The Deposit Insurance Fund
The primary purposes of the Deposit Insurance Fund (DIF) are: (1) to insure the deposits and protect the depositors of insured banks and (2) to resolve failed banks. The DIF is funded mainly through quarterly assessments on insured banks, but also receives interest income on its securities. The DIF is reduced by loss provisions associated with failed banks and by FDIC operating expenses.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act) revised the FDIC's fund management authority by setting requirements for the Designated Reserve Ratio (DRR) and redefining the assessment base, which is used to calculate banks' quarterly assessments. (The reserve ratio is the DIF balance divided by estimated insured deposits.) In response to these statutory revisions, the FDIC developed a comprehensive, long-term management plan for the DIF designed to reduce pro-cyclicality and achieve moderate, steady assessment rates throughout economic and credit cycles while also maintaining a positive fund balance even during a banking crisis. The FDIC Board adopted the existing assessment rate schedules and a 2.0 percent DRR pursuant to this plan.