FDIC ASKS WHETHER TO CHANGE THE WAY DEPOSIT INSURANCE PREMIUMS ARE SET
FOR IMMEDIATE RELEASE
The FDIC Board of Directors today agreed to seek public comment on
whether to change the "assessment base" used for the last half-century to
determine how much an individual bank or thrift institution pays for deposit
Broadly stated, the assessment base is defined as an institution's
total domestic deposits as of the end of a quarter. Institutions currently
pay risk-related insurance premiums within a range of 23 cents to 31 cents per
$100 of these total domestic deposits.
The definition of the assessment base has remained substantially the
same since 1935. Until recently, the FDIC did not have statutory authority to
change the definition. However, the FDIC Improvement Act of 1991 gave the
FDIC the ability to determine the assessment base, starting January 1, 1994.
Although the FDIC has continued to use the traditional definition, the agency
today issued an "advance notice of proposed rulemaking" that asks whether to
redefine the assessment base and, if so, how. After comments are reviewed,
the agency will determine whether to propose specific rule changes for
additional public comment.
Among the key questions the agency is seeking guidance on is whether
the FDIC should begin charging insurance premiums for deposits that U.S. banks
have in their foreign offices and for certain non-deposit liabilities and
"off-balance-sheet" items, as these also expose the FDIC's insurance funds to
risks of loss. The agency also is asking whether assessments should be based
on an average level of deposits held by the institution rather than
quarter-end figures. The latter question is intended in part to address
situations where institutions temporarily shift funds out of the assessment
base at the end of a quarter solely to reduce their insurance payments.
FDIC Chairman Andrew C. Hove, Jr., said: "The world of financial
services and deposit insurance is vastly different than it was 10 years ago,
let alone 50 years ago. Changes in banking laws, technology, financial
instruments and payment systems have clearly meant new benefits but also new
risks to our banking institutions and to the FDIC's insurance funds. This
review of how insurance risks are calculated and assessed is long overdue, and
we urge all interested parties to give us their views on how the system could
Steven A. Seelig, the FDIC's Chief Financial Officer, added: "The goal
of the FDIC in undertaking this review is not to raise additional money for
the deposit insurance funds. But we do intend to make sure that the risks
taken by our insured banks and savings institutions are more accurately
accounted for in setting deposit insurance premiums. The result, for many
individual institutions, could be insurance payments going up or down."
Comments on the FDIC's notice will be accepted for 120 days after it
appears in the Federal Register.