New Market Rates Insight Analysis Shows January 1 Mandatory FDIC Deposit-Rate Cap Will Have Most Impact on Banks in Nine States

On January 1st, 2010, the FDIC final rule becomes mandatory restricting some banks to a maximum of 75 basis points (rate cap) above the national rate published by the FDIC

San Anselmo, CA, November 19, 2009 --( A new analysis from Market Rates Insight (MRI,, a leading research firm that tracks rates for deposits, loans, and fees for financial institutions, found that banks which are less than well capitalized, will find it harder to compete on rates in nine states, where the highest rates offered are greater than the FDIC national rate cap. The nine states are (from highest to lowest variance) Washington, North Carolina, California, Texas, Florida, Nevada, Idaho, Oregon and Minnesota. For example, the FDIC average cap rate, for Money Market and Certificate of Deposits up to $100,000, is 1.98, whereas the top rate average top rate offered on the same products in Washington State is 2.20, a difference of 22 basis points.

In the remaining states, less-than-well-capitalized banks can compete on rates without exceeding the FDIC national rate cap because the maximum rates in these states are below the fate cap of the FDIC.

On May 29, 2009, the FDIC Board approved a final rule, which becomes mandatory on January 1st, 2010. The final rule changes the way the FDIC administers its statutory restrictions on the deposit interest rates paid by banks that are less than well capitalized under Section 337.6 of the FDIC Rules and Regulations. The final rule redefines the national rate as "a simple average of rates paid by insured depository institutions and branches for which data are available" and deems the national rate to be the prevailing rate for all market areas. The FDIC rate cap allows the addition of up to 75 basis points to the FDIC national rate.

The analysis compared the FDIC cap rate, which is the maximum rate that a less than well-capitalized bank can offer in any market, to the maximum rates offered in each of the 50 states during the week of November 9, 2009, and for the same Money Market and Certificate of Deposits reported weekly by the FDIC.

“This is a classic chicken and the egg scenario,” said Dan Geller, Ph.D. Executive Vice President at Market Rates Insight. “The purpose of the final rule is to limit the expense exposure of under-capitalized banks, but, at the same time, it prevents these banks from raising capital by effectively by competing for deposits on rates.”

The complete analysis can be viewed on the Market Rates Insight website at this location:

About Market Rates Insight

For more than two decades, Market Rates Insight (MRI) has been helping subscribers price with precision by providing banks, thrifts, credit unions, and other financial institutions with accurate market intelligence on deposits, loans, and fees. MRI uses deposit surveys, mortgage and consumer loan surveys, fee and feature studies, scanned ads, new product alerts, and market share and money fund reports to give subscribers the intelligence they need to profitably react to emerging trends. MRI’s products include customized, web-enabled market research tools that report on rates, as well as online searchable databases, gauges, alerts, and dashboards that aggregate key client data to provide real-time views on how they stack up against market competitors.

Market Rates Insight is located in San Anselmo, California. For more information, see


Dr. Dan Geller
Market Rates Insight

Tom Woolf
Market Rates Insight
(415) 259-5638

Market Rates Insight
Tom Woolf