FDIC Federal Register Citations

[Federal Register: May 19, 1997 (Volume 62, Number 96)]

[Rules and Regulations]

[Page 27171-27177]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr19my97-2]

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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 327

RIN 3064-AB59

Assessments

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule.

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SUMMARY: The FDIC is preserving the current adjusted rate schedule for

assessments paid to the Bank Insurance Fund (BIF) for the second

semiannual period of 1997 (July-December), and for subsequent

semiannual periods subject to review on a semiannual basis. Absent

action by the FDIC, the BIF rates would revert to the base rates, which

are 4 basis points higher. The resulting assessments would exceed the

amount allowed by law.

The FDIC is issuing the final rule without prior notice and comment

under the procedure established by the FDIC's regulations for making

limited adjustments to base assessment rates.

The final rule removes obsolete provisions regarding the special

assessment and pre-1997 rates, and clarifies other provisions without

altering their substance.

EFFECTIVE DATE: Effective May 6, 1997.

FOR FURTHER INFORMATION CONTACT: Fred Carns, Assistant Director,

Division of Insurance, (202) 898-3930; William Farrell, Chief,

Assessment Management Section, Division of Finance, (202) 416-7156;

Richard Osterman, Senior Counsel, (202) 898-3523, or Jules Bernard,

Counsel, (202) 898-3731, Legal Division, Federal Deposit Insurance

Corporation, Washington, D.C. 20429.

SUPPLEMENTARY INFORMATION:

I. The Final Rule

A. Background

In accordance with section 7(b) of the Federal Deposit Insurance

(FDI Act), 12 U.S.C. 1817(b), the FDIC has adopted a risk-based

assessment program for the BIF. The program has two main components.

The first component is a set of base rates that are appropriate for the

BIF over the long term. These rates, which are presented in the BIF

Base Assessment Schedule, see 12 CFR 327.9(a)(2)(i), will be changed

only after full notice-and-comment rulemaking. The second component is

a mechanism for making limited and relatively short-term adjustments to

the BIF base rates. The adjustments are made by rulemaking without

prior notice and comment, see id. 327.9(c), but are revisited by the

FDIC on a semiannual basis. The adjusted rates are presented in the BIF

Adjusted Assessment Schedule. See id. 327.9(b)(2)(i). The adjusted

rates are the effective ones--that is, the rates that BIF-assessable

institutions currently pay to the BIF.¹

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\1\ An institution that holds BIF-assessable deposits must also

pay an assessment to the Financing Corporation (FICO) based on those

deposits. 12 U.S.C. 1441(f)(2); see Deposit Insurance Funds Act of

1996 (Funds Act), Pub. L. 104-208, section 2703, 110 Stat. 3009,

3009-479 et seq. (Sept. 30, 1996). The FICO payment is separate

from, and in addition to, the BIF assessment.

The FDIC will continue to collect the FICO assessments on the

FICO's behalf. The FDIC's quarterly invoices will reflect the

current amount of the FICO assessment.

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The BIF base assessment rates are appropriate, over the long term,

to generate assessments that maintain the BIF's capitalization at the

level prescribed by statute. The base rates reflect a thorough

historical analysis of FDIC experience, including consideration of

recent statutory changes that may moderate future deposit insurance

losses (e.g., prompt corrective action authority and the least-cost

resolution requirement). See 60 FR 42680 (Aug. 16, 1995). The BIF base

rates range from 4 basis points (bp) for institutions in the best

assessment risk classification (1A institutions) to 31 bp for

institutions in the least favorable one. The final rule does not alter

these rates.

Over the short term, however, the BIF base rates would produce a

continued rise in the Bank Insurance Fund reserve ratio (BIF reserve

ratio)--that is, in the ratio of the BIF's net worth to the aggregate

estimated deposits that the BIF insures. See 12 U.S.C. 1817(l)(6). The

BIF reserve ratio is currently above the target ratio prescribed by

statute, and is rising. (See discussion at I.B., below). The FDIC's

Board of Directors (Board) has therefore adopted a temporary adjustment

to the BIF base rates. See 61 FR 64609 (Dec. 6, 1996). The adjustment

has lowered the base rates by 4 bps. The resulting adjusted rates

(which are now in effect) range from zero to 27 bp.

