Deposit Insurance Assessments
Assessment Changes since 2016
Paycheck Protection Program (PPP) & Money Market Mutual Fund Liquidity Facility (MMLF) Mitigation
Events in the first quarter of 2020 significantly and adversely impacted the global economy and financial markets. The spread of the Coronavirus Disease (COVID–19) dramatically slowed economic activity in many countries including the United States. Sudden disruptions in financial markets put increasing liquidity pressure on money market mutual funds and raised the cost of credit for most borrowers. In response, on March 27, 2020, the U.S. government passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
The CARES Act created the Paycheck Protection Program (PPP). PPP loans are fully guaranteed as to principal and accrued interest by the Small Business Administration (SBA). SBA guarantees are backed by the full faith and credit of the U.S. Government.
In order to prevent the disruption in the money markets from destabilizing the financial system, on March 18, 2020, the Board of Governors of the Federal Reserve System authorized the Federal Reserve Bank of Boston (FRBB) to establish the Money Market Mutual Fund Liquidity Facility (MMLF). Under the MMLF, the FRBB is able to extend nonrecourse loans to eligible borrowers to purchase assets from money market mutual funds.
Effective June 26, 2020, the FDIC adopted a Final Rule to mitigate the effect on deposit insurance assessments when an insured institution participates in either or both the PPP and MMLF. Under the rule, the FDIC provides adjustments to the risk based premium formula and certain of its risk ratios, and provides an offset to an insured institution’s total assessment amount due for the increase to its assessment base attributable to participation in the PPP and MMLF.
For detailed information on the FDIC rule and its effects on risk-based deposit insurance assessments, please select Paycheck Protection Program (PPP) and Money Market Mutual Fund Liquidity Facility (MMLF) Mitigation.
Legislation 2011 - 2016
Assessment collections changed when the Reserve Ratio reached 1.15% effective June 30, 2016. The Reserve Ratio is the total of the Deposit Insurance Fund (DIF) divided by the total estimated insured deposits of the industry. Legislative rulings and corresponding assessment changes included:
- On February 7, 2011, the FDIC adopted a rule that included the provision that effective the quarter after the Reserve Ratio reached 1.15%, the assessment rate schedule was reduced.
- On March 15, 2016, the FDIC adopted a rule in accordance with provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act that required large institutions to bear the burden of raising the Reserve Ratio from 1.15% to 1.35%. When the Reserve Ratio reached 1.15%, the FDIC began collecting large institution assessment surcharges. Surcharges were collected on invoices dated December 30, 2016 through December 30, 2018.
- When the reserve ratio reaches 1.38%, small institutions will receive credits to offset their contribution to raising the Reserve Ratio to 1.35% (see below).
- On April 26, 2016, the FDIC adopted a rule amending small institution pricing for deposit insurance which was also effective the quarter after the Reserve Ratio reached 1.15%.
The Reserve Ratio reached 1.15% effective as of June 30, 2016, therefore:
- the lower rates, surcharges, and new pricing became effective July 1, 2016; and
- the lower rates, surcharges, and new pricing appeared on the December 30, 2016 invoice (which was payment for the third quarter of 2016).
The Reserve Ratio reached 1.36% effective as of September 30, 2018, therefore:
- surcharges ended with the December 30, 2018 invoice collection; and
- small institution credits were computed and eligible institutions notified in January 2019.
Assessment Rate Schedule
Effective July 1, 2016, the initial base assessment rates for all insured institutions were reduced from 5 to 35 basis points to 3 to 30 basis points. Total base assessment rates after possible adjustments were reduced from 2.5 to 45 basis points to 1.5 to 40 basis points.
|
|
Large & Highly |
||
Initial Base Assessment Rate |
3 to 16 |
6 to 30 |
16 to 30 |
3 to 30 |
Unsecured Debt Adjustment *** |
-5 to 0 |
-5 to 0 |
-5 to 0 |
-5 to 0 |
Brokered Deposit Adjustment |
N/A |
N/A |
N/A |
0 to 10 |
Total Base Assessment Rate |
1.5 to 16 |
3 to 30 |
11 to 30 |
1.5 to 40 |
* Total base rates that are not the minimum or maximum rate will vary between these rates. Total base assessment rates do not include the Depository Institution Debt Adjustment (“DIDA”).
** See 12 CFR 327.8(f) and (g) for the definition of large and highly complex institutions.
*** The unsecured debt adjustment cannot exceed the lesser of 5 basis points or 50 percent of an insured depository institution’s initial base assessment rate; thus, for example, an insured depository institution with an initial base assessment rate of 3 basis points will have a maximum unsecured debt adjustment of 1.5 basis points and cannot have a total base assessment rate lower than 1.5 basis points. The unsecured debt adjustment does not apply to new institutions or insured branches.
