Final Rule on Assessments, Revised Deposit Insurance Assessment Rates

Laws and Regulations

October 18, 2022

Summary:

The Federal Deposit Insurance Corporation (FDIC) adopted a final rule, applicable to all insured depository institutions, to increase initial base deposit insurance assessment rate schedules uniformly by 2 basis points, beginning in the first quarterly assessment period of 2023. The FDIC also concurrently maintained the Designated Reserve Ratio (DRR) for the DIF at 2 percent for 2023. The increase in assessment rate schedules is intended to increase the likelihood that the reserve ratio of the Deposit Insurance Fund (DIF) reaches the statutory minimum of 1.35 percent by the statutory deadline of September 30, 2028. The new assessment rate schedules will remain in effect unless and until the reserve ratio meets or exceeds 2 percent in order to support growth in the DIF in progressing toward the FDIC’s long-term goal of a 2 percent DRR. Progressively lower assessment rate schedules will take effect when the reserve ratio reaches 2 percent, and again when it reaches 2.5 percent.

Statement of Applicability: The contents of, and material referenced in, this FIL apply to all FDIC-insured financial institutions.

Highlights:

Extraordinary growth in insured deposits during the first and second quarters of 2020 caused the DIF reserve ratio, calculated by dividing the DIF balance by the dollar amount of insured deposits in the banking system, to decline below the statutory minimum of 1.35 percent.
On June 21, 2022, the FDIC Board of Directors (Board) adopted an Amended Restoration Plan and a notice of proposed rulemaking to increase the likelihood that the reserve ratio would be restored to at least 1.35 percent by September 30, 2028.

The FDIC continues to project that the reserve ratio is at risk of not reaching the statutory minimum of 1.35 percent by the statutory deadline of September 30, 2028, absent an increase in assessment rates.

After careful consideration of the comments received on the proposal and updated analysis and projections, the Board adopted as final and without change, the proposed rule to increase initial base deposit insurance assessment rate schedules uniformly by 2 basis points.
Revised assessment rate schedules applicable to all insured depository institutions will take effect on January 1, 2023, and will be applicable to the first quarterly assessment period of 2023 (i.e., January 1 through March 31, 2023, with an invoice payment date of June 30, 2023).
The increase in assessment rates is projected to have an insignificant effect on institutions’ capital levels, is estimated to reduce income slightly by annual average of 1.2 percent, and should not impact lending or credit availability in any meaningful way. It also reduces the likelihood of a pro-cyclical increase in the future.
The increase in assessment rate schedules is also intended to support growth in the DIF in progressing toward the FDIC’s long-term goal of a 2 percent DRR, which the Board voted to maintain for 2023, and will increase the likelihood of the DIF remaining positive throughout periods of significant losses due to bank failures, consistent with the FDIC’s long-term fund management plan.
The new assessment rate schedules will remain in effect unless and until the reserve ratio meets or exceeds 2 percent, absent further Board action. Progressively lower assessment rate schedules will take effect when the reserve ratio reaches 2 percent, and again when it reaches 2.5 percent.