[Federal Register: October 16, 1996 (Volume 61, Number 201)]
[Rules and Regulations]
[Page 53834-53841]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
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FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 327
RIN 3064-AB93
Assessments
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Final rule.
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SUMMARY: The Deposit Insurance Funds Act of 1996 (Funds Act) requires
the FDIC to impose a special assessment on institutions holding
deposits subject to assessment by the Savings Association Insurance
Fund (SAIF). The Funds Act mandates that the special assessment
increase the SAIF's net worth as of October 1, 1996 to 1.25 percent of
SAIF-insured deposits.
The Funds Act requires the FDIC to determine the amount of the
special assessment based on the most recently calculated SAIF balance
(August 31, 1996) and insured deposit data reported in the most recent
quarterly reports of condition filed not later than 70 days before
enactment (reports as of March 31, 1996, filed April 30, 1996). The
special assessment will be collected on November 27, 1996. This
assessment, which the FDIC estimates to be 65.7 basis points, is
required to be applied against SAIF-assessable deposits which generally
were held by institutions as of March 31, 1995.
The final rule provides for certain discounts and exemptions
related to the special assessment. In addition, the FDIC is
establishing guidelines for identifying institutions classified as
``weak'', and therefore exempt from the special assessment. The final
rule also adjusts the base for computing the regular semiannual
assessments paid by certain institutions, in accordance with the Funds
Act.
EFFECTIVE DATE: October 8, 1996.
FOR FURTHER INFORMATION CONTACT: Stephen Ledbetter, Chief, Assessments
Evaluation Section, Division of Insurance (202) 898-8658; Allan Long,
Assistant Director, Division of Finance, (202) 416-6991; Cary Hiner,
Associate Director, Division of Supervision, (202) 898-6814; James
McFadyen, Senior Financial Analyst, (202) 898-7027, Division of
Research and Statistics; Richard Osterman, Senior Counsel, (202) 898-
3523, or Jules Bernard, Counsel, Legal Division, (202) 898-3731;
Federal Deposit Insurance Corporation, 550-17th St., N.W., Washington,
D. C. 20429.
SUPPLEMENTARY INFORMATION:
I. The Final Rule
The final rule imposes a special assessment on all institutions
that pay assessments to the SAIF, but allows discounts for certain
institutions, and exempts others. The final rule also reduces the
adjusted attributable deposit amounts (AADAs) of certain Oakar banks:
banks that belong to the Bank Insurance Fund (BIF), but hold deposits
that are treated as insured by the SAIF pursuant to the Oakar
Amendment, 12 U.S.C. 1815(d)(3).
A. The Special Assessment
The Funds Act, Pub. L. 104-208, 110 Stat. 3009 et seq., requires
the FDIC's Board of Directors (Board) to impose a special assessment on
all institutions that hold SAIF-assessable deposits--that is, on SAIF-
member institutions, and on Oakar banks--in an amount sufficient to
increase the Savings Association Insurance Fund reserve ratio (SAIF
reserve ratio) 1 to the designated reserve ratio (DRR) of 1.25
percent 2 as of October 1, 1996. Funds Act section 2702(a); see 12
U.S.C. 1817(b)(2)(a)(4).
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\1\ The Savings Association Insurance Fund reserve ratio is the
ratio of SAIF's net worth to aggregate SAIF-insured deposits. 12
U.S.C. 1817(l)(7).
\2\ The DRR is a target ratio that has a fixed value for each
year. The value is either (i) 1.25 percent, or (ii) such higher
percentage as the Board determines to be justified for that year by
circumstances raising a significant risk of substantial future
losses to the fund. Id. 1817(b)(2)(A)(iv). The Board has not
increased the DRR for the SAIF.
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The Funds Act requires the special assessment to be applied against
the SAIF-assessable deposits held by institutions as of March 31, 1995.
If an institution that held deposits on that date has transferred the
deposits to another institution after March 31, 1995, and is no longer
an insured institution on November 27, 1996 (the collection date for
the special assessment), the transferee institution is deemed to have
held the transferred deposits as of March 31, 1995, and must pay the
assessment due on them. See Funds Act section 2710(8)(B).
The Board is also required to take the following exemptions and
adjustments into account in determining the amount of the special
assessment: (1) The Funds Act decreases by 20 percent the amount of
SAIF-assessable deposits against which the special assessment will be
applied for certain institutions; (2) the Funds Act grants exemptions
to certain specifically defined institutions; and (3) the Funds Act
also provides the Board with the authority to exempt weak institutions
from paying the special assessment if the Board determines that such an
exemption would reduce risk to the SAIF.
1. 20 Percent Discounts
When calculating the amount of special assessment for certain
institutions, those institutions' SAIF-assessable deposits, determined
as of March 31, 1995, are decreased by 20 percent.
Section 2702(h) of the Funds Act provides the discount to the
following Oakar banks:
--Any Oakar bank that, as of June 30, 1995, had an AADA that was
less than half of its total domestic (and therefore assessable)
deposits. Id. section 2702(h)(1)(A).
--Any Oakar bank that met all the following conditions as of June
30, 1995: it had more than $5 billion in total assessable deposits;
it had an AADA that was less than 75 percent of that amount; and it
belonged to a bank holding company system that, in the aggregate,
had more BIF-insured deposits than SAIF-insured deposits. Id.
section 2702(h)(1)(B).
Section 2702(j) of the Funds Act provides the same discount to the
following ``converted'' institutions:
--A SAIF-member federal savings association that had no more than $4
billion of SAIF-assessable deposits as of March 31, 1995, and that
had been, or is a successor to, an institution that used to be a
state savings bank insured by the FDIC prior to August 9, 1989, and
that converted to a federal savings association pursuant to section
5(i) of the Home Owners' Loan Act before January 1, 1985. Id.
section 2702(j)(2)(A).
