Federal: Joint Trade Letter to FDIC on Request for comment deadline extension for Recordkeeping for Custodial Accounts NPRM

October 18, 2024

James P. Sheesley

Assistant Executive Secretary

Federal Deposit Insurance Corporation

550 17th Street NW Washington, DC 20429

Attention: Comments—RIN 3064-AG07

Re: Recordkeeping for Custodial Accounts

To Whom It May Concern,

On October 2, 2024, the Federal Deposit Insurance Corporation issued a Notice of Proposed Rulemaking on Recordkeeping for Custodial Accounts.¹ The proposal would establish new recordkeeping requirements for “custodial deposit accounts with transactional features” at insured depository institutions. ² Among other requirements, the rule would require IDIs to maintain records identifying the beneficial owners of these accounts and the account balances, establish and maintain related written policies and procedures, and complete an annual certification and report.

The FDIC explains that the proposal is partly motivated by the bankruptcy of Synapse Financial Technologies, Inc, a financial technology company that provided application programming interfaces and technological infrastructure allowing businesses to integrate banking services into their applications through relationships with IDIs. Upon its bankruptcy, consumers could not access funds placed at IDIs for several months, as many IDIs encountered significant difficulties in obtaining, reviewing, and reconciling Synapse’s records.

As several of our associations noted in a request for an extension for the joint agency Request for Information on Bank-Fintech Arrangements Involving Banking Products and Services Distributed to Consumers and Businesses,³ we support the FDIC’s work to consider and address the opportunities and risks posed by bank and fintech relationships. However, we agree with Vice Chair Hill’s observation that the FDIC “should have waited to issue this proposal until first receiving comments from the RFI – both because the comments[the FDIC] receive[s] might help inform [its] policymaking, and because preempting the end of the comment period sends a message to the public that it is a waste of time to invest time and resources to provide feedback if the FDIC is going to move forward with its own predetermined policy changes anyway.”⁴ Signatories are currently allocating time and resources to responding to the Bank-Fintech RFI, and some will respond to other requests for information and comment that the FDIC issued recently. Alongside Vice Chair Hill, we also emphasize that, as a matter of good governance, the FDIC should collect and consider the requested input on bank and fintech arrangements before proposing new custodial recordkeeping requirements that address these same arrangements.

In August, the FDIC issued an NPR on restrictions on brokered deposits and an RFI on Deposits⁵ and recently extended the comment periods for both items.⁶Given the overlapping NPRs and RFIs that require attention from the same subject matter experts within institutions, the FDIC should ensure adequate time for the public to prepare comprehensive feedback on each request for comment.

In light of these issues, we request that the agencies extend the comment deadline for the Rulemaking on Recordkeeping for Custodial Accounts by 60 days. An additional 60 days will allow banks, financial technology companies, and the public to provide the FDIC with more valuable and comprehensive feedback on the proposal. The FDIC should grant the full 60-day period requested, as a 30-day extension would be of little utility due to the December holiday season (during which many key stakeholders will be unavailable).

We appreciate the FDIC’s recent responsiveness tocommenters’ need for sufficient time to provide useful feedback. We urge the FDIC to provide additional time for the public to comment on the Proposed Rulemaking on Recordkeeping for Custodial Accounts as it has done for the other recent proposals related to deposits.

Thank you for considering our request for an extension.

Sincerely,

American Bankers Association

American Fintech Council

Bank Policy Institute

Electronic Transactions Association

Financial Data and Technology Association North America

Financial Technology Association

Independent Community Bankers of America

SIFMA

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1 89 Fed. Reg. 80,135 (Oct. 2, 2024).

2 The proposed rule identifies these accounts as those established for the benefit of a beneficial owner that holds commingled deposits and that the beneficial owner may authorize or direct a transfer from the account through the account holder to an outside party.

3 89 Fed. Reg. 61,577 (July 31, 2024).

4 Travis Hill, Statement on Notice of Proposed Rulemaking on Custodial Deposit Accounts with Transaction Features and Prompt Payment of Deposit Insurance to Depositors, FDIC (Sep. 17, 2024), https://www.fdic.gov/news/speeches/2024/statement-vice-chairman-travis-hill-notice-proposed-rulemaking-custodial-deposit.

5 89 Fed. Reg. 68,244 (Aug. 23, 2024); 89 Fed. Reg. 63,946(Aug. 6, 2024).

6 FDIC Announces Extension of Comment Period for Proposed Changes to its Brokered Deposit Regulations, FDIC

(Oct. 8, 2024),https://www.fdic.gov/news/press-releases/2024/fdic-announces-extension-comment-periodproposed-changes-its-brokered; FDIC Extends Comment Period on Request forInformation on Deposits, FDIC

(Oct. 8, 2024),https://www.fdic.gov/news/press-releases/2024/fdic-extends-comment-period-request-informationdeposits.

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