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Restoration Plan for the FDIC Deposit Insurance Fund

September 15, 2020

Summary:

On September 15, 2020, the Federal Deposit Insurance Corporation (FDIC) Board of Directors (Board) voted to adopt a Restoration Plan to restore the Deposit Insurance Fund (DIF) reserve ratio to at least 1.35 percent within 8 years, as required by the Federal Deposit Insurance Act. Under the Restoration Plan, the FDIC will: (1) monitor deposit balance trends, potential losses, and other factors that affect the reserve ratio; (2) maintain the current schedule of assessment rates for all insured depository institutions (IDIs); and (3) provide updates to its loss and income projections at least semiannually.

A copy of the Restoration Plan can be found on the FDIC’s website.

A Statement from FDIC Chairman Jelena McWilliams can also be found on the FDIC’s website.

Statement of Applicability: This Financial Institution Letter (FIL) applies to all FDIC-insured institutions.

Highlights:

  • As of June 30, 2020, the DIF reserve ratio, calculated by dividing the DIF balance by the dollar amount of insured deposits in the banking system, fell to 1.30 percent from its recent peak of 1.41 percent as of December 31, 2019, and below the statutory minimum of 1.35 percent.
  • The decline in the reserve ratio was solely a result of extraordinary insured deposit growth.
    • An unprecedented inflow of more than $1 trillion in estimated insured deposits in the first half of 2020 resulted mainly from the COVID-19 pandemic, specifically monetary policy actions, direct government assistance to consumers and businesses, and an overall reduction in spending.
    • The DIF balance grew and did not experience material losses.
  • Based on a range of reasonable estimates of future losses and assuming a return to normal insured deposit growth rates, the FDIC projects that the DIF would return to 1.35 percent without further action by the FDIC Board before the end of the eight-year period.
  • Under the Restoration Plan, the FDIC will closely monitor deposit balance trends, potential losses, and other factors that affect the reserve ratio.
  • The FDIC will maintain the current schedule of assessment rates for all IDIs.
  • At least semiannually, staff will update the Board on projections for the DIF, and if necessary, recommend modifications to the plan.

Distribution:

FDIC-Insured Institutions

Suggested Routing:

Chief Executive Officer 
President 
Chief Financial Officer 
 

Additional Related Topics:

  • Assessments, 12 CFR Part 327
Attachment(s)
Deposit Insurance Fund (DIF) Restoration Plan
Statement from FDIC Chairman Jelena McWilliams

Last Updated: September 15, 2020