The adjustment only applies to the current semiannual period

(January-June 1997), and expires at the end of it. See 12 CFR

327.9(b)(2)(ii). Absent this final rule, the effective BIF rates would

revert to the long-term rates set forth in the BIF Base Assessment

Schedule.

The final rule preserves the effective BIF rates at their current

levels for the second semiannual period of 1997 (July-December) and

indefinitely thereafter. The final rule does so by making an adjustment

to the BIF Base Assessment Schedule in accordance with the procedure

prescribed in id. 327.9(c). The adjustment lowers the rates in the BIF

Base Assessment Schedule by four bp. The adjustment is of indefinite

duration, but is reviewed semiannually.

B. Statutory and Regulatory Framework for Adjusting the Base Assessment

Rates

1. Statutory Provisions

The touchstone for setting a fund's assessments is the fund's

reserve ratio. When that ratio is below the ``designated reserve

ratio'' (DRR),² the

[[Page 27172]]

FDIC must set assessments to increase the fund's reserve ratio to the

DRR. When the reserve ratio is at or above the DRR--as is now the case

for the BIF--the FDIC must set assessments to maintain the reserve

ratio at the target DRR. 12 U.S.C. 1817(b)(2)(A)(i). The FDIC may not

generally set assessments in excess of the amounts needed to meet these

goals. Id. 1817(b)(2)(A)(iii). But the FDIC may set such assessments

for institutions that exhibit financial, operational, or compliance

weaknesses or are not well capitalized. Id.

1817(b)(2)(A)(v).³

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\2\ The DRR is a target ratio that has a fixed value for each

year. The default value is 1.25 percent. The FDIC may set a higher

value under certain conditions, but has not exercised that power.

See 12 U.S.C. 1817(b)(2)(A)(iv).

\3\ The FDIC has by regulation interpreted this provision to

embrace institutions that have an assessment risk classification

other than 1A. See 12 CFR 327.10.

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In order to determine the aggregate amount to be collected for a

fund, the FDIC must consider: (1) The fund's expected operating

expenses; (2) the fund's case resolution expenditures and income; (3)

the effect of assessments on the earnings and capital of fund members;

and (4) any other factors that the FDIC deems appropriate. Id.

1817(b)(2)(A)(ii).⁴

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\4\ The FDIC must base a particular institution's semiannual

assessment on the following factors: (1) The probability that the

institution will cause a loss to the fund, (2) the likely amount of

the loss, and (3) the fund's revenue needs. 12 U.S.C. 1817(b)(1)(C).

To that end, the FDIC assigns every institution to an ``assessment

risk classification,'' and sets rates for each of the

classifications. See 12 CFR 327.4 and 327.9.

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2. Regulatory Provisions

The FDIC has adopted a special procedure for making limited and

relatively short-term adjustments to a fund's base rates in order to

maintain the fund's reserve ratio at the target DRR. See 12 CFR

327.9(c).

Adjustments are subject to strict constraints. An adjustment must

apply uniformly to every rate in the base assessment schedule. No

adjustment may, when aggregated with prior adjustments, cause the

adjusted rates to deviate at any time from the base rates by more than

5 bp. No one adjustment may constitute an increase or decrease of more

than 5 bp. And no adjustment may result in a negative assessment rate.

Id. 327.9(c)(1).

In line with the statutory requirements for setting assessments, an

adjustment is determined by (1) the amount of assessment revenue

necessary to maintain the fund's reserve ratio at the DRR, and (2) the

assessment schedule that would provide the amount so needed considering

the risk profile of the institutions that pay assessments to the fund.

Id. To determine the assessment revenue needed for a fund, the FDIC

considers the fund's expected operating expenses, its case resolution

expenditures and income, the effect of assessments on the earnings and

capital of the institutions paying assessments to the fund, and any

other relevant factors. Id. 327.9(c)(2).