--A state-chartered SAIF member that had been a state savings bank
prior to October 15, 1982, and that was a federal savings
association on August 9, 1989. Id. section 2702(j)(2)(B).
--An insured bank that was established de novo in order to acquire
the deposits of a savings association in default or in danger of
default, that did not open for business before acquiring the
deposits of such savings association, and that was a SAIF member as
of the date of enactment of the Funds Act. Id. section
2702(j)(2)(C).
--A ``Sasser bank''--that is, a bank that converted its charter from
a savings association to a bank, yet remained a SAIF member in
accordance with the Sasser Amendment, 12 U.S.C. 1815(d)(2)(G)--that
underwent the conversion before December 19, 1991, and that
increased its capital by more than 75 percent in conjunction with
the conversion. Funds Act section 2702(j)(2)(D).
[[Page 53835]]
2. Exemptions
Section 2702(f)(3) of the Funds Act grants exemptions from the
special assessment to the following institutions:
--A savings association that was in existence on October 1, 1995,
but held no SAIF-assessable deposits prior to January 1, 1993. An
institution is ``deemed to have held SAIF-assessable deposits prior
to January 1, 1993'' if the institution directly held such deposits
prior to that date, or if the institution succeeded to, acquired,
purchased, or otherwise held any SAIF-assessable deposits as of the
date of enactment of the Funds Act that were SAIF-assessable
deposits prior to January 1, 1993. Id. section 2702(f)(3)(A)(i); see
id. section 2702(f)(3)(B).
--A federal savings bank that was established de novo in April 1994,
in order to acquire the deposits of a savings association that was
in default or in danger of default, if the acquiring federal savings
bank received minority interim capital assistance from the
Resolution Trust Corporation under section 21A(w) of the Federal
Home Loan Bank Act, 12 U.S.C. 1441a(w), in connection with the
acquisition. Funds Act section 2702(f)(3)(A)(ii).
--A SAIF-insured savings association that, prior to January 1, 1987,
was chartered as a federal savings bank insured by the Federal
Savings and Loan Insurance Corporation for the purpose of acquiring
all or substantially all of the assets and assuming all or
substantially all of the deposit liabilities of a national bank in a
transaction consummated after July 1, 1986, and that, as of the date
of the transaction, had assets of less than $150,000,000. Id.
section 2702(f)(3)(A)(iii).
3. Weak institutions
Section 2702(f)(1) of the Funds Act gives the Board authority to
grant an exemption to any institution that the Board determines to be
``weak'', if the Board determines that the exemption would reduce risk
to the SAIF. Section 2702(f)(2) of the Funds Act requires the Board to
prescribe guidelines that set forth the Board's criteria for
determining whether an institution is ``weak''. Accordingly, the FDIC
is adopting the following guidelines. The first two guidelines refer to
the assessment risk classifications set forth in part 327, which are
used to determine the regular semiannual assessments that insured
institutions pay under the FDIC's risk-based assessment system. The
third guideline refers to the supervisory ratings issued by the federal
supervisory agencies.
Guideline #1. If a SAIF-member institution or an Oakar bank has so
little capital that it currently meets the standards for capital group
3 (``undercapitalized'') pursuant to section 327.4(a)(1)(iii) of the
FDIC's regulations, the institution generally presents a significant
risk of loss to the SAIF for the purpose of section 2(f) of the Funds
Act. The special assessment would deplete such an institution's
resources even further: it would diminish the institution's capital,
lower its earnings, and reduce its liquidity. Accordingly, the Board
has generally determined to exempt all such institutions from the
special assessment, on the ground that doing so would reduce the risk
to the SAIF.
Guideline #2. The special assessment could itself cause some
institutions to meet the standards of capital group 3, and thereby
present a significant risk of loss to the SAIF for the purpose of
section 2(f) of the Funds Act. The Board has generally determined to
exempt these institutions as well, on the same ground.
(3) Guideline #3: Institutions rated 4 or 5. If an institution's
composite rating by its primary supervisor is 4 or 5, the institution
may request the FDIC to consider whether it would be appropriate to
exempt the institution from the special assessment. Such an institution
is regarded as ``weak'' if the institution would, after having paid the
assessment, present a significant risk of loss to the SAIF for the
purpose of section 2(f) of the Funds Act. The Board has determined to
exempt such institutions for the reason given with respect to
Guidelines #1 and #2.
The Board is delegating authority to administer these guidelines to
the Director of the FDIC's Division of Supervision (DOS Director). The
DOS Director will examine and evaluate the circumstances of each
institution that is initially regarded as ``weak'', taking into account
all relevant information currently available to the FDIC. The DOS
Director will begin by looking to the institution's current assessment
risk classification: that is, its risk classification for the second
semiannual period of 1996 (which has determined its assessment rate for
the regular semiannual assessment for that period). The DOS Director
will use later financial information, where available, for the limited
purpose of ascertaining whether an institution meets the criteria set
forth in the guidelines.3
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\3\ The FIDC has a formal procedure pursuant to which an
institution may request a review of its current assessment risk
classification. See 12 CFR 327.4(d). An institution must invoke the
procedure within 30 days after receiving the invoice for the first
quarterly payment for the current semiannual period, however. No
institution in capital group 3 has done so, however, and the
deadline has passed. As a result, the procedure is not available in
connection with the special assessment.
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This later information will have no bearing on an institution's
current assessment risk classification, or on the regular semiannual
assessment it has already paid for the second semiannual period of
1996. The information will only pertain to the question whether an
institution is obliged to pay--or is exempt from paying--the special
assessment, without regard for the institution's current
classification.
The Board believes that it is possible to adopt this approach
because, as a practical matter, only a few institutions are likely to
present issues that require the use of such data. The Board is pledging
that the FDIC will work closely and intensively with each affected
institution to determine the institution's classification for purposes
of the special assessment.
