This administrative appeal concerns whether [Bank] (X) or (“Bank”)
permitted to recalculate its adjusted attributable deposit amount (“AADA”)
as a result of a 1991 amendment to section 5 of the Federal Deposit
Insurance Act regarding the computation of an Oakar institution's AADA.2 That
amendment3 eliminated the minimum seven percent annual growth rate for
computing an Oakar institution’s AADA. X is appealing a decision by the
FDIC’s Division of Finance (“DOF”) denying the Bank’s request to adjust its
AADA. X contends that it has paid over $2.5 million in excess assessments
because of the Bank’s incorrect calculation of the Bank’s AADA.
The FDIC is charged with assessing and collecting deposit insurance
premiums for the Bank Insurance Fund (“BIF”) and the Savings Association
Insurance Fund (“SAIF”). This process is fairly straightforward for insured
depository institutions that hold only deposits insured by one insurance
fund. The process becomes significantly more complicated, however, when the
institution is one of the more than 800 existing Oakar institutions, which
have deposits insured by both the BIF and the SAIF.
Under the Oakar Amendment4
a BIF-insured institution that acquires
deposits from a SAIF-insured institution is an “Oakar” institution. As such,
it is treated by statute as a hybrid institution required to pay deposit
insurance assessments to both its primary and secondary insurance funds. The
“primary fund” is the deposit insurance fund of which the institution is a
The “secondary fund” is the insurance fund that is not the member’s
For example, a “BIF Oakar,” is a member of the BIF but a
portion of its assessment base is also allocated to the SAIF. The deposits
attributed to the institution’s secondary fund are based upon the
institution’s AADA, which is computed and adjusted over time pursuant to the
statutory formula contained in the Oakar Amendment. Under the FDI Act,
assessments on BIF-insured deposits are paid into the BIF and assessments on
SAIF-insured deposits are paid into the SAIF.7
Also, FDIC losses resulting
from the failure of an Oakar institution are shared, pro rata, by BIF and
The AADA is the means by which an Oakar institution’s deposits are
allocated for assessment and fund loss-allocation purposes.
In 1990 the Oakar Amendment provided, in relevant part, that the AADA
consisted of the sum of:
(i) the amount of Oakar deposits acquired;
(ii) the total of amounts for previous semiannual periods required
to be included pursuant to calculations stated in (iii) below; and
(iii) the amount by which the sum of the amounts described in
clause (i) and (ii) would have increased during the previous
semiannual period (other than any semiannual period beginning
before the date of the transaction) if such increase occurred at a
rate equal to the greater of – (I) an annual rate of 7 percent; or
(II) the annual rate of growth of [the institution’s overall deposits].
In FDICIA, Congress modified the Oakar Amendment by eliminating the
minimum seven percent annual growth assumption and retained only the method
of calculation based on the actual growth of the institution’s overall
deposits. The revised statute stated that the third component of an
institution’s AADA consists of:
The amount by which the sum of the amounts described in clauses (i)
and (ii) would have increased during the preceding semiannual period
(other than any semiannual period before the date of the transaction) if
such increase occurred at a rate equal to the annual growth of [the
institution’s overall deposits].9
FDICIA specified that this change to the Oakar Amendment “shall apply
with respect to semiannual periods beginning after the date of enactment of
FDICIA’s enactment date was December 19, 1991. The first
semiannual period beginning after FDICIA’s enactment started on January 1,
1992, the beginning of the January-June 1992 semiannual assessment period.
X is an Oakar bank. It acquired SAIF-insured deposits on December 14,
1990. Under procedures in place at the time, as of December 31, 1991, the
Bank completed and submitted the required AADA growth worksheets identifying
deposit growth for the annual period, December 31, 1990, through December
31, 1991. Based on this deposit-growth analysis, the Bank reported to the
FDIC a composite AADA of approximately $2.4 billion. That total included the
pre-FDICIA minimum seven percent annual increase required by the Oakar
statute. (The Bank asserts that its actual deposit-growth rate for that
period was negative seven percent.) More than seven years later, in May
1998, X sought to amend the Bank’s December 31, 1991, AADA and all
subsequent AADAs that the Bank had reported, so that the revised AADAs would
not reflect the minimum seven percent annual growth rate.11
In a letter dated September 17, 1998, the Deputy Director of DOF denied
X’s request, concluding that the FDICIA revisions to the Oakar Amendment did
not apply to AADA determinations made as of a date prior to the first
semiannual period of 1992. The Bank is appealing that decision, asserting
that the FDIC incorrectly interpreted and implemented FDICIA’s elimination
of the minimum seven percent annual growth rate.12
Under the statutory scheme, the assessment process requires that the
assessment base in one semiannual period serve as a “proxy” for the
assessment base of the next assessment period.13
For example, the assessment
for the January-June assessment period of a particular year is based upon
deposit data reported by an institution for the July-December period of the
prior year. When the Oakar Amendment was enacted in 198914
the FDIC developed
a program to administer its provisions and developed a procedure to
calculate AADAs. An Oakar institution’s AADA was redetermined on a yearly
basis, as of the end of the corresponding calendar quarter in each following
year. Pursuant to the Oakar Amendment, the growth rate applied in making
that calculation was the Oakar institution’s actual growth rate for the
prior twelve-month period. If, however, the actual growth rate was less than
seven percent, the statutory minimum rate of seven percent was applied.
