FDIC Proposes Changes to Deposit Insurance Assessments

The FDIC today proposed a rule change in how smaller banks are assessed for deposit insurance, basing assessments on recent experience with bank failures. Under the proposal, which the FDIC said would be revenue-neutral, some banks would pay more and some would pay less — but “because it measures risk more accurately, the model reduces the subsidization of riskier banks by less risky banks,” the FDIC said.

The rule would adjust the statistical model the FDIC uses to predict an insured bank’s risk of failure to incorporate lessons learned from the post-2007 wave of bank failures. Instead of using broad risk categories keyed to CAMELS ratings and capital levels, assessments would be based on a “financial ratios model” incorporating some new metrics that the FDIC found relevant to predicting failures. The model uses information already included in Call Reports, so banks would not be required to report any new information.

The rule, which applies to banks with less than $10 billion in assets, would take effect when the Deposit Insurance Fund reaches 1.15 percent of insured deposits, which it is expected to be next year and when assessment rates are already scheduled to go down. Bankers can use a downloadable FDIC calculator to determine how the proposal would affect their assessment rate.

ABA staff have been discussing refinements to the assessment system with the FDIC, and an ABA summary of the proposal is posted here. Comments on the proposal are due 60 days after it is published in the Federal Register. For more information, contact ABA’s Rob Strand.