PART 337—UNSAFE AND UNSOUND BANKING PRACTICES 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. Source: 39 FR 29179, Aug. 14, 1974, unless otherwise noted. § 337.1 Scope. The provisions of this part apply to certain banking practices which are likely to have adverse effects on the safety and soundness of insured State nonmember banks or which are likely to result in violations of law, rule, or regulation. § 337.2 Standby letters of credit. (a) Definition. standby letter of credit 1 similar arrangement 1 standby letter of credit (b) Restriction. Provided, however, 2 2 (c) Exceptions. (1) Prior to or at the time of issuance, the issuing bank is paid an amount equal to the bank's maximum liability under the standby letter of credit; or, (2) Prior to or at the time of issuance, the issuing bank has set aside sufficient funds in a segregated deposit account, clearly earmarked for that purpose, to cover the bank's maximum liability under the standby letter of credit. (d) Disclosure. § 337.3 Limits on extensions of credit to executive officers, directors, and principal shareholders of FDIC-supervised institutions. (a) With the exception of 12 CFR 215.5(b) and (c)(3) and (4), FDIC-supervised institutions are subject to the restrictions contained in Federal Reserve Board Regulation O (12 CFR part 215) to the same extent and to the same manner as though they were member banks. (b) For the purposes of compliance with § 215.4(b) of Federal Reserve Board Regulation O, no FDIC-supervised institution may extend credit or grant a line of credit to any of its executive officers, directors, or principal shareholders or to any related interest of any such person in an amount that, when aggregated with the amount of all other extensions of credit and lines of credit by the FDIC-supervised institution to that person and to all related interests of that person, exceeds the greater of $25,000 or five percent of the FDIC-supervised institution's unimpaired capital and unimpaired surplus, 1 1 (1) The extension of credit or line of credit has been approved in advance by a majority of the entire board of directors of that FDIC-supervised institution and (2) The interested party has abstained from participating directly or indirectly in the voting. (c)(1) No FDIC-supervised institution may extend credit in an aggregate amount greater than the amount permitted in paragraph (c)(2) of this section to a partnership in which one or more of the FDIC-supervised institution's executive officers are partners and, either individually or together, hold a majority interest. For the purposes of paragraph (c)(2) of this section, the total amount of credit extended by an FDIC-supervised institution to such partnership is considered to be extended to each executive officer of the FDIC-supervised institution who is a member of the partnership. (2) An FDIC-supervised institution is authorized to extend credit to any executive officer of the bank for any other purpose not specified in § 215.5(c)(1) and (2) of Federal Reserve Board Regulation O (12 CFR 215.5(c)(1) and (2)) if the aggregate amount of such other extensions of credit does not exceed at any one time the higher of 2.5 percent of the FDIC-supervised institution's unimpaired capital and unimpaired surplus or $25,000 but in no event more than $100,000, provided, however, that no such extension of credit shall be subject to this limit if the extension of credit is secured by: (i) A perfected security interest in bonds, notes, certificates of indebtedness, or Treasury bills of the United States or in other such obligations fully guaranteed as to principal and interest by the United States; (ii) Unconditional takeout commitments or guarantees of any department, agency, bureau, board, commission or establishment of the United States or any corporation wholly owned directly or indirectly by the United States; or (iii) A perfected security interest in a segregated deposit account in the lending FDIC-supervised institution. (3) For the purposes of this paragraph (c), the definitions of the terms used in Federal Reserve Board Regulation O shall apply including the exclusion of executive officers of an FDIC-supervised institution's parent bank or savings and loan holding company and executive officers of any other subsidiary of that bank or savings and loan holding company from the definition of executive officer for the purposes of complying with the loan restrictions contained in section 22(g) of the Federal Reserve Act. For the purposes of complying with § 215.5(d) of Federal Reserve Board Regulation O, the reference to “the amount specified for a category of credit in paragraph (c) of this section” shall be understood to refer to the amount specified in paragraph (c)(2) of this § 337.3. (d) Definition. FDIC-supervised institution [85 FR 3246, Jan. 21, 2020] § 337.4 [Reserved] § 337.5 Exemption. Check guaranty card programs, customer-sponsored credit card programs, and similar arrangements in which a bank undertakes to guarantee the obligations of individuals who are its retail banking deposit customers are exempted from § 337.2: Provided, however, [50 FR 