The Board recognizes that in a particular case an institution may
meet the standards for classification in capital group 3 as a formal
matter, but may nevertheless be capable of paying the special
assessment. If such an institution prefers to pay, and if the DOS
Director considers that doing so will not materially increase the risk
to the SAIF, the institution will be permitted to make the payment.
The Funds Act specifies that the Board must exempt weak
institutions ``by order''. Id. section 2702(f)(1). The Board regards
the action of issuing exemption orders as a ministerial function, and
is delegating authority to take such action to the DOS Director under
these guidelines.
Section 2702(f)(2) of the Funds Act requires the FDIC to publish
the guidelines in the Federal Register. The FDIC is fulfilling this
requirement by publishing the guidelines in connection with this
rulemaking proceeding. The FDIC is presenting the guidelines as an
appendix to subpart C of part 327 of its assessment regulation, as
added by this final rule.
4. Payments by Exempt Institutions
Certain exempt institutions--``weak'' institutions, and those
listed in section 2702(f)(3) of the Funds Act (see I.A.2 and 3,
supra)--must continue to pay regular semiannual assessments to the SAIF
according to the rate-schedule that was in effect for SAIF assessments
on June 30, 1995.4 Id. section 2702(f)(4)(A). Any such institution
must do so through the end of 1999, or until it makes a pro-
[[Page 53836]]
rata payment of the special assessment. 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. Id. section 2702(f)(4)(B).
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\4\ Section 2703 of the Funds Act provides that, for semiannual
periods beginning after December 31, 1996, amounts authorized to be
assessed by the SAIF will not be reduced by amounts assessed by the
FICO. Accordingly, the SAIF assessment for the first semiannual
period of 1997 will be separate from, and in addition to, the
assessment imposed by the FICO. The alternative reading would have
the anomalous result that exempt institutions in the highest risk
category would pay lower overall semiannual assessments than
comparable non-exempt institutions.
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An exempt institution must pay the regular assessment (at the June
30, 1995, rates) for the first semiannual period of 1997. An exempt
institution may make a pro-rata payment in any calendar year from 1997
through 1999, and thereby become subject to the rate-schedule
applicable to non-exempt institutions. The Funds Act specifies that any
such payment is to be made ``upon such terms as the FDIC may
announce''. Id. section 2702(f)(4)(B). The FDIC expects to specify
appropriate terms in the invoice for the special assessment.
5. Computing the Assessment Rate
The Funds Act requires the FDIC to impose the special assessment in
accordance with the FDIC's regulations governing assessments. The FDIC
will accordingly determine the aggregate amount of the special
assessment, and will compute the particular amount that each
institution must pay, just as if the assessment were a regular
semiannual assessment (except insofar as the Funds Act specifically
prescribes another methodology).
Amount needed. For the purpose of computing the special assessment,
the FDIC is required to use the SAIF's most recent monthly balance as
the numerator for the reserve ratio. Id. section 2702(b)(1). On August
31, 1996 (the date for the most recent monthly balance) the SAIF had a
balance of $4.1 billion.
The Funds Act requires the FDIC to use the amount of SAIF-insured
deposits as reported in the most recent reports of condition filed not
later than 70 days before the date of enactment of the Funds Act as the
denominator for calculating the reserve ratio. Id. section 2702(b)(2).
The relevant filing date is April 30, 1996, which is the filing date
for the reports of condition for the first calendar quarter of 1996.
After adjusting for the 20 percent decrease in the SAIF-assessable
deposits of certain Oakar banks, which the FDIC estimates to be $28.2
billion, the amount of SAIF-insured deposits as of March 31, 1996 was
$688.1 billion. Id. section 2702(h)(1).5
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\5\ Section 2702(i)(2) of the Funds Act reduces the AADAs of
certain Oakar banks permanently by 20 percent for the purpose of
computing the institutions' regular assessments for the first
semiannual period of 1997 and thereafter. See 12 U.S.C.
1815(d)(3)(K).
The assessments for that first period are based on the
institutions' reports of condition for the second semiannual period
of 1996, however: the deposits in these reports therefore reflect
the lower AADAs that the institutions have with respect to the prior
semiannual period (that is, the second semiannual period of 1996).
The FDIC considers that it is appropriate to regard the AADAs of
these institutions as having been likewise reduced for insurance
purposes on the effective date of the Funds Act. In this respect,
the final rule maintains the relationship between the AADA for a
semiannual period (which determines the assessment for that period)
and the AADA with respect to the prior semiannual period (which
determines the allocation of loss between the BIF and the SAIF if an
Oakar institution fails in that prior semiannual period, and which
can be affected immediately by certain changes such as acquisitions
of secondary-fund deposits).
The Funds Act directs the FDIC to determine the denominator of
the reserve ratio for October 1, 1996, by using the aggregate volume
of deposits reported in the quarterly reports of condition for the
first quarter of 1996. In accordance with section 2702(b)(3) of the
Funds Act, which authorizes the Board to consider ``any other
factors that the Board of Directors deems appropriate'', the FDIC
has determined to reduce the aggregate volume so reported by 20
percent, in order to reflect the lower insurance liability
experienced by the SAIF as of October 1, 1996. The reduction is
$28.2 billion.
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The resulting reserve ratio is .60 percent. In order to raise the
ratio to 1.25 percent, the special assessment must collect an
additional $4.5 billion.
Assessable base. The FDIC must raise this amount by assessing the
SAIF-assessable deposits that institutions held (or, in the case of
certain transferees, are deemed to have held) as of March 31, 1995
($726.2 billion). Id. section 2702(c). After adjusting for the
estimated $36.8 billion decrease in the SAIF-assessable deposits of
institutions receiving the 20 percent discount,6 and the $4.0
billion in SAIF-assessable deposits of exempted institutions,7 the
amount of SAIF-assessable deposits as of March 31, 1995, subject to the
special assessment is estimated to be $685.4 billion.