C. The BIF Adjusted Assessment Schedule

For the reasons given below, the FDIC considers that there is no

current need for assessment income to maintain the BIF's reserve ratio

at the target DRR. Accordingly, the final rule adjusts the rates in the

BIF Base Assessment Schedule by lowering each rate 4 bp, effective July

1, 1997, thereby retaining the rates currently in effect. The adjusted

rates are as follows:

BIF Adjusted Assessment Schedule

------------------------------------------------------------------------

Supervisory subgroup

Capital group -----------------------------

A B C

------------------------------------------------------------------------

1......................................... 0 3 17

2......................................... 3 10 24

3......................................... 10 24 27

------------------------------------------------------------------------

1. Maintaining the BIF Reserve Ratio at the Target DRR. As of

December 31, 1996 (unaudited), the latest date for which complete data

are available, the BIF had a balance of $26.854 billion (see Table 3)

and a reserve ratio of 1.34 percent. The industry's performance in

recent months has been strong; the growth of the BIF reserve ratio has

been robust. Accordingly, the near-term outlook for the BIF reserve

ratio is favorable.

Expected operating expenses. Operating expenses were approximately

$505 million during 1996. They averaged $42 million per month for the

year, but increased to an average of $55 million per month during the

last quarter of 1996 (a full-year equivalent figure of $656 million).

For 1997, operating expenses are projected to be $652 million. The

savings from corporate downsizing is offset by a higher allocation of

overhead expenses to corporate, a result of fewer receiverships.

Case resolution expenditures and income. Expected case resolution

expenditures and income are reflected in projected insurance losses,

which consist of two components: a contingent liability for future

failures, and an allowance for losses on institutions that have already

failed. Using the FDIC's current estimates of failed-bank assets and a

20 percent loss rate on such assets, the change in the contingent

liability for future failures is estimated to be between $100 million

(low estimate) and $300 million (high estimate) for calendar year 1997.

While annual changes in the allowance for losses on past failures,

as a percent of the estimated net recovery value of closed

banks,⁵ have been as high as +13 percent and as low as -16

percent over the last five years, the change in 1994 was -5.75 percent

, +10.2 percent in 1995, and -3.0 percent in 1996. An estimated range

of +5 percent to -5 percent was used in the projections detailed below.

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\5\ The estimated recovery value of closed banks was $4.34

billion as of December 31, 1996.

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Table 1 summarizes the effect of these assumptions on projections

of the provision for losses:

Table 1.--Changes in Contingent Liabilities and Allowance for Losses (1)

------------------------------------------------------------------------

Low loss High loss

estimate estimate

(million) (million)

------------------------------------------------------------------------

Contingent Liability for Future Cases......... $100 $300

Allowance for Losses: Closed Banks (2)........ (200) 200

Total Provision for Losses.................... (100) 500

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Notes:

(1) Both projections assume a continuation of current economic

conditions during 1997.

(2) Assumes a range of -5 percent to +5 percent of the estimated net

recovery value of closed banks ($4.34 billion as of 12/31/96).

[[Page 27173]]

Assessment Income. Based on the distribution of the assessment base

across the BIF assessment rate matrix as of January 1, 1997, BIF

assessment income for 1997 would be $23 million under the existing

assessment rate schedule.

Table 2 summarizes the distribution of institutions across the

risk-based assessment matrix:

Table 2.--BIF Assessment Base Distribution (1)

[Deposits as of December 31, 1996; Supervisory Subgroup and Capital Groups in Effect January 1, 1997]

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Supervisory subgroups

Capital group --------------------------------------------------------------------------------

A Percent B Percent C Percent

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1. Well:

Number..................... 9,362 95.0 304 3.1 57 0.6

Base ($billion)............ 2,597.0 98.3 29.4 1.1 2.4 0.1

2. Adequate:

Number..................... 84 0.9 17 0.2 15 0.2

Base ($billion)............ 9.7 0.4 1.2 0.1 1.2 0.1

3. Under:

Number..................... 0 0.0 2 0.0 11 0.1

Base ($billion)............ 0.0 0.0 0.4 0.0 0.8 0.0

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Estimated annual assessment revenue--$23 million

Assessment Base--$2,642 billion

Average annual assessment rate (bp)--0.09 bp

Notes: (1) ``Number'' reflects the number of BIF members, including BIF-member Oakar institutions; ``Base''

reflects all BIF-assessable deposits.

