Florida Banking September 2023

CHAIR’S MESSAGE

2023 IOTA AMENDMENT: WHERE WE STAND

BY JOSE CUETO, FBA CHAIR

A s you know, Interest Only Trust Accounts (IOTAs) have become a hot-button issue for the banking industry. The 2023 IOTA Amendment to the Rules Regulating the Florida Bar now requires lawyers to only maintain their trust accounts in institutions that pay a particular rate. The order requires that “[w]hen the Wall Street Journal Prime Rate (“indexed rate”) is between 325 and 499 basis points (3.25% and 4.99%), the minimum interest rate paid net of all fees and service charges (“yield”) must be no less than 300 basis points (3.00%) below the indexed rate in effect on the first business

Motion for Rehearing. The order requires the Florida Bar to report on the implementation of the new rule and allows the FBA and any other interested parties to provide comment by November 1, 2023. In addition to litigating the matter through the Florida courts, the FBA has also been in continued contact with Florida Bar officials since June to discuss the framework for a potential compromise rate that both groups could agree to outside of the court system. At the invitation of the Bar, President & CEO Corey Neil (Bank of Tampa) presented before the Florida Bar’s Board of Governors at its July meeting in Sarasota. During that

day of each month. When the indexed rate is 500 basis points (5.00%) or above, the yield must be no less than 40% of the indexed rate in effect on the first business day of each month.” As an organization with our own foundation, we can appreciate the Florida Bar’s goal of increasing access to justice through benefitting the Bar Foundation with

meeting, the Bar’s Board of Governors approved an ad hoc committee of the Bar to discuss a compromise rate. After several weekly discussions with bankers from around the state, led by CEO Dennis Murphy (Gulfside Bank), the FBA has moved toward supporting a framework of a rule that it believes could be helpful in reaching a compromise. FBA has continued its weekly

“ON FRIDAY, AUGUST 4, THE FLORIDA SUPREME COURT GRANTED THE FBA’S MOTION FOR REHEARING.”

the interest paid on IOTAs. However, with the rising interest rate environment and the focus on bank liquidity, it has been challenging for banks to implement the new rule according to the timeline laid out by the Florida Supreme Court. Since learning of the Florida Supreme Court’s ruling in April, the FBA has been focused on finding a solution to help Florida banks. In March, the FBA filed two well-argued briefs for rehearing, requesting that the Court “suspend the effective date or otherwise provide IOTA participants, including FBA members, with a reasonable time period of no less than six months to comply with the 2023 IOTA Amendment, or to transition from the IOTA program.” On Friday, August 4, the Florida Supreme Court granted the FBA’s

meetings with member banks to discuss the issue. If you or others within your organization would like to learn more about the issue or join the ad hoc committee of bankers meeting via Zoom to strategize, please reach out to SVP of Government Affairs Kenneth Pratt at kpratt@floridabankers.com. While there is still some uncertainty about how the IOTA issue will ultimately be resolved, I want to personally commend the members of the FBA who have engaged on this issue. Our combined work on this issue is yet another testament to the importance of us all working together under the umbrella of the FBA. With the many regulatory and legislative challenges that continue to plague the industry, we must continue our efforts within the FBA to meet these challenges.

4 — FLORIDA BANKING THE VOICE OF FLORIDA BANKING