064-0099, https://www.reginfo.gov/​public/​do/​PRAViewICR?​ref_​nbr=​202308-3064-001 .

133.   12 U.S.C. 4802(a) .

134.   12 U.S.C. 4802(b) .

[ FR Doc. 2024-18214 Filed 8-22-24; 8:45 am]

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