With 99.0 percent of the number of institutions and 99.8 percent of

the assessment base in the three lowest assessment risk classifications

(1A, 1B and 2A), the current distribution in the matrix reflects little

fundamental difference from the previous period when the percentages

were 98.7 percent and 99.2 percent, respectively. The slightly lower

number of institutions in these three categories (down 229) reflects

continuation of industry consolidation trends, as the overall total

declined by 247 institutions. There are only 102 institutions outside

the three lowest assessment risk classifications compared to 120 during

the previous period, and only 490 outside the 1A classification as

compared with 561 in the previous period.

Interest Income. Income from the estimated average investment

portfolio of $24.5 billion is estimated at $1.485 billion for 1997

(6.06 percent yield). Given a range of + or -19 bp for the yield (5.87

percent to 6.25 percent) for 1997, based on a range for interest rate

changes of + or -100 bp, interest income is projected to be between

$1.438 billion and $1.531 billion.

Table 3 summarizes the effects on the fund balance of the low and

high estimates that define the ranges assumed for interest income and

insurance losses:

Table 3.--Fund Balance

[$ in millions]

------------------------------------------------------------------------

Low projected High projected

estimate estimate

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Revenue \1\:

Assessments \2\..................... $23 $23

Interest Income \3\................. 1,438 1,531

-------------------------------

Total Revenue..................... 1,461 1,554

Expenses & Losses \1\:

Operating Expenses.................. 652 652

Provision for Losses................ 500 (100)

-------------------------------

Total Expenses & Losses........... 1,152 552

Net Income \1\.......................... 309 1,002

Fund Balance (Unaudited)--12/31/96...... 26,854 26,854

Projected Fund Balance--12/31/97........ 27,163 27,856

------------------------------------------------------------------------

Notes:

\1\ Figures are for the full year ending December 31, 1997.

\2\ Assumes that the current assessment rate schedule remains in effect

through December 31, 1997.

\3\ Portfolio yield is estimated to be between 5.87 percent (low) and

6.25 percent (high), reflecting variation of + or -100 bp in interest

rates. The average invested fund balance is estimated to be $24.5

billion.

Growth of insured deposits. Insured deposit growth has been

volatile. Since 1986, annual growth of BIF-insured deposits has been as

high as 7.1 percent and annual shrinkage as much as 2.1 percent:

BILLING CODE 6714-01-P

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[GRAPHIC] [TIFF OMITTED] TR19MY97.012

BILLING CODE 6714-01-C

The recent trend has been toward growth. Over the last two years

there have been only two quarters in which insured deposits have

shrunk, and even then the shrinkage has been slight (.01 percent and

.03 percent). It is difficult to determine whether this development

primarily reflects the incentives created by reduced BIF assessment

rates, including the incentive for deposit-shifting from the Savings

Association Insurance Fund (SAIF) to the BIF, or whether it indicates a

change in the pattern of BIF-insured deposit growth due to other

causes. With the passage of the Funds Act and the recent revision of

FDIC rules governing the allocation of deposit growth or shrinkage

between the BIF and the SAIF, both of which should inhibit deposit-

shifting, the primary causes of recent BIF-insured deposit growth

should become clearer. In the interim, considering the experience of

the last five years taken together, the FDIC considers that BIF-insured

deposits are likely to experience a growth rate in the range of -2

percent to +5 percent between year-end 1996 and year-end 1997.

