FDIC | Banker Resource Center: Liquidity and Funds Management (2024)

Laws and Regulations

Key laws and regulations that pertain to FDIC-supervised institutions; note that other laws and regulations also may apply.

• Part 337.6 Brokered Deposits and Part 337.7 Interest Rate Restrictions address restrictions on less than well capitalized financial institutions regarding the acceptance, renewal, or roll over of brokered deposits and interest rates they may pay on deposits - note that Sections 337.6 and 337.7 apply to all FDIC-insured institutions
• Relevant Federal Register Notices incorporated into Part 337 that include information describing the basis and purpose of the rule and its revisions:
  • Limited Exception for a Capped Amount of Reciprocal Deposits From Treatment as Brokered Deposits implementing section 202 of the Economic Growth, Regulatory Relief, and Consumer Protection Act
  • Section 337.6 explaining the changes made in the revised final rule that became effective April 1, 2022
  • Notification of additional designated business relationship that meets the primary purpose exception adding an additional designated business relationship to those published in the revised final rule
• Part 329 — Liquidity Risk Measurement Standards requires certain large and complex banking organizations to comply with the Liquidity Coverage Ratio and the Net Stable Funding Ratio
• Relevant Federal Register Notices incorporated into Part 329 that describe the basis and purpose of the rule and its revisions
  • Net Stable Funding Ratio Final Rule establishes a quantitative metric, the NSFR, to measure the stability of the funding profile of certain large banking organizations and requires these banking organizations to maintain minimum amounts of stable funding to support their assets, commitments, and derivatives exposures over a one-year time horizon. It is effective as of July 1, 2021
  • Final Rule for Treatment of Certain Emergency Facilities in the Regulatory Capital Rule and the Liquidity Coverage Ratio Rule facilitates use of the Money Market Mutual Fund Liquidity Facility (MMLF) and the Paycheck Protection Program Liquidity Facility (PPPLF)
  • Changes to Applicability Thresholds for Regulatory Capital and Liquidity Requirements tailors applicability thresholds for regulatory capital and liquidity requirements for certain large and complex banking organizations
  • Treatment of Certain Municipal Obligations as High-Quality Liquid Assets updates the LCR to treat liquidity and readily-marketable, investment grade municipal obligations as high-quality liquid assets, consistent with Section 403 of the Economic Growth Regulatory Relief, and Consumer Protection Act
  • Revisions to the Definition of Qualifying Master Netting Agreement and Related Definitions amends the definition of “qualifying master netting agreement” in the FDIC's capital and liquidity rules, and certain related terms in the FDIC's capital rules to ensure that the regulatory capital and liquidity treatment of qualified financial contracts (QFCs) to which a covered institution is party would not be affected by the restrictions on such QFCs
  • Liquidity Coverage Ratio: Liquidity Risk Measurement Standards final rule implements a quantitative liquidity requirement designed to promote the short-term resilience of the liquidity risk profile of large and internationally active banking organizations

Supervisory Resources

Frequently asked questions, advisories, statements of policy, and other information issued by the FDIC alone, or on an interagency basis, provided to promote safe and sound operations.

• Contingency Funding Plans Addendum was issued by the agencies on July 28, 2023. This updated guidance reminds depository institutions to maintain actionable contingency funding plans that take into account a range of possible stress scenarios
• Funding and Liquidity Risk Management Interagency Guidance emphasizes the importance of cash flow projections, diversified funding sources, stress testing, a cushion of liquid assets and a formal contingency funding plan
• Brokered Deposits may have an effect on liquidity. For useful resources related to liquidity matters, refer to the Brokered Deposits page for more information regarding brokered deposit and interest rate definitions and restrictions applicable to all FDIC-insured institutions under the brokered deposit rule that became effective on April 1, 2021
• Interagency Statement on the Use of Capital and Liquidity Buffers issued in March 2020 encourages banks to use capital and liquidity buffers to support households and businesses
• FAQs on Statement Regarding the Use of Capital and Liquidity Buffers issued in March 2020 clarifies the agencies' statement encouraging the use of capital and liquidity buffers to support households and businesses
• Frequently Asked Questions for financial institutions affected by COVID-19 question 6 addresses sales of held-to-maturity securities for liquidity purposes
• Frequently Asked Questions address identifying, accepting and reporting brokered deposits
• Correspondent Concentration Risks Interagency Guidance outlines practices for identifying, monitoring, and managing correspondent concentration risks between financial institutions
• Managing Sensitivity to Market Risk in a Challenging Interest Rate Environment re-emphasizes the importance of developing a comprehensive asset-liability and interest rate risk management program
• Interagency Guidance on Funds Transfer Pricing Related to Funding and Contingent Liquidity Risks describes risk management practices for large bank funds transfer pricing programs
• Frequently Asked Questions address the LCR, which applies to certain large and complex banks
• The Use of Volatile or Special Funding Sources by Financial Institutions that are in a Weakened Condition reminds management to oversee operations in a way that stabilizes the risk profile and strengthens financial condition
• Use of The Federal Reserve's Primary Credit Program in Effective Liquidity Management highlights the importance of updating contingency plans and ensuring collateral arrangements are appropriate
• Section 6.1 — Liquidity and Funds Management of the Risk Management Manual of Examination Policies discusses liquidity risk, components of effective liquidity and funds management programs, and examination processes and rating criteria used for safety and soundness examinations

Other Resources

Supplemental information related to safe-and-sound banking operations.

• FDIC's Supervisory Insights — Summer 2017 article “Community Bank Liquidity Risk: Trends and Observations from Recent Examinations”
• FDIC's Supervisory Insights — Summer 2009 article “A Year in Bank Supervision: 2008 and a Few of Its Lessons” highlighting lessons learned from the 2008 financial crisis
• Section 1506 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Study to evaluate deposits was submitted to Congress in July 2011

Videos/Webcasts/Teleconferences

Informational videos and recordings of prior webcasts and teleconferences.

• On May 24, 2023, The Federal Reserve Board (Board), Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), and the Conference of State Bank Supervisors (CSBS) jointly hosted an Ask the Regulators webinar on funding and liquidity risk management. The webinar and presentation materials are hosted at AskTheFed.
• Interagency Community Bank Teleconference on Liquidity and Funds Management (transcript and audio) targeted to institutions with less than $10 billion in total assets
• Interest Rate Risk Videos:
• Types of Interest Rate Risk (10:02)
• Measurement Systems (12:29)
• Deposit Assumptions (11:39)
• Rate Changes and Prepayment Assumptions (08:57)
• Risk Limits and Mitigation (09:06)
• Internal Control and Review (08:16)