While two FDIC proposals to revise deposit insurance assessments and resolution planning are a step in the right direction, the agency could go further to achieve its stated goals, the American Bankers Association said today.
The FDIC board in June advanced two proposals seeking to improve how it handles failed bank resolutions. The first proposal would raise the deposit insurance assessment asset threshold under which an institution is considered a large bank from $10 billion to $30 billion, and establish a process for adjusting the threshold every four years to account for inflation. It would also 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. Large and highly complex banks would have the option to earn one basis point through compliance with a proposed Resolutions Readiness Adjustment.
The second proposal would eliminate more than half of current resolution plan content requirements, end the public comment requirement, and move all covered institutions to a three-year cycle for filing the renamed “resolution submissions.” It also would raise the reporting threshold from $50 billion to $100 billion to reflect inflation since the existing rule’s implementation in 2022.
ABA recommendations
In a letter, ABA said that while it supports a proposed two-basis-point reduction for small banks, the same reduction should apply to all institutions, regardless of size. It also supports the proposed increase and indexing of the asset threshold.
In a separate letter, ABA said proposed resolution plan content requirements would better align the FDIC’s statutory role as receiver for failed banks while reducing the reporting burden on banks. Still, it recommended further changes, including eliminating duplicative submissions for banks that already must submit resolution plans under the Dodd-Frank Act.
ABA also recommended eliminating capabilities testing that does not facilitate the FDIC’s preparedness for receivership, and adopting clear safeguards for confidential data use in resolution preparedness.
“ABA appreciates the FDIC’s proposal to adjust assessments in a manner that recognizes the strength and resilience of the Deposit Insurance Fund,” ABA President and CEO Rob Nichols said in a statement. “The FDIC rightly recognizes that deposit insurance assessments must balance the size and resilience of the DIF against the costs imposed on banks and the customers they serve.
“We also appreciate Chairman [Travis] Hill’s commitment to streamlining resolutions, and we will continue to work with the FDIC to develop a framework that allows the FDIC to efficiently resolve large institutions while maintaining robust data security, minimizing duplication and reducing regulatory burdens,” Nichols added.