10495, Mar. 15, 1985] § 337.6 Brokered deposits. (a) Definitions. (1) Appropriate Federal banking agency (2) Brokered deposit (3) Capital categories. (i) For purposes of section 29 of the Federal Deposit Insurance Act, this section, and § 337.7, the terms well capitalized, adequately capitalized, and undercapitalized, 1 2 1 2 (ii) If the appropriate Federal banking agency reclassifies a well capitalized insured depository institution as adequately capitalized pursuant to section 38 of the Federal Deposit Insurance Act, the institution so reclassified shall be subject to the provisions applicable to such lower capital category under this section and § 337.7, including paragraph (e)(2)(i)(A)( 2 (iii) An insured depository institution shall be deemed to be within a given capital category for purposes of this section and § 337.7, including paragraph (e)(2)(i)(A)( 2 (4) Deposit (5) Deposit broker. (A) Any person engaged in the business of placing deposits of third parties with insured depository institutions; (B) Any person engaged in the business of facilitating the placement of deposits of third parties with insured depository institutions; (C) 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 (D) 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 deposits. (iii) Engaged in the business of facilitating the placement of deposits. (A) The person has legal authority, contractual or otherwise, to close the account or move the third party's funds to another insured depository institution; (B) The person is involved in negotiating or setting rates, fees, terms, or conditions for the deposit account; or (C) The person engages in matchmaking activities. ( 1 ( i ( ii ( 2 Anti-evasion. (iv) Engaged in the business (v) The term deposit broker (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 is not the placement of funds with depository institutions; or ( 1 Designated business exceptions that meet the primary purpose exception. ( i ( ii ( iii ( iv ( v ( vi ( vii ( viii ( ix ( x ( xi ( xii ( xiii ( xiv ( 2 Approval required for business relationships not designated in paragraph 1 ( 3 Brokered CD placements not eligible for primary purpose exception. ( 4 Brokered CD (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. (vi) Notwithstanding paragraph (a)(5)(v) of this section, the term deposit broker (6) Employee (ii) Whose compensation is primarily in the form of a salary; (iii) Who does not share such employee's compensation with a deposit broker; and (iv) Whose office space or place of business is used exclusively for the benefit of the insured depository institution which employs such individual. (7) FDIC (8) Insured depository institution et seq. (b) Solicitation and acceptance of brokered deposits by insured depository institutions. (2) An adequately capitalized insured depository institution may not accept, renew, or roll over any brokered deposit unless it has applied for and been granted a waiver of this prohibition by the FDIC in accordance with the provisions of this section. (3) An undercapitalized insured depository institution may not accept, renew, or roll over any brokered deposit. (4) Acceptance of nonmaturity brokered deposits. (A) At the time a new nonmaturity account is opened by or through any deposit broker; or (B) In the case of an existing nonmaturity brokered account, or accounts, that had been opened by or through a particular deposit broker: ( 1 ( 2 (c) Waiver. (d) Exclusion for institutions in FDIC conservatorship. (e) Limited exception for reciprocal deposits Limited exception. (i) An amount equal to 50 percent of the portion of the total liabilities of the agent institution that is less than or equal to $1,000,000,000; (ii) An amount equal to 40 percent of the portion, if any, of the total liabilities of the agent institution that is greater than $1,000,000,000, but less than or equal to $10,000,000,000; and (iii) An amount equal to 30 percent of the portion, if any, of the total liabilities of the agent institution that is greater than $10,000,000,000, but less than or equal to $96,333,333,333. (2) Additional definitions that apply to the limited exception for reciprocal deposits Agent institution (A)( 1 ( 2 (B) Has obtained a waiver pursuant to paragraph (c) of this section; or (C) 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. (ii) Covered deposit (A) Is submitted for placement through a deposit placement network by an agent institution; and (B) Does not consist of funds that were obtained for the agent institution, directly or indirectly, by or through a deposit broker before submission for placement through a deposit placement network. (iii) Deposit placement network (iv) Network member bank (v) Reciprocal deposits (3) Requalifying as an Agent Institution due to a Rating Change or Receipt of Reciprocal Deposits in Excess of 4-Quarter Average Rating change. (ii) Receipt of Reciprocal Deposits in Excess of 4-Quarter Average. (4) Receipt of nonmaturity reciprocal deposits. [57 FR 23941, June 5, 1992, as amended at 58 FR 54935, Oct. 25, 1993; 60 FR 31384, June 15, 1995; 63 FR 44750, Aug. 20, 1998; 66 FR 17622, Apr. 3, 2001; 74 FR 