Based on the projected BIF balance and the growth of the insured

deposit base, the FDIC projects the BIF reserve ratio to be within the

range of 1.29 to 1.42 at December 31, 1997:

Table 4.--Projected BIF Reserve Ratios

[$ in millions]

------------------------------------------------------------------------

December

31, 1996

------------------------------------------------------------------------

Fund Balance (Unaudited)................................... $26,854

Estimated Insured Deposits................................. $2,007,447

BIF Ratio.................................................. 1.34

------------------------------------------------------------------------

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Low Estimate \1\-- High Estimate \2\--

December 31, 1997 December 31, 1997

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Projected Fund Balance............................................ $27,163 $27,856

Estimated Insured Deposits........................................ $2,107,819 $1,967,298

Estimated BIF Ratio............................................... 1.29 1.42

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Notes:

\1\ The low estimate refers to the scenario of lower interest income (portfolio yield: 5.87 percent), higher

insurance losses ($500 million) and a higher insured deposit growth rate (+5 percent).

\2\ The high estimate refers to the scenario of higher interest income (portfolio yield: 6.25 percent), a

reduction in insurance losses (-$100 million) and a shrinkage of the insured deposit base (-2 percent).

The low estimate produces a 5 bp decrease below the December 31,

1996, ratio. It reflects an assumed increase in the insured deposit

base (+5 percent for 1997) and a small offset from an increase in the

fund balance. (The fund balance in the low-estimate scenario increases

because the higher projected insurance losses still do not fully offset

interest income.) The high-estimate scenario produces an 8 bp increase

above the December 31, 1996, ratio. It reflects an assumed shrinkage of

the BIF-insured deposit base (-2 percent for 1997) and a strong

increase in the BIF balance due to low insurance losses and high

interest income.

In light of recent trends and current conditions in the banking

industry, the FDIC considers that the low-estimate scenario is not

likely to be realized. Even if it were, however, the current rate

schedule still would be sufficient to maintain the BIF's reserve ratio

at the DRR through year-end 1997.

2. Impact on Institutions' Earnings and Capital

The estimated annual costs to BIF-assessable institutions, before

taxes, from the existing rate schedule is $23 million, down from the

$43 million estimate based on July 1, 1996, classifications. This

decline is largely due to the assessment base of 1A institutions

increasing from 96.8 percent to 98.3 percent of the total.

Additionally, the estimated total base increased $148.0 billion while

the 1A base increased $181.3 billion.

Institutions having approximately $45 billion in deposits, out of a

total base of approximately $2,642.0 billion (1.7 percent), will be

charged a non-zero risk-based assessment. Having considered the impact

on these institutions' earnings and capital, the FDIC believes that the

BIF adjusted rates will have no unwarranted adverse effects.

3. Assessment Schedule Needed to Generate the Revenue

The FDIC does not presently need to collect assessment revenues

from 1A institutions in order to maintain the BIF reserve ratio at the

DRR over the short term.⁶ The FDIC is therefore lowering the

rates in the BIF Base Assessment Schedule by four bp. The adjustment

results in an effective assessment rate for 1A institutions of zero bp.

The BIF effective rates are set forth in the BIF Adjusted Assessment

Schedule.

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\6\ The assessments payable by non-1A institutions reflect the

amounts needed to maintain a risk-based assessment system for the

BIF.

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D. Technical Changes

1. Removal of Pre-1997 SAIF Adjusted Rates

The final rule removes provisions pertaining to pre-1997 SAIF

adjusted rates. These provisions are obsolete.

[[Page 27175]]

Removing them simplifies and clarifies the current regulation.

During the final calendar quarter of 1996, a particular group of

SAIF-assessable institutions--namely, SAIF-member savings

associations--were subject to a special interim set of adjusted rates.

The interim rates expired on December 31, 1996. From the start of 1997

forward, all SAIF-assessable institutions have been subject to the same

SAIF adjusted rates. The references to the pre-1997 SAIF adjusted

rates--and, in particular, to the special interim rates--are no longer

needed.

The final rule does not alter either the SAIF Base Assessment

Schedule or the SAIF Adjusted Assessment Schedule now in effect, but

merely republishes these schedules. The effective SAIF rates, which

range from zero to 27 bp, remain at the current levels.

2. Removal of Special-Assessment Provisions

The final rule eliminates subpart C of part 327, which is chiefly

concerned with the special assessment imposed by the Funds Act. The

FDIC has assessed and collected the special assessment. The vast

majority of subpart C has therefore become obsolete.