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\6\ The Funds Act discounts SAIF-insured deposits of certain
BIF-member Oakar banks by 20 percent, or $34.4 billion. Id. section
2702(h)(1). It also discounts the deposits of certain ``converted
associations'' by 20 percent, or $2.4 billion. Id. section 2702(j).
\7\ The Funds Act exempts certain institutions from the special
assessment, removing an estimated $400 million from the SAIF
assessment base. Id. section 2702(f)(3). It also authorizes the
Board to exempt institutions that the Board classifies as ``weak''.
The Board has established criteria for making that determination;
several institutions satisfy those criteria, and have been exempted.
As a result, an estimated $3.6 billion is removed from the SAIF
assessment base. Id. section 2702(f)(1) and (2).
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Resulting rate. The special assessment rate is determined by
dividing the amount needed ($4.5 billion) by the adjusted SAIF-
assessable deposits as of March 31, 1995. The resulting rate is 65.7
basis points (0.657 percent).
The FDIC recognizes that--in principle--there could be revisions in
the deposits of individual institutions, and re-evaluations of
individual institutions' eligibility for exemption from the special
assessment, and that such revisions or re-evaluations could cause
adjustments to be made in the data used to compute the aggregate amount
of the special assessment. The FDIC does not anticipate that any such
adjustments will be so large as to affect materially the aggregate
amount needed or the resulting rate, however. If an adjustment is
needed, the FDIC will announce the adjustment and the resulting rate on
November 13, 1996, when the FDIC mails out the invoices for the special
assessment.
6. Collection Procedures
The FDIC expects to send, immediately after adoption of this final
rule, a letter to all SAIF members and all Oakar banks. The letter will
describe the procedures that the FDIC will follow in determining and
collecting the special assessment from the institutions.
The FDIC expects to contact immediately any institution that
initially appears to meet the standards for classification in capital
group 3; any institution that might, in the FDIC's judgment, do so if
the institution were to pay the special assessment; and any institution
rated composite 4 or 5 by its primary supervisor.
Together with the letter, the FDIC expects to mail to each
institution a statement showing the estimated amount of the special
assessment that the institution must pay, together with an explanation
of the way the FDIC calculated the amount. In the case of institutions
that initially appear to be ``weak'', the FDIC expects to transmit the
statement in a more expeditious manner.
Institutions will have until November 1, 1996, to review the
statement. If an institution believes the assessed amount is incorrect,
the institution may provide whatever information may be necessary to
correct it. For example, if the FDIC has improperly failed to identify
an institution that is exempt from the special assessment, or one that
is eligible for a reduction in the base on which its special assessment
is to be computed, the institution will have until the start of
November to bring the matter to the FDIC's attention. If the matter
cannot be resolved before the final invoice for the special assessment
is sent out, the institution will be required to pay the invoiced
amount, which will be subject to adjustment (if necessary) after a
final determination is made.
In addition, during this interval each institution that the FDIC
has initially
[[Page 53837]]
identified as ``weak'' may ask for a review of that status, and may
provide additional documentation to the FDIC to support its request for
reclassification. The FDIC expects to inform any such institution
promptly of the FDIC's final determination.
The FDIC expects to send out invoices to all affected institutions
on November 13, 1996.
Institutions will pay the special assessment by the same means as
they pay their regular semiannual assessments--that is, through the
accounts they have designated for that purpose. Each institution must
fund its designated account with enough money to pay the amount
specified in its invoice. The FDIC will debit each institution's
designated account on November 27, 1996.
7. Institutions Facing Hardship
Section 2702(g) of the Funds Act allows certain institutions to
elect to pay the special assessment in two installments. The FDIC must
consent to the election.
In order to be eligible to make the election, either the
institution itself or the depository institution holding company that
controls the institution must be subject to terms or covenants in debt
obligations or preferred stock outstanding on September 13, 1995. The
FDIC must then determine whether payment of the entire special
assessment on November 27 would pose a significant risk of causing the
depository institution or its depository institution holding company to
default on or to violate any of these terms or covenants.
If the institution meets these criteria, the FDIC must decide
whether to grant its approval. The FDIC will base its decision on the
entire circumstances of the proposed election, including but not
limited to the election's effects on the institution, on the SAIF, and
on the public interest.
If an institution receives approval to make the election, the
institution must pay the first installment on November 27. The first
installment is equal to half the special assessment the electing
institution would otherwise have to pay.
The second installment is 51 percent of the amount computed by
applying the rate for the special assessment to the electing
institution's SAIF-assessable deposits either as of March 31, 1996, or
as of such other date as the Board may determine. The Board has
determined to apply the rate to the institution's SAIF-assessable
deposits as of December 31, 1996, on the ground that it is preferable
to use current data for the second installment. The Funds Act evidently
contemplates the use of current data for this purpose.
The Board has chosen March 31, 1997, as the appropriate date for
the second installment. This date is ``practicable'' because
institutions make a regular quarterly payment on that date. The FDIC
will be able to adapt its regular assessment procedures to the
collection of the second installment, thereby minimizing inconvenience
both to the FDIC and to the institution. Moreover, it is the first such
date that is more than 15 days after the December 31, 1996, assessment-
base determination day.
An electing institution must also pay a supplemental special
assessment at the same time as it pays the second installment. The
supplemental amount is computed as follows: the FDIC must determine
whether the institution's SAIF-assessable deposits have decreased from
March 31, 1995, to the December 31, 1996, assessment-base determination
day, and if so, by how much; multiply the amount of the decrease by 95
percent; and then multiply the result by one-half the rate for the
special assessment.
