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ABA Comments on FDIC Proposal for Small Bank Assessments

March 8, 2016
Reading Time: 2 mins read

ABA yesterday offered feedback on the FDIC’s revised proposal for assessing deposit insurance premiums on banks with under $10 billion in assets. The association generally supported the revised proposal—which incorporated several of ABA’s comments on the initial proposal issued last June—however, the comment letter highlighted three lingering areas of concern with the revised assessment formula: the proposed “loan mix index,” the weighting for the tier 1 leverage ratio, and the proposed asset growth factor.

ABA recommended that the revised formula should measure loan asset quality management based on the performance of a bank’s own loan portfolio in the past, rather than using an index of the types of loans in its portfolio. The letter also urged FDIC to: not penalize well-capitalized banks with CAMELS ratings of I or II simply because they do not hold excessive amounts of tier 1 capital; recognize that asset growth—even in excess of a 10 percent four-quarter threshold—is normal and healthy and does not warrant higher assessments; and use CAMELS component ratings to gauge asset quality and management.

Members of ABA’s Government Relations Council Administrative Committee communicated the need for these changes in person last Friday during a meeting with FDIC officials.

The FDIC is expected to issue its final rule this summer, and the revised system will take effect the quarter after the FDIC insurance fund reaches 1.15 percent of insured deposits, which is expected in the second or third quarter of 2016. However, ABA recommended a delay in implementation if time is needed for the suggested revisions to be incorporated into the final version of the formula. For more information, contact ABA’s Rob Strand.

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Tags: Deposit insuranceExam fairnessRegulatory burden
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Monica C. Meinert

Monica C. Meinert

Monica C. Meinert is a senior editor at the ABA Banking Journal and VP for executive communications at the American Bankers Association.

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