The FDIC today proposed updating the definitions of small and large institutions that determine which methodology is applied to calculate an institution’s deposit insurance assessment rate, and revising the deposit insurance rate schedules for all institutions.
The three-member FDIC board voted unanimously to advance the proposed rule, which would raise the assessment asset threshold under which an institution is considered a large bank, from $10 billion to $30 billion. It would also establish a process for adjusting the threshold every four years to account for inflation. FDIC staff estimate that the change would shift 76 institutions from large banks to small banks for assessment purposes.
The proposal also would reduce initial base assessment rate schedules by two basis points for small banks, and by one basis point for large banks or highly complex institutions. FDIC Chairman Travis Hill said the adjustments reflect the progress made in restoring the Deposit Insurance Fund since it dipped below its statutory minimum revere ratio in 2020.
Finally, the proposed rule would create a two-step “resolution readiness adjustment” that large banks and highly complex institutions can use to lower their assessment rates by as much as one basis point if they take steps to share information with the FDIC that could be used to manage and market the institution following a failure.
FDIC estimated that, taken together, the changes would reduce industry assessments by $4 billion annually.
In a statement, Rob Nichols, American Bankers Association president and CEO, commended the FDIC for today’s proposal.
“We welcome the proposal to adjust the methodologies for deposit insurance assessments and ensure that they are indexed going forward,” Nichols said, adding that ABA appreciates the FDIC’s work to adjust assessment rates that “better reflect the level needed to build and maintain a stable Deposit Insurance Fund.”
ABA will “carefully review” the proposal with its members, he said, and looks forward to offering its perspective during the comment process.
Comments on the proposed rule will be accepted for 60 days after publication in the Federal Register.