B. Permanent Reduction in AADAs for Certain Oakar Banks
Section 2702(i) of the Funds Act makes a permanent change in the
computation of the AADAs of certain Oakar banks. The general rule is
that the initial component of an Oakar bank's AADA is equal in value to
the amount of SAIF-insured deposits that the Oakar bank acquires from
another institution pursuant to the Oakar Amendment. Section 2702(i) of
the Funds Act specifies that, for certain Oakar banks, the amount of
such deposits used to fix that initial component is to be reduced by 20
percent in the case of transactions occurring on or before March 31,
1995.
The effect of the change is to reduce the AADAs of the affected
Oakar banks prospectively and permanently. The change applies for the
purpose of computing regular semiannual assessments for the first
semiannual period of 1997 and thereafter.
The change affects any Oakar bank that, as of June 30, 1995,
either:
--had an AADA that was less than 50 percent of the institution's
deposits of that institution as of June 30, 1995, see FDI Act
section 5(d)(3)(K)(i), 12 U.S.C. 1815(d)(3)(K)(i); or
--had more than $5 billion in total assessable deposits, had an AADA
that was less than 75 percent of its total assessable deposits, and
belonged to a bank holding company system that, in the aggregate,
had more BIF-insured deposits than SAIF-insured deposits, see FDI
Act section 5(d)(3)(K)(ii), 12 U.S.C. 1815(d)(3)(K)(ii).
The final rule amends part 327 to incorporate this statutory
change.
II. Effective Date
The final rule is effective upon enactment by the Board. The FDIC
is choosing to make the rule effective immediately, and not upon
publication in the Federal Register, because the Funds Act directs the
Board to impose the special assessment, and further specifies that the
special assessment is to be ``due'' on October 1. The FDIC wishes to
issue invoices to institutions promptly; the rule provides the
foundation for the invoices.
For the reasons given below, the FDIC has determined that it is
impracticable and unnecessary, and contrary both to public interest and
to the intent of the Funds Act, to incur the delay that the ordinary
process of notice and public comment would entail. In addition, the
FDIC has further determined for the reasons given below that there is
good cause for the rule to be made immediately effective, and not after
a 30-day delay following publication of the final rule. The FDIC is
therefore issuing this rule without notice and public comment (see 5
U.S.C. 553(b)(3)(B)) or a delayed effective date (see id.
553(d)(3)(C)).
The FDIC considers that it is impracticable--and contrary to the
public interest and to the intent of Congress--to incur either one of
the delays because the short deadlines prescribed by the Funds Act. The
Funds Act requires the Board to impose a special assessment which is to
be due on October 1, 1996, and which is payable not later than November
29, 1996 (sixty days after the date of enactment of the Funds Act);
requires the FDIC to allow certain discounts and exemptions from the
special assessment; and permits the FDIC to exempt ``weak''
institutions from the special assessment. In order to comply with these
directives, the FDIC must undertake a number of administrative tasks
that are mechanical in nature: computing each institution's assessment;
notifying the institution of the amount to be paid, and date of
payment; allowing institutions time to consider and perhaps question
the amount; resolving questions not involving material disagreements;
and arranging for the collection of the assessments through the
payments system. These tasks require careful preparation and time for
proper execution. It would not be possible for the FDIC to carry out
this mandate within the prescribed deadline if the final rule were
subjected either to the notice-and-comment process or to a delayed
effective date.
[[Page 53838]]
The FDIC further considers that it is unnecessary to seek prior
notice and comment on the rule--and to incur the delay thereof--because
the FDIC is already in full possession of the information needed to
determine the amount of the assessment and the rate that is needed to
raise that amount.8 The Funds Act further gives the Board ``sole
discretion'' to exempt institutions that the Board classifies as
``weak''. Id. section 2702(f)(1). Accordingly, the notice-and-comment
procedure would not serve any useful purpose.
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\8\ In addition, the Funds Act gives the Board ``sole
discretion'' to determine the rate at which the special assessment
will be imposed. Funds Act section 2702(a).
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The delayed effective date is also unnecessary, and, therefore,
good cause exists for dispensing with the requirement. The purpose of
the delay is to give affected parties time to prepare for the rule's
coming into effect and take whatever action they deem necessary. In
this case, the only requirement imposed by the rule on affected parties
is the payment of money. The final rule is being issued more than 30
days before the payment is due, and provides the equivalent of a 30-day
delayed effective date. Although the rate is subject to adjustment
before final invoices are sent out, any such adjustment is expected to
be limited and will be announced 14 days before the special assessment
is collected. Moreover, specific provision is made in the rule for
institutions for which payment might present a problem. Finally,
delaying the effective date would be counterproductive since it would
preclude the FDIC from sending out the invoices at the earliest
possible date and giving affected parties the maximum amount of time to
arrange for payment.
The Funds Act also makes a permanent change in the method for
determining the initial component of the AADAs of certain Oakar banks.
Id. section 2702(i); see 12 U.S.C. 1815(d)(3)(K). The final rule
incorporates the change into the FDIC's assessment regulation. This
aspect of the final rule is purely ministerial, however; notice and
comment would serve no useful purpose. In addition, this aspect of the
final rule is exempt from the notice-and-comment requirement on another
ground: incorporating the statutory language into the regulation is
purely interpretative, being necessary to conform the regulation to the
statute.
III. Paperwork Reduction Act
The FDIC expects to contact all institutions that initially appear
to qualify as weak institutions under the guidelines, and also all
other institutions that would initially appear to so qualify upon
payment of the special assessment. The FDIC will not present identical
questions to the subject institutions, however, but will rather conduct
an informal inquiry regarding the condition of the particular
institution. Accordingly, the FDIC is not engaging in a ``collection of
information'' within the meaning of the Paperwork Reduction Act of
1995. See 44 U.S.C. 3502(3).
IV. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., does
not apply to the final rule. The RFA only applies to rulemaking for
which notice and comment are required. See id. section 603 and 604. For
the reasons given above, the Administrative Procedure Act (id. 553)
does not require notice of proposed rulemaking; no other provision of
law does so either.
