FDIC Votes Not to Raise Assessments

The FDIC board today voted not to raise deposit insurance assessments on banks in order to recapitalize its insurance fund. Instead, the FDIC will continue monitoring the situation, as FDIC staff expect the pandemic-related surge in deposits during 2020 that caused the Deposit Insurance Fund reserve ratio to fall below its statutory minimum of 1.35% even as the DIF reached a record level of $119 billion.

The FDIC is required under law to implement a plan to recapitalize the DIF within eight years when it falls below its minimum, which normally involves raising the assessments schedules. While the ratio declined from 1.38% in March 2020 to 1.3% last June, “the growth in insured deposits associated with the pandemic may recede as depositor behavior returns to normal and individuals and businesses redirect deposits toward consumption and higher-yielding investments,” the FDIC staff memo said.

The board decision recognized that the banking sector remains strong, FDIC Chairman Jelena McWilliams noted, “with robust levels of capital and liquidity, after serving as a source of strength throughout the pandemic last year.”