A few provisions of Subpart C--those that pertain to institutions

that were exempted from the special assessment--have a continuing

vitality. The Funds Act requires these institutions (and their

successors) to pay SAIF assessments at the rates in effect on June 30,

1995, for three years. Funds Act section 2702(f)(4)(A). The Funds Act

also gives the institutions (and their successors) the power to

terminate that obligation by paying a pro rata share of the amount

otherwise due for the special assessment. Funds Act section

2702(f)(4)(B). The final rule retains but relocates the provisions from

subpart C that pertain to these matters.

3. Definitions

The final rule adds an introductory phrase to 12 CFR 327.8, which

sets forth definitions. The introductory phrase makes it clear that

Sec. 327.8's definitions apply throughout part 327, and not just within

subpart A.

The final rule retains the provisions, heretofore found in subpart

C, defining ``BIF'' and ``SAIF.''

E. Rulemaking Procedures; Effective Date

1. The BIF Rate Adjustment

The Board is issuing this final rule in pursuant to id. 327.9(c),

which enables the Board to adjust the rates in a fund's base assessment

schedule without engaging in notice-and-comment rulemaking proceedings

for each adjustment. The final rule is therefore effective immediately

upon adoption. The adjustment made by the final rule, and the BIF

adjusted rates specified in the final rule, apply during the second

semiannual period of 1997 (July-December, 1997) and subsequent

semiannual periods.

The Board has found it necessary to establish this procedure

because the FDIC must set ``semiannual'' assessments, see 12 U.S.C.

1817(b)(2)(A), and therefore reviews the assessment schedule for each

insurance fund every six months. Moreover, the FDIC ``shall set

assessments when necessary, and only to the extent necessary'' to

maintain an insurance fund's reserve ratio at the DRR, or to raise an

insurance fund's reserve ratio to that level, id. 1817(b)(2)(A)(i);

conversely, the FDIC ``shall not set assessment rates in excess of the

amount needed'' for those purposes, id. 1817(b)(2)(A)(iii). These twin

commands require the FDIC to respond quickly in order to keep each

fund's assessments commensurate with its level of capitalization.

As discussed in more detail in the Federal Register of December 24,

1996, in which the FDIC established the current procedure for adjusting

the base rates, and also in the Federal Register of August 16, 1995, in

which the FDIC adopted its prior procedure for adjusting the BIF base

rates temporarily by means of a Board resolution, the FDIC recognizes

and understands the concern for the possibility of assessment rate

increases without the benefit of full notice-and-comment rulemaking.

See 61 FR 67687, 67693-67694 (Dec. 24, 1996); see also 60 FR 42680,

42739-42740 (Aug. 16, 1995). Nevertheless, for the reasons given below,

the FDIC considers that notice and public participation with respect to

the adjustment made by this final rule would generally be

``impracticable, unnecessary, or contrary to the public interest''

within the meaning of 5 U.S.C. 553(b). For the same reasons, the FDIC

considers that it has ``good cause'' within the meaning of id. 553(d)

to make the final rule effective immediately, and not after a 30-day

delay.

Notice-and-comment rulemaking procedures are ``unnecessary'' in

this case because BIF-assessable institutions are already on notice

with respect to: (1) The benchmark rates that are set forth in the BIF

Base Assessment Schedule; (2) the need for making routine semiannual

adjustments to those rates; and (3) the maximum amount of the

adjustment. In short, institutions are fully aware that the effective

rates are subject to some limited amount of variability, and that any

variations in the rates are directly tied to the capitalization of the

BIF.

Notice-and-comment rulemaking procedures are also ``unnecessary''

because they would not provide additional relevant information.

Institutions provide part of the needed information in their quarterly

reports of condition. The FDIC generates the rest of the information

internally: e.g., the current balance and expected operating expenses

of the BIF, and the BIF's case resolution expenditures and income.