Large Institution Surcharges
Large institution surcharges were collected on the deposit insurance invoices dated December 30, 2016 through December 30, 2018. Key aspects of the surcharges included:
- The surcharge applied to large institutions which are generally defined as those with total consolidated assets of $10 billion or more.
- The first $10 billion was subtracted from the regular insurance assessment base to determine the surcharge base. This more equitably shifted the surcharge burden from institutions near the $10 billion threshold.
- The cumulative net increase in the aggregate regular assessment bases of affiliated small institutions above the aggregate regular assessment bases as of December 31, 2015 of affiliated small institutions as of that date that were in excess of an effective annual rate of 10 percent was added to the surcharge base.
- The surcharge equaled an annual flat rate of 4.5 basis points (or a quarterly multiplier of .0001125) applied to the institution’s surcharge base.
Small Bank Credits
Since large institution surcharges were collected for nine quarters, the regular quarterly assessments paid by small institutions (generally institutions with less than $10 billion in total consolidated assets) during that period also contributed to raising the Reserve Ratio from 1.15% to 1.35%. The FDIC provided small bank assessment “credits” to eligible small institutions for the portion of their assessments that contributed to the Reserve Ratio growth. Key aspects of these credits include:
- Eligible institutions received a portion of the aggregate credit amount as determined by the FDIC and described in the assessment regulations.
- The FDIC notified eligible institutions of their credit amount in January 2019.
- The credits were first applied on the September 2019 assessment invoice (for the second quarter of 2019), when the Reserve Ratio first reached or exceeded 1.38%.
- Credits will be applied so long as the Reserve Ratio is at or above 1.35%.
- After applying the credits for four quarters, the FDIC will remit to banks the value of any remaining credits on the next assessment invoice, so long as the Reserve Ratio remains at least 1.35%.
- The credit amount applied cannot exceed the institution’s quarterly assessment amount due.
- Institutions cannot buy or sell credits.
- Credits transfer only in a legal merger or consolidation of two insured depository institutions.
Small Institution Pricing Changes
Effective July 1, 2016, changes took place to the pricing system for established small institutions and appeared on the December 30, 2016 invoice. The new pricing system
- Eliminated all risk categories (that is, Risk Categories I, II, III, and IV) and uses the Financial Ratios Method to determine assessment rates for all small established institutions. However, CAMELS composite ratings are used to set minimum and maximum assessment rates for an institution. CAMELS composite ratings set a maximum on the assessment rates that CAMELS composite 1- and 2-rated institutions are charged and minimums on the assessment rates that CAMELS composite 3-, 4- and 5-rated institutions are charged.
- Revised the Financial Ratios Method so that is it based on a statistical model estimating the probability of failure over three years; and updates the financial measures used in the Financial Ratios Method so the measures are consistent with the statistical model.
- Did not require institutions to report any additional data.
Please see the Assessment Rate Calculators for determining assessments for your institution. Questions on the calculators should be emailed to RRPSAdministrator@fdic.gov.
More information on the new small institution pricing system can be found in Financial Institution Letter FIL-28-2016 and in the Recommendation and Summary memorandum.
For a Reserve Ratio history, go to Statistics at a Glance and click on “FDIC Historical Trends.”
Final FICO Assessments
FICO Assessments Final Regulation
The FDIC, as agent for the Financing Corporation (FICO), collected FICO Assessments from FDIC-insured institutions to pay interest on FICO bonds. The 30-year FICO bonds were issued between 1987 and 1989 to recapitalize the (former) Federal Savings & Loan Insurance Corporation (FSLIC). The FICO bond maturity schedule is below.
The Federal Housing Finance Agency (FHFA), the agency authorized by Congress to prescribe regulations relating to FICO, issued a rule regarding the final FICO assessments. The rule specified the following:
- The determination of the final FICO assessment collection. The final collection was on the March 29, 2019 FDIC Quarterly Certified Statement Invoice.
- Amendments to Reports of Condition and Income (Call Reports) made after March 26, 2019 do not result in changes to a bank’s previously-paid FICO assessments.
Only FICO assessments are affected by the FHFA rule. The FHFA rule does not affect the FDIC’s policy on deposit insurance assessments, which will continue in the normal manner. Please refer to the FDIC’s policy regarding assessment adjustments.
For more information on this regulation, please contact the FHFA. Contact information is found in the final regulation (see the link below).
Helpful Web Links & Documents
FICO Assessment Final Rule
FICO Rate History
FICO Bond Maturity Schedule