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Deposit Insurance Assessment Appeals: Guidelines & Decisions
AAC-2000-02 (December 12,
The three supervisory subgroups, as set forth in the current and previous Financial Institution Letters addressing the Risk-Related Premium System, are as follows:
The supervisory cut-off date for determining SS assignments is September 30 for assessment periods beginning January 1, and March 31 for assessments periods beginning July, 1. For determining SS assignments for state member banks, national banks and thrifts, composite ratings as of the supervisory cut-off date are provided to the FDIC via data tape by the appropriate federal agency. These composite ratings are then converted to SS assignments. For the January 1, 2000, semiannual assessment period, the Bank was assigned a supervisory subgroup rating of B. This SS assignment was based on a composite rating of 3, which was provided to the FDIC by the OCC as of the September 30, 1999, cut-off date. This composite rating resulted from a June 21, 1999, OCC examination that was completed on September 16, 1999.
Following the completion of the above examination, the Bank submitted a letter of appeal to the OCC, dated October 4, 1999. The Bank disagreed with the composite 3 rating, and the component 3 ratings that were assigned to asset quality and management. The OCC officially responded to the Banks appeal by a letter dated December 2, 1999. The letter of response expressed the conclusion that the Composite 3 rating was appropriate at the time of the examination. The letter further indicated that because of actions taken by the Bank during and subsequent to the examination, discussions with the board about changes to be incorporated into its processes, and favorable trends in asset quality measures, the current asset quality rating should be 2. Thus, the December 2, 1999, letter served as official notification to the Bank that the asset quality and the composite ratings had been upgraded subsequent to the examination.
After being notified of the change to the composite rating, Bank requested a review of the SS assignment by letter dated January 11, 2000. The Bank requested that the SS assignment for the first semiannual assessment period of 2000 be changed to A, pursuant to the December 2, 1999, notification by the OCC that the composite rating had been upgraded. By letter dated June 14, 2000, DOI notified the Bank that their request was denied. This decision was based on the fact that it was the OCCs position that the composite 3 rating was appropriate at the time of the examination completed in September 1999. The subsequent decision by the OCC to upgrade the composite rating was based on favorable trends and improvements that were implemented by the Bank in response to concerns raised with respect to the examination. This decision was made and communicated to the Bank well after the September 30, 1999, supervisory cut-off-date. The OCC did not retroactively upgrade the SS rating it provided to the FDIC for the January 1, 2000 assessment period.
Analysis and Conclusion
Xs main argument is that the overall condition of the Bank has continued to improve, especially in the asset quality area, and that its ability to compete has been impaired by the increased FDIC insurance cost expense. Even though improvement has been noted relative to credit administration issues, the fact remains that the OCC, in its December 1999 letter, reaffirmed the appropriateness of the composite 3 rating at the time the rating was issued in September 1999. Moreover, the SS rating provided to the FDIC by the OCC as of the September 30, 1999 cut-off date for purposes of determining the Banks SS for the first semiannual assessment period of 2000 was, and remains, a composite 3 rating. The OCC has not changed that rating for the applicable assessment period.
For the reasons discussed herein, under authority delegated by the Board
of Directors of the Federal Deposit Insurance Corporation, the Committee
denies the Banks appeal. This recommendation is fully consistent with
well-established FDIC policy and practices regarding applicability of the SS
cut-off dates, and while exceptions to the rules may, under compelling
circumstances, be considered, such must be both rare and well supported if
the system is to maintain credibility.
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