X participated in an Oakar transaction during December 1990. According to
the procedures explained above, the Bank’s AADA was established as of
December 31, 1990, based on the dollar amounts of the SAIF-insured deposits
so acquired. That AADA was used for the purpose of determining the Bank’s
BIF and SAIF assessments payable for the periods beginning in January 1991
and July 1991 – the two subsequent semiannual periods. That AADA also
provided the means of allocating X’s deposits between BIF and SAIF for
loss-allocation purposes. X’s first AADA adjustment was made as of December
That redetermination occurred as of a date prior to the beginning of the
first semiannual period of 1992. Thus, the adjustment was based on the
minimum seven percent annual growth rate then in effect. The AADA determined
as of December 31, 1991, was used for computing the Bank’s BIF and SAIF
assessments for the January 1992 and July 1992 semiannual periods and for
allocating the Bank’s deposits between BIF and SAIF for loss-allocation
purposes. The second adjustment of X’s AADA was made the following year.
This second adjustment, and all subsequent adjustments, reflected the Bank’s
actual growth rate, in accordance with the post-FDICIA Oakar Amendment.
X contends that the FDIC misapplied the plain language of FDICIA’s
effective date provision and inaccurately described the effect of the Bank’s
refund request on the allocation of insurance risk. On the first contention,
X argues that “the AADA in question was calculated after FDICIA’s effective
date, covered a period after FDICIA’s effective date, and was used for
purposes of a semiannual assessment that was payable after FDICIA’s
effective date. Accordingly, … X’s AADA for the first half of 1992 should
have been computed under the [FDICIA amendment.]”
As noted above, FDICIA stated that the amendment to the AADA statute was
to apply “with respect to semiannual periods beginning after the date of the
enactment of [FDICIA],” December 19, 1991. The FDIC interpreted this
effective date provision to mean that the FDICIA revision would apply to all
AADA growth calculations for periods during and after the first semiannual
period of 1992.15
It did not interpret the FDICIA revisions as requiring the
FDIC to change AADA growth determinations, under the pre-FDICIA rules, for
periods before 1992. To do otherwise would have required the FDIC to apply
the FDICIA revisions retroactively.
The AADA used to allocate X’s deposits between BIF and SAIF for both
assessment and deposit insurance loss allocation purposes was based on the
growth (in X’s overall deposits) that occurred between December 1990 and
December 1991. X’s assessment growth cycle ended on December 31, 1991. As of
that date, the Bank’s AADA was adjusted by the statutorily required minimum
seven percent annual growth rate.
In April 1992, the FDIC Legal Division concluded in an advisory opinion
that the FDICIA changes to the Oakar Amendment were not intended to be
retroactive. The opinion noted that the “effective date” provision was
intended, in part, to prevent the midstream disruption of the calculation of
AADAs by institutions that participated in Oakar transactions prior to
FDICIA. The opinion concluded that the FDICIA effective date provision
allowed the FDIC and Oakar institutions to make a smooth transition from the
pre-FDICIA requirements to the post-FDICIA requirements pertaining to the
The FDIC implemented FDICIA’s elimination of the AADA minimum seven
percent annual growth rate and effective date provision in a manner
consistent with the FDIC’s assessment procedures. It integrated the required
change to the mathematical formula for calculating AADAs with those
established and accepted administrative procedures. Nothing in either FDICIA
or its legislative history suggested that Congress intended to change or
contravene the FDIC’s administrative procedures. X’s AADA for the first
semiannual period of 1992 was established as of December 31, 1991 – i.e.,
before 1992 – based on deposit data for the year December 1990 through
December 1991. Thus, the AADA was computed using the statutory minimum rate.
