FDIC Proposes Additional Changes to Deposit Insurance Assessments

The FDIC today proposed a change in deposit insurance assessments that implements a Dodd-Frank Act provision requiring banks with over $10 billion in assets to be responsible for recapitalizing the FDIC insurance fund to 1.35 percent of insured deposits after it reaches a 1.15 percent reserve ratio. With the fund expected to be at 1.15 percent in the final quarter of this year, or possibly the first quarter of next year, the rule would go into effect in the first or second quarter of 2016.

Once the DIF reaches 1.15 percent, the assessment rate schedule for all banks is set to decline by more than two basis points. Banks with less than $10 billion be the primary beneficiaries of the lower schedule. As proposed, they will receive credits for any amount above their share of the assessments needed to maintain the fund at a 1.15 percent reserve ratio. The FDIC estimated that the credits would amount to $900 million in the aggregate and banks would use their credits against assessments once the fund reaches a 1.4 percent reserve ratio.

For banks with over $10 billion in assets, the proposed rule would impose a 4.5 basis point surcharge to bring the fund’s reserve ratio to 1.35 percent by the end of 2018. (There would be a one-time special assessment in first quarter 2019 if this goal was not achieved.) For the surcharge only, the assessment base of subject banks would be reduced by $10 billion to avoid a “cliff effect” on banks just above this size. Moreover, the assets of affiliated banks with under $10 billion would be added to that of surcharged banks. The FDIC estimated that the combination of the lower assessment rate and surcharges would result in lower assessments for nearly a third of larger banks.

ABA staff have for some time been discussing refinements to the assessment system with FDIC staff and released a preliminary summary of the proposed rule. Comments on the proposal will be due 60 days after it is published in the Federal Register. For more information or to participate in ABA’s comment letter, contact ABA’s Rob Strand.