Furthermore, the RFA's definition for the term ``rule'' excludes
``a rule of particular applicability relating to rates''. Id. 601(2).
The FDIC considers that the exclusion governs the final rule, because
the final rule implements Congress' command to impose a one-time
special assessment on SAIF-assessable institutions. The RFA's
requirements regarding an initial and final regulatory flexibility
analysis (id. sectio603 and 604) do not apply on this ground as well.
Finally, the RFA's legislative history indicates that its
requirements are inappropriate to this proceeding. 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 final
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 neither an initial nor a final regulatory flexibility analysis is
required.
V. Riegle Community Development and Regulatory Improvement Act of
1994
Section 302(b) of the Riegle Community Development and Regulatory
Improvement Act of 1994 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 to the final rule, which does not
impose such additional or new requirements.
VI. Congressional Review
The FDIC is submitting a report to each House of the Congress and
to the Comptroller General with respect to the final rule in conformity
with the procedures specified in 5 U.S.C. 801. The FDIC is submitting
the report voluntarily and not under compulsion of the statute,
however. The term ``rule''--as that term is used in section 801--
excludes ``any rule of particular applicability, including a rule that
proves or prescribes for the future rates * * * .'' Id. 804(3). The
FDIC considers that the final rule is governed by this exclusion,
because the final rule implements Congress' command to impose a one-
time special assessment on SAIF-assessable institutions. Accordingly,
the requirements of id. sections 801-808 do not apply.
In any case, for the reasons given above regarding the need for
notice and comment, the FDIC has for good cause found that notice and
public procedure thereon are impracticable, unnecessary, and contrary
to the public interest. The final rule will therefore take effect on
the date specified herein. See id. section 808.
List of Subjects in 12 CFR Part 327
Bank deposit insurance, Banks, banking, Savings associations.
For the reasons set out in the preamble, 12 CFR part 327 is amended
as follows:
PART 327--ASSESSMENTS
1. The authority citation for part 327 is revised to read as
follows:
[[Page 53839]]
Authority: 12 U.S.C. 1441, 1441b, 1813, 1815, 1817-1819; Deposit
Insurance Funds Act of 1996, Pub. L. 104-208, 110 Stat. 3009 et seq.
2. Section 327.32 is amended by revising paragraphs (a)(2)(i)(A)
and (a)(3)(i) and by adding a new paragraph (c) to read as follows:
Sec. 327.32 Computation and payment of assessment.
(a) * * *
(2) * * *
(i) * * *
(A) Except as provided in Sec. 327.43(c)(1), be subject to
assessment according to the schedule of assessment rates applicable to
SAIF members pursuant to subpart A of this part; and
* * * * *
(3) * * *
(i) The amount of any deposits acquired by the institution in
connection with the transaction (as determined at the time of such
transaction) described in Sec. 327.31(a), but subject to the adjustment
specified in paragraph (c) of this section;
* * * * *
(c) Reduction of deposits acquired by certain institutions. In the
case of a transaction occurring on or before March 31, 1995, the amount
determined under paragraph (a)(3)(i) of this section shall be reduced
by 20 percent for the purpose of computing the adjusted attributable
deposit amount for any semiannual period beginning after December 31,
1996, of a BIF member bank that, as of June 30, 1995:
(1) Had an adjusted attributable deposit amount the value of which
was less than 50 percent of the amount of its total deposits; or
(2)(i) Had an adjusted attributable deposit amount the value of
which was less than 75 percent of the value of its total deposits;
(ii) Had total deposits greater than $5,000,000,000; and
(iii) Was owned or controlled by a bank holding company that owned
or controlled insured depository institutions having an aggregate
amount of deposits insured or treated as insured by the BIF greater
than the aggregate amount of deposits insured or treated as insured by
the SAIF.
3. A new subpart C, consisting of Secs. 327.41 through 327.45, is
added to part 327 to read as follows:
Subpart C--Special Assessment
Sec.
327.41 Special assessment imposed.
327.42 Assessment base.
327.43 Exemptions from the special assessment.
327.44 Hardship exception.
327.45 Definitions.
Appendix A to Subpart C of Part 327--Guidelines for Exemption of
Weak Institutions
Subpart C--Special Assessment
Sec. 327.41 Special assessment imposed.
(a) Payment required. Except as provided in Secs. 327.43 and
327.44, each insured depository institution shall pay a special
assessment on the SAIF-assessable deposits that the institution held on
March 31, 1995, in accordance with the provisions of this subpart C.
(b) Rate. Except as provided in Sec. 327.44, the rate for the
special assessment shall be 0.657 percentum, subject to such
adjustments as the Corporation may deem necessary to cause the Savings
Association Fund reserve ratio to achieve the designated reserve ratio
for the SAIF on October 1, 1996.
(c) Due date. The special assessment shall be due on October 1,
1996.
(d) Payment date. Except as provided in Sec. 327.44, each
institution shall pay the special assessment to the Corporation on
November 27, 1996. Each institution shall make the payment in the
manner and according to the procedures set forth in paragraph (e) of
this section.
(e) Procedures--(1) Preliminary and final invoices; requests for
correction of amount due. The Corporation will issue a preliminary
invoice to each institution showing the amount expected to be due from
the institution and the computation of that amount. An institution may
request the Corporation to revise the amount due; any such request must
be made in writing on or before November 1, 1996. The Corporation will
issue a final invoice to each insured depository institution no later
than 14 days prior to the date specified in paragraph (d) of this
section, showing the amount due from the institution and the
computation of that amount.
(2) Funding of designated accounts. Each insured depository
institution shall take all actions necessary to allow the Corporation
to debit the invoiced amount from the deposit account designated by the
institution pursuant to Sec. 327.3(a)(2). Each insured depository
institution shall, prior to the date specified in paragraph (d) of this
section, ensure that funds in an amount at least equal to the invoiced
amount are available in the designated account on that date for direct
debit by the Corporation. Failure to take any such action or to provide
such funding of the account shall be deemed to constitute nonpayment of
the amount due.
