Magazine article American Banker

Securities Industry Group Blasts Proposed Broker Insurance Limit

Magazine article American Banker

Securities Industry Group Blasts Proposed Broker Insurance Limit

Article excerpt

The securities industry on Tuesday sharphy objected to a restriction of deposit insurance on brokered funds proposed by the Federal Deposit Insurance Corp. and the Federal Home Loan Bank Board.

Limiting to $100,000 per broker the insurance available on deposits placed in any one institution, "effectively eliminates insured deposit brokerage," asserted Edward I. O'Brien, president of the Securities Industries Association.

"The agencies fail to see the widespread damage possible from this ruling," Mr. O'Brien said at a hurriedly called press briefing in New York, where he was joined by officials of seven major securities firms involved in the deposit brokerage market.

Meanwhile in Washington, Comptroller of the Currency C.T. Conover restated his concern that an alternative plan must be found. Mr Conover, who sits on the three-member FDIC board of directors, was the only regulator involved who voted against the proposed limit.

The rule would end both the retail and institutional markets for brokered deposits, said Roger Vasey, chairman of Merrill Lynch Money Markets, Inc. The agencies' proposal, he asserted, amounts to administering a "regulatory sledgehammer."

While the agencies must protect the deposit insurance funds and curtail abuses, "they should direct their efforts toward weak financial institutions," he said, rather than at investors who want to buy certificates of deposit through a third party.

The securities firms said they support a four-point regulatory effort that would:

* Restrict the access of weak institutions to the market.

* Require firms dealing in certificates of deposits to register with the Securities and Exchange Commission.

* Limit multiple insurance payments to the same institutional depositor.

* Impose higher insurance premiums on institutions engaged in riskier lending. …

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