WASHINGTON — The Federal Deposit Insurance Corporation (FDIC) adopted a final rule to increase initial base deposit insurance assessment rate schedules uniformly by 2 basis points beginning in the first quarterly assessment period of 2023. After careful consideration of comments received and updated analysis and projections, the FDIC adopted as final and without change, the increase in assessment rates as proposed on June 21, 2022.
“The increased assessment revenue will strengthen the DIF at a time of significant downside risk to the economy and financial system, increasing the likelihood that the reserve ratio will reach the statutory minimum of 1.35 percent while reducing the likelihood of a pro-cyclical increase in the future, and promoting public confidence in federal deposit insurance,” said Acting Chairman Martin Gruenberg.
The final rule 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, consistent with the Amended Restoration Plan. The final rule also reduces the likelihood that the FDIC would need to consider a potentially pro-cyclical assessment rate increase (i.e., raise assessments when banking and economic conditions may be less favorable).
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.
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 also intended to support growth in the DIF in progressing toward the FDIC’s long-term goal of a 2 percent DRR. Growing the DIF increases 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. Therefore, 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.
Revised rate schedules will be effective on January 1, 2023, and 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 revised rate schedules are applicable to all insured depository institutions.