FDIC proposes changes to large, complex IDI assessments to address TDR elimination

In response to the Financial Accounting Standards Board’s recent elimination of accounting guidance for troubled debt restructurings for adopters of the current expected credit loss standard, the FDIC is proposing to update the scorecard it uses to calculate assessments for large and highly complex insured depository institutions to reflect the changes.

The FDIC calculates deposit insurance assessment rates for these firms based on supervisory ratings and financial measures, including the underperforming assets ratio and the higher-risk assets ratio, both of which are determined, in part, using restructured loans or troubled debt restructurings. Specifically, the FDIC is proposing to “define restructured loans in the underperforming assets ratio to include ‘modifications to borrowers experiencing financial difficulty,’” and to “amend the definition of a refinance for purposes of determining whether a loan is a higher-risk C&I loan or a higher-risk consumer loan, both elements of the higher risk assets ratio.”

The proposed changes would not affect small bank small bank deposit insurance assessments. Comments on the proposal are due 30 days after publication in the Federal Register.