WASHINGTON – The Federal Deposit Insurance Corporation (FDIC) Board of Directors (Board) today issued a notice of proposed rulemaking to increase deposit insurance assessment rates by 2 basis points for all insured depository institutions in order 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 2028. The Board also adopted an Amended Restoration Plan, which incorporates the increase in assessment rates.
“Better to take prudent but modest action earlier in the statutory 8-year period to reach the minimum reserve ratio of the Deposit Insurance Fund than to delay and potentially have to consider a larger increase in assessments at a later time when banking and economic conditions may be less favorable,” said Acting Chairman Martin Gruenberg.
The proposed assessment rate schedules would begin with the first assessment period of 2023 and remain in effect unless and until the reserve ratio meets or exceeds 2 percent.
Extraordinary growth in insured deposits during the first and second quarters of 2020 caused the Deposit Insurance Fund (DIF) reserve ratio to decline below the statutory minimum of 1.35 percent. The reserve ratio is the ratio of the DIF to all insured deposits in the United States. As of June 30, 2020, the reserve ratio stood at 1.30 percent. As required by the Federal Deposit Insurance Act, the Board adopted a Restoration Plan on September 15, 2020, to restore the DIF reserve ratio to at least 1.35 percent by September 30, 2028. The Plan also requires the FDIC to update its analysis and projections for the fund balance and reserve ratio at least semiannually, which enables the FDIC to evaluate whether the reserve ratio is likely to reach 1.35 percent within the 8-year period.
Insured deposits continued to grow and, as of March 31, 2022, the reserve ratio declined by 4 basis points to 1.23 percent. The Amended Restoration Plan and proposed increase in assessment rates intend to increase the likelihood that the reserve ratio will reach the statutory minimum of 1.35 percent by September 30, 2028, as required by statute. The proposal would also support growth in the DIF in progressing toward the FDIC’s long-term goal of a 2 percent Designated Reserve Ratio (DRR).
The proposed rule provides opportunity for public comment through August 20, 2022.