The FDICIA revisions came into play when the FDIC made its next computation
of the Bank’s AADA.
X also disputes the conclusion reached in the DOF response letter of
September 17, 1998, that recalculating the Bank’s AADAs would result in a
retroactive reallocation of risk to the deposit insurance funds. As
indicated above, an institution’s AADA serves an insurance loss-allocation
purpose as well as an assessment purpose. This loss allocation is based on
the failed institution’s AADA as of the assessment growth period immediately
prior to the date of failure. Contrary to the Bank’s assertion, if X had
failed on January 5, 1992, for instance, (i.e., a date after the date as of
which its AADA was redetermined but before X submitted the Growth Sheet
showing the Bank’s recalculated AADA) the FDIC would have allocated the
losses attributed to X’s failure to BIF and SAIF based on its AADA
determined as of December 31, 1991. The FDIC does not look to the completion
of a form to establish the effective date of an institution”s AADA. The
effective date of an AADA is the end of the assessment growth period.
Moreover, FDIC programs, policies, reports and other substantive and
procedural matters are affected by the relative risks presented to the
insurance funds based on the dollar amount and risk involved in deposits
insured by the BIF and SAIF, respectively. The FDIC interpreted the FDICIA
provisions in issue as not requiring the FDIC to retroactively reallocate
the relative risks to the deposit insurance funds posed by Oakar
Congress has established and the FDIC has been charged with administering
a complex deposit insurance assessment scheme. When Congress amended the
scheme in FDICIA and changed the formula for calculating the AADA, the FDIC
interpreted the changes in harmony with the FDIC’s established assessment
procedures. The FDIC implemented the FDICIA changes uniformly. Nothing in
either FDICIA or its legislative history indicates that Congress intended to
alter or invalidate the FDIC’s assessment procedures.
17 The staff’s approach
was reasonable and is supported by the contemporaneous opinion issued by the
FDIC’s Legal Division.
For the reasons discussed herein, under authority delegated by the Board
of Directors of the Federal Deposit Insurance Corporation, the Committee
denies X’s appeal.
X is a subsidiary of Bank Y, who filed this appeal with the
Committee. Earlier correspondence on this matter was received directly from
212 U.S.C. 1815(d)(3)(C).
3 FDIC Improvement Act of 1991 (“FDICIA”), Pub. L. No. 102-242,
105 Stat. 2236 (1991).
4 12 U.S.C. 1815(d)(3)(C). The “Oakar Amendment” was named after
Congresswoman Mary Rose Oakar, the primary sponsor of the amendment.
5 12 C.F.R. 327.8(j). 6Id. At 327.8(k).
7 12 U.S.C. 1821(a)(5)&(6) 8Id. 9 12 U.S.C. 1815(d)(3)(C)(iii)
10 12 U.S.C. 1815 note.
11 The Committee notes that X filed its request with the FDIC to
amend its December 31, 1991, AADA over seven years after that date. Such an
amendment would appear to be foreclosed by 12 U.S.C. 1817(g). Although the
Committee considered the substantive merits of X’s argument today, the
Committee notes that those claims may be barred by the FDI Act.
In addition, granting X’s appeal would undermine certainty in the assessment
area that institutions have come to rely on since 1991. Adopting X’s new
interpretation of FDICIA’s elimination of the minimum seven percent annual
AADA growth rate would affect approximately 75 other institutions.
Implementing the Bank’s interpretation would be especially difficult because
it has been over seven years since FDICIA was enacted and many affected
Oakar institutions have been acquired by institutions that have themselves
12 The FDIC Board of Directors has delegated to the Assessment
Appeals Committee the authority to consider and decide deposit insurance
13 12 U.S.C. 1817(a). 14 The Financial Institutions Reform, Recovery and Enforcement
Act of 1989, Pub. L. 101-73, 103 Stat. 183 (1989).
15 The FDIC did not apply the minimum seven percent annual growth
requirement to any institutions having established growth periods ending
after the FDICIA January 1, 1992, effective date, even if the growth period
began prior to the effective date.
FDIC Advisory Op. 92-19, 2 FDIC Law, Regulations, Related Acts
4619 (April 6, 1992).
17 In a recent decision, a federal court of appeals confirmed the
deference due to the FDIC in matters involving the assessment process,
particularly with regard to interpretations of ambiguous assessment-related
statutes. Branch Banking & Trust Co. v. FDIC, No. 98.1558 (4th Cir.