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Deposit Insurance Assessment Appeals: Guidelines & Decisions
AAC-2000-03 (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 assessment periods beginning July 1. Thus for the July 1, 2000, assessment period the supervisory cut-off date was March 31, 2000. For the July 1, 2000, assessment period the supervisory cut-off date was March 31, 2000. For the July 1, 2000, semiannual assessment period, the Banks supervisory subgroup assignment of B was based on a composite rating of 3 as of the March 31, 2000, cut-off date. This composite rating resulted from a September 20, 1999, examination conducted jointly by the FDIC and the State of New Mexico. The examination was completed on October 21, 1999.
The Bank requested a review of the SS assignment by letter dated June 30, 2000. The Bank argued that an institution with a Total Risk-Based Capital to Risk-Weighted Assets ration of 26.40 percent should not be paying FDIC insurance premiums. By letter dated July 21, 2000, Division of Insurance notified the Bank that their request was denied. This decision was based on the fact that the most recent Report of Examination indicated that the Banks condition warranted an SS assignment of B.
Analysis and Conclusion
Xs main argument is that the capital position of the Bank is very strong and mitigates the risk posed to the deposit insurance fund. However, after reviewing the Banks condition and the reasons for assigning a composite 3 rating to the Bank at the September 20, 1999, examination, the Committee agrees with the examination findings. Capital ratios alone may not adequately reflect the risk posed by the Bank. Factors such as asset quality, loan underwriting standards and other operating systems are best evaluated as part of the ongoing supervisory process. Regardless, the FDICs existing risk-based premium system, in place since 1993, uses both capital ratios and supervisory ratings not capital ratios alone to determine premiums. The most recent examination rating as of the March 31, 2000, cut-off date established for the second semiannual assessment period of 2000 was a composite 3 rating, which corresponds to a supervisory subgroup assignment of B.
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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