(3) Manner of payment. The Corporation will cause the invoiced
amount to be directly debited on the date specified in paragraph (d) of
this section from the deposit account designated by the insured
depository institution pursuant to Sec. 327.3(a)(2).
(f) Deposit of proceeds. The proceeds of the special assessment,
and of the assessments paid pursuant to Sec. 327.44, shall be deposited
in the SAIF.
Sec. 327.42 Assessment base.
(a) In general. Except as provided in paragraphs (b) and (c) of
this section, an institution's special assessment shall be computed
with reference to the institution's SAIF assessment base on March 31,
1995.
(b) ``Converted'' institutions. In the case of each of the
following SAIF members, the volume of SAIF-insured deposits used to
determine the institution's SAIF assessment base on March 31, 1995,
shall be reduced by 20 percent:
(1) A federal savings association:
(i) That had deposits subject to assessment by the SAIF which did
not exceed $4,000,000,000, as of March 31, 1995; and
(ii) That had been, or is a successor by merger, acquisition, or
otherwise to an institution that had been, a state savings bank, the
deposits of which were insured by the Corporation prior to August 9,
1989, which institution converted to a federal savings association
pursuant to section 5(i) of the Home Owners' Loan Act, 12 USC 1464(i),
prior to January 1, 1985;
(2) A SAIF-member state depository institution that had been a
state savings bank prior to October 15, 1982, and was a federal savings
association on August 9, 1989;
(3) An insured bank that:
(i) Was established de novo in order to acquire the deposits of a
savings association in default or in danger of default;
(ii) Did not open for business before acquiring the deposits of
such savings association; and
(iii) Was a SAIF member as of the date of enactment of the Deposit
Insurance Funds Act of 1996; and
(4) An insured bank that:
(i) Resulted from a savings association before December 19, 1991,
in accordance with section 5(d)(2)(G) of the FDI Act; and
(ii) Had an increase in its capital in conjunction with the
conversion in an amount equal to more than 75 percent of the capital of
the institution on the day before the date of the conversion.
(c) Oakar banks. The special assessment shall be computed with
[[Page 53840]]
reference to that portion of an institution's SAIF assessment base for
March 31, 1995, which is equal to 80 percent of the institution's
adjusted attributable deposit amount for that date, if the institution
is a BIF member that, as of June 30, 1995:
(1) Had an adjusted attributable deposit amount that was less than
50 percent of its total domestic deposits; or
(2)(i) Had an adjusted attributable deposit amount equal to less
than 75 percent of its total assessable deposits;
(ii) Had total assessable deposits greater than $5,000,000,000; and
(iii) Was owned or controlled by a bank holding company that owned
or controlled insured depository institutions having an aggregate
amount of deposits insured or treated as insured by the BIF greater
than the aggregate amount of deposits insured or treated as insured by
the SAIF.
Sec. 327.43 Exemptions from the special assessment.
(a) Mandatory exemptions. The following institutions are exempt
from the special assessment:
(1) An institution that was in existence on October 1, 1995, and
held no SAIF-assessable deposits prior to January 1, 1993. For this
purpose, an institution shall be deemed to have held SAIF-assessable
deposits prior to January 1, 1993, if:
(i) The institution directly held SAIF-assessable insured deposits
prior to that date; or
(ii) The institution succeeded to, acquired, purchased, or
otherwise held any SAIF-assessable deposits as of September 30, 1996,
that were SAIF-assessable deposits prior to January 1, 1993;
(2) A federal savings bank that:
(i) Was established de novo in April 1994 in order to acquire the
deposits of a savings association which was in default or in danger of
default; and
(ii) Received minority interim capital assistance from the
Resolution Trust Corporation under section 21A(w) of the Federal Home
Loan Bank Act in connection with the acquisition of any such savings
association; and
(3) A savings association, the deposits of which are insured by the
SAIF, that:
(i) Prior to January 1, 1987, was chartered as a federal savings
bank insured by the Federal Savings and Loan Insurance Corporation for
the purpose of acquiring all or substantially all of the assets and
assuming all or substantially all of the deposit liabilities of a
national bank in a transaction consummated after July 1, 1986; and
(ii) As of the date of that transaction, had assets of less than
$150,000,000.
(b) Weak institutions. If an institution meets any criterion for
designation as ``weak'' under the guidelines set forth in appendix A of
this subpart, the institution shall generally be exempt from the
special assessment, unless the exemption would not materially reduce
risk to the SAIF. Authority to determine whether an institution meets
any such criterion, authority to issue orders exempting ``weak''
institutions, authority to determine whether the risk to the SAIF would
not be materially reduced if an institution qualifying for exemption as
a ``weak'' institution were nevertheless allowed to pay the special
assessment, and authority to determine whether an institution rated 4
or 5 by its appropriate federal banking agency would present a
substantial risk of loss to the SAIF unless the institution were exempt
from the special assessment, are delegated to the Director of the
Division of Supervision.
(c) Semiannual assessments payable to the SAIF--(1) Special rate
schedule. Except as provided in paragraph (c)(2) of this section, an
institution that is exempt from the special assessment pursuant to
paragraph (a) or (b) of this section 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 Sec. 327.9(d)(1) as in effect for SAIF members on
June 30, 1995.
(2) Termination of special rate schedule. An institution that makes
a pro-rata payment of the special assessment shall cease to be subject
to paragraph (c)(1) 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.
Sec. 327.44 Hardship exception.
(a) Applicability. This section applies to an insured depository
institution if:
(1) The institution, or a depository institution holding company
that controls the institution, is subject to terms or covenants in any
debt obligation or preferred stock outstanding on September 13, 1995;
and
(2) The Corporation has determined that payment of the special
assessment in accordance with the provisions of Sec. 327.41 would pose
a significant risk of causing the depository institution or its
depository institution holding company to default on or to violate any
term or covenant specified in paragraph (a)(1) of this section.
