As I understand it, a wholesale institutions is at risk of losing their designation if they engage in retail lending. Is there any risk if an institution engages in retail deposits, or it limited to retail lending only?

Since you have to apply for this designation and it is totally up to your regulator as to whether they might revoke your designation, the easiest thing would be to call them up and set up a discussion with them regarding how they view anything that you are proposing and how they would react. No reason to play any sort of a guessing game on this issue. On these sorts of issues, they are your friend and not your enemy. Sitting down and having a pre-conversation with them prior to making any changes to your business model is the proper thing to do.