Notice-and-comment rulemaking procedures are ``impracticable'' and

``contrary to the public interest'' in this case because they are not

compatible with the need to satisfy two competing interests. On one

hand, the FDIC must comply with the statutory directive to maintain the

BIF's reserve ratio at the target DRR. The FDIC must monitor the BIF

closely, and must use data that are as current as possible to set BIF

assessments on a semiannual basis. On the other hand, the FDIC must

give institutions adequate notice of those assessments. In the current

case, the assessment is due on June 30. See 12 CFR 327.3(c)(2). The

FDIC must issue invoices by May 31. See id. 327.3(d)(1). The FDIC must

announce the rates--and therefore must adopt the final rule--by May 16.

See id. 327.9(c)(4). Notice-and-comment procedures entail delays that

are incompatible with these tight scheduling requirements.

2. Other Changes

The other changes made by the final rule are ``housekeeping''

measures of a purely interpretative nature. Neither prior notice and

comment, nor a delayed effective date, are required for such rules. 5

U.S.C. 553(b) and (d).

II. Paperwork Reduction Act

No collections of information pursuant to section 3504(h) of the

Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.) are contained

in this rule. Accordingly, no information has been submitted to the

Office of Management and Budget for review.

III. Regulatory Flexibility Analysis

The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., does

not apply to this rule. The RFA defines ``rule'' to exclude ``a rule of

particular applicability relating to rates''. Id. 601(2). The FDIC

considers that the rule is governed by this exclusion.

In addition, the legislative history of the RFA indicates that its

requirements are inappropriate to this proceeding.

[[Page 27176]]

The RFA focuses on the ``impact'' that a rule will have on small

entities. The legislative history shows that the ``impact'' at issue is

a differential impact--that is, an impact that places a

disproportionate burden on small businesses:

Uniform regulations applicable to all entities without regard to

size or capability of compliance have often had a disproportionate

adverse effect on small concerns. The bill, therefore, is designed

to encourage agencies to tailor their rules to the size and nature

of those to be regulated whenever this is consistent with the

underlying statute authorizing the rule. 126 Cong. Rec. 21453 (1980)

(``Description of Major Issues and Section-by-Section Analysis of

Substitute for S. 299'').

The final rule does not impose a uniform cost or requirement on all

institutions regardless of size. Rather, it imposes an assessment that

is directly proportional to each institution's size. Nor does the rule

cause an affected institution to incur any ancillary costs of

compliance (such as the need to develop new recordkeeping or reporting

systems, to seek out the expertise of specialized accountants, lawyers,

or managers) that might cause disproportionate harm to small entities.

As a result, the purposes and objectives of the RFA are not affected,

and an initial regulatory flexibility analysis is not required.

IV. Riegle Community Development and Regulatory Improvement Act

Section 302(b) of the Riegle Community Development and Regulatory

Improvement Act of 1994 (Riegle Act) requires that, as a general rule,

new and amended regulations that impose additional reporting,

disclosure, or other new requirements on insured depository

institutions shall take effect on the first day of a calendar quarter.

See 12 U.S.C. 4802(b). This restriction is inapplicable because the

final rule would not impose such additional or new requirements.

Nevertheless, the changes made by the final rule apply beginning July

1, 1997, in line with the Riegle Act's specification.

V. Congressional Review

As a general matter, when an agency adopts a final rule, the agency

must submit to each House of Congress and to the Comptroller General a

report containing a copy of the rule, a general statement relating to

the rule, and the rule's proposed effective date. 5 U.S.C. 801(a)(1).

But the term ``rule'' excludes ``any rule of particular applicability,

including a rule that approves or prescribes for the future rates''.

Id. 804(3). The final rule is governed by this exclusion, because the

final rule sets assessment rates and relates to the computations

associated with assessment rates. Accordingly, the reporting

requirement of id. 801(a)(1), and the more general requirements of id.

sections 801-808, do not apply.

List of Subjects in 12 CFR Part 327

Assessments, Bank deposit insurance, Banks, banking, Financing

Corporation, Savings associations.