(b) Election. An insured depository institution may elect, with the
prior approval of the Corporation, to pay the special assessment
prescribed by the Deposit Insurance Funds Act of 1996 in two
installments in accordance with the provisions of this section. In
deciding whether to grant or withhold approval, the Corporation will
consider the entire circumstances of the proposed election, including
but not limited to the election's effects on the institution, on the
SAIF, and on the public interest.
(c) Procedures--(1) Initial assessment--(i) Date. An institution
that makes the election specified in paragraph (b) of this section
shall pay the initial installment of the special assessment to the
Corporation on November 27, 1996.
(ii) Amount. The initial installment shall be equal to 50 percent
of the amount that the institution would otherwise be required to pay
on November 27, 1996, in accordance with Sec. 327.41.
(iii) Payment procedures. The procedures set forth in
Sec. 327.41(e) shall apply to the payment of the initial installment.
(2) Second installment--(i) Date. An institution that makes the
election specified in paragraph (b) of this section shall pay a second
installment to the Corporation on the regular payment date for the
second quarterly payment for the first semiannual period of 1997.
(ii) Amount. The second installment shall be an amount computed as
follows: the SAIF assessment base of the institution on December 31,
1996, multiplied by the rate specified in Sec. 327.41(b), multiplied by
51 percent.
(iii) Payment procedures. The procedures set forth in
Sec. 327.41(e) shall apply to the payment of the second installment,
except that any reference to the date specified in Sec. 327.41(d) shall
be deemed to be a reference to the date specified in paragraph
(c)(2)(i) of this section, and that any reference to November 1, 1996,
shall be deemed to be a reference to February 1, 1997.
(3) Supplemental assessment--(i) Date. An institution that makes
the election specified in paragraph (b) of this section shall pay a
supplemental assessment to the Corporation at the same time as the
second installment.
(ii) Amount. The supplemental assessment shall be an amount
computed as follows: the institution's SAIF assessment base for
December 31, 1996, shall be subtracted from the institution's SAIF
assessment base for March 31, 1995; if the result is greater than zero,
the result shall be multiplied by 95 percent; and the product thereof
[[Page 53841]]
shall be multiplied by one-half the rate for the special assessment.
(iii) Payment procedures. The procedures set forth in
Sec. 327.41(e) shall apply to the payment of the supplemental
assessment, except that any reference to the date specified in
Sec. 327.41(d) shall be deemed to be a reference to the date specified
in paragraph (c)(2)(i) of this section, and that any reference to
November 1, 1996, shall be deemed to be a reference to February 1,
1997.
Sec. 327.45 Definitions.
For the purpose of this subpart C:
(a) BIF; SAIF--(1) BIF. The term BIF refers to the Bank Insurance
Fund.
(2) SAIF. The term SAIF refers to the Savings Association Insurance
Fund.
(b) SAIF-assessable deposits. The term SAIF-assessable deposits
means all deposits that are subject to assessment by the Corporation
for deposit in the SAIF, and, in the case of a BIF member, includes
that portion of the deposits of the BIF member that is equal to the BIF
member's adjusted attributable deposit amount.
(c) Deposits held on March 31, 1995. A deposit is deemed to have
been held on March 31, 1995, by an institution if either:
(1) The institution held the deposit on that date; or
(2)(i) The deposit was held by another institution (``transferring
institution'') on that date;
(ii) The institution assumed the deposit from the transferring
institution after that date, either directly or indirectly; and
(iii) The transferring institution is not an insured depository
institution on the payment date specified in Sec. 327.41(d).
(d) SAIF assessment base. The term SAIF assessment base for any
date means that portion of an institution's assessment base for that
date that is subject to assessment by the Corporation for deposit in
the SAIF.
Appendix A to Subpart C of Part 327--Guidelines for Exemption of
Weak Institutions
(a) The Board of Directors of the Corporation has adopted
criteria for identifying institutions that are regarded as ``weak''
within the meaning of section 2702(f) of the Deposit Insurance Funds
Act of 1996. The Board has determined that granting exemptions to
institutions that meet the criteria would generally reduce the risk
to the SAIF.
(b) The criteria apply only to institutions that are members of
the Savings Association Insurance Fund (SAIF) or that hold deposits
that are treated as insured by the SAIF pursuant to section 5(d)(3)
of the Federal Deposit Insurance Act, 12 U.S.C. 1815(d)(3).
(c) The criteria are as follows:
(1) Guideline #1: Capital group 3 institutions. An institution
is regarded as ``weak'' if, in the judgment of the Corporation, the
institution meets the standards for assignment to capital group 3
(``undercapitalized'') pursuant to Sec. 327.4(a)(1)(iii).
(2) Guideline #2: Potential capital group 3 institutions. An
institution is regarded as ``weak'' if, in the judgment of the
Corporation, the institution would satisfy the criteria set forth in
Guideline #1 if the institution were to pay the special assessment
imposed under Sec. 327.41(a).
(3) Guideline #3: Institutions rated 4 or 5. If an institution
has a composite rating of 4 or 5 by its primary supervisor, the
institution may request the Corporation to consider whether it would
be appropriate to exempt the institution from the special
assessment. Such an institution is regarded as ``weak'' if the
institution would, after having paid the assessment, present a
significant risk of loss to the SAIF for the purpose of section 2(f)
of the Funds Act.
By order of the Board of Directors.
Dated at Washington, D.C., this 8th day of October 1996.
Federal Deposit Insurance Corporation.
Jerry L. Langley,
Executive Secretary.
[FR Doc. 96-26504 Filed 10-11-96; 10:23 am]
BILLING CODE 6714-01-P