27683, June 11, 2009; 78 FR 55595, Sept. 10, 2013; 83 FR 17740, Apr. 24, 2018; 84 FR 1353, Feb. 4, 2019; 86 FR 6789, Jan. 22, 2021; 91 FR 33070, June 3, 2026; 91 FR 56028, Sept. 1, 2026] § 337.7 Interest rate restrictions. (a) Definitions National rate. (2) National rate cap. (i) National rate plus 75 basis points, or (ii) 120 percent of the current yield on similar maturity U.S. Treasury obligations plus 75 basis points or, in the case of any nonmaturity deposit, the federal funds rate plus 75 basis points. (3) Local market rate cap. (4) Local market area. (5) On-tenor and off-tenor maturities. (b) Computation and publication of national rate cap Computation. (2) Publication. (c) Application Well capitalized institutions. (2) Institutions that are not well capitalized. (d) Notice related to local market rate cap applicability. (e) Offering products with off-tenor maturities. (f) Discretion to delay effect of published national rate cap. (g) Treatment of nonmaturity deposits for purposes of this section. (1) Solicitation of nonmaturity deposits. (A) A nonmaturity account is opened; (B) The institution raises the rate being paid on a nonmaturity account existing at the time when the institution was last well capitalized; or, (C) Funds for a new depositor are credited to a nonmaturity account existing at the time when the institution was last well capitalized. (2) Acceptance of nonmaturity brokered deposits subject to a waiver. (i) Any new nonmaturity accounts opened by or through that particular deposit broker; (ii) An amount of funds that exceeds the amount(s) in the account(s) that, at the time the institution fell to less than well capitalized, had been opened by or through the particular deposit broker; or (iii) For agency or nominee accounts, any funds for a new depositor credited to a nonmaturity account or accounts. [86 FR 6791, Jan. 22, 2021, as amended at 91 FR 33070, June 3, 2026] §§ 337.8-337.9 [Reserved] § 337.10 Waiver. An insured State nonmember bank has the right to petition the Board of Directors of the Corporation for a waiver of this part or any subpart thereof with respect to any particular transaction or series of similar transactions. A waiver may be granted at the discretion of the Board upon a showing of good cause. All such petitions should be filed with the Executive Secretary, Federal Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 20429. [39 FR 29179, Aug. 14, 1974, as amended at 67 FR 71071, Nov. 29, 2002] § 337.11 Effect on other banking practices. (a) Nothing in this part shall be construed as restricting in any manner the Corporation's authority to deal with any banking practice which is deemed to be unsafe or unsound or otherwise not in accordance with law, rule, or regulation; or which violates any condition imposed in writing by the Corporation in connection with the granting of any application or other request by an FDIC-Supervised institution, or any written agreement entered into by such institution with the Corporation. Compliance with the provisions of this part shall not relieve an FDIC-supervised institution from its duty to conduct its operations in a safe and sound manner nor prevent the Corporation from taking whatever action it deems necessary and desirable to deal with specific acts or practices which, although they do not violate the provisions of this part, are considered detrimental to the safety and sound operation of the institution engaged therein. (b) Definition. FDIC-supervised institution [85 FR 3247, Jan. 21, 2020] § 337.12 Frequency of examination. (a) General. (b) 18-month rule for certain small institutions. (1) The institution has total assets of less than $3 billion; (2) The institution is well capitalized as defined in § 324.403(b)(1) of this chapter; (3) At the most recent FDIC or applicable State agency examination, the FDIC: (i) Assigned the institution a rating of 1 or 2 for management as part of the institution's composite rating under the Uniform Financial Institutions Rating System (commonly referred to as CAMELS); and (ii) Assigned the institution a composite rating of 1 or 2 under the Uniform Financial Institutions Rating System (copies of which are available at the addresses specified in § 309.4 of this chapter); (4) The institution currently is not subject to a formal enforcement proceeding or order by the FDIC, OCC, or the Board of Governors of the Federal Reserve System; and (5) No person acquired control of the institution during the preceding 12-month period in which a full-scope, on-site examination would have been required but for this section. (c) Authority to conduct more frequent examinations. (d) From December 2, 2020, through December 31, 2021, for purposes of determining eligibility for the extended examination cycle described in paragraph (b) of this section, the total assets of an institution shall be determined based on the lesser of: (1) The assets of the institution as of December 31, 2019; and (2) The assets of the institution as of the end of the most recent calendar quarter. [81 FR 10069, Feb. 29, 2016, as amended at 83 FR 43965, Aug. 29, 2018; 85 FR 77364, Dec. 2, 2020]