For the reasons set forth in the preamble, the Board of Directors

of the Federal Deposit Insurance Corporation is amending part 327 of

title 12 of the Code of Federal Regulations as follows:

PART 327--ASSESSMENTS

1. The authority citation for part 327 continues to read as

follows:

Authority: 12 U.S.C. 1441, 1441b, 1813, 1815, 1817-1819; Pub. L.

104-208, 110 Stat. 3009-479 (12 U.S.C. 1821).

2. Section 327.8 is amended by adding introductory text and by

revising paragraphs (f) and (g) to read as follows:

Sec. 327.8 Definitions.

For the purpose of this part 327:

* * * * *

(f) BIF; BIF member. (1) BIF. The term BIF means the Bank Insurance

Fund.

(2) BIF member. The term BIF member means a depository institution

that is a member of the BIF.

(g) SAIF; SAIF member. (1) SAIF. The term SAIF means the Savings

Association Insurance Fund.

(2) SAIF member. The term SAIF member means a depository

institution that is a member of the SAIF.

* * * * *

3. Section 327.9 is amended by revising paragraph (b) to read as

follows:

Sec. 327.9 Assessment schedules.

* * * * *

(b) Adjusted assessment schedules--(1) In general. Except as

provided in paragraph (b)(3)(ii) of this section, institutions shall

pay semiannual assessments at the rates specified in this paragraph (b)

whenever such rates have been prescribed by the Board.

(2) Adjusted rates for BIF members. The Board has adjusted the BIF

Base Assessment Schedule by reducing each rate therein by 4 basis

points for the first semiannual period of 1997 and thereafter.

Accordingly, the following adjusted assessment schedule applies to BIF

members:

BIF Adjusted Assessment Schedule

------------------------------------------------------------------------

Supervisory subgroup

Capital group -----------------------------

A B C

------------------------------------------------------------------------

1......................................... 0 3 17

2......................................... 3 10 24

3......................................... 10 24 27

------------------------------------------------------------------------

(3) Adjusted rates for SAIF members--(i) In general. The Board has

adjusted the SAIF Base Assessment Schedule by reducing each rate

therein by 4 basis points for the first semiannual period of 1997 and

thereafter. Accordingly, except as provided in paragraph (b)(3)(ii) of

this section, the following adjusted assessment schedule applies to

SAIF members:

SAIF Adjusted Assessment Schedule

------------------------------------------------------------------------

Supervisory subgroup

Capital group -----------------------------

A B C

------------------------------------------------------------------------

1......................................... 0 3 17

2......................................... 3 10 24

[[Page 27177]]

3......................................... 10 24 27

------------------------------------------------------------------------

(ii) Institutions exempt from the special assessment--(A) Rate

schedule. An institution that, pursuant to former Sec. 327.43 (a) or

(b) as in effect on November 27, 1996 (See 12 CFR 327.43 as revised

January 1, 1997.), was exempt from the special assessment prescribed by

12 U.S.C. 1817 Note shall pay regular semiannual assessments to the

SAIF from the first semiannual period of 1996 through the second

semiannual period of 1999 according to the schedule of rates specified

in former Sec. 327.9(d)(1) as in effect for SAIF members on June 30,

1995 (See 12 CFR 327.9 as revised January 1, 1996.), as follows:

------------------------------------------------------------------------

Supervisory subgroup

Capital group -----------------------------

A B C

------------------------------------------------------------------------

1......................................... 23 26 29

2......................................... 26 29 30

3......................................... 29 30 31

------------------------------------------------------------------------

(B) Termination of special rate schedule. An institution that makes

a pro-rata payment of the special assessment shall cease to be subject

to paragraph (b)(3)(ii)(A) of this section. The pro-rata payment must

be equal to the following product: 16.7 percent of the amount the

institution would have owed for the special assessment, multiplied by

the number of full semiannual periods remaining between the date of the

payment and December 31, 1999.

* * * * *

Subpart C--[Removed]

4. Subpart C is removed.

By order of the Board of Directors.

Dated at Washington, DC, this 6th day of May 1997.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Deputy Executive Secretary.

[FR Doc. 97-12587 Filed 5-16-97; 8:45 am]

BILLING CODE 6714-01-P