Federal Deposit Insurance Corporation Restoration Plan
The recent failures of a large institution and other smaller
have significantly increased the Deposit Insurance Fund's (the DIF or
the fund) loss provisions, resulting in a decline in the reserve ratio.
As of June 30, 2008, the reserve ratio stood at 1.01 percent, 18 basis
points below the reserve ratio as of March 31, 2008. This is the lowest
reserve ratio for a combined bank and thrift insurance fund since March
31, 1995. The FDIC expects a higher rate of insured institution
failures in the next few years compared to recent years; thus, the
reserve ratio may continue to decline. Because the fund reserve ratio
has fallen below 1.15 percent and is expected to remain below 1.15
percent, the FDIC is required to establish and implement a restoration
plan to restore the reserve ratio to 1.15 percent within five years.
In FDIC's view, to restore the reserve ratio to 1.15 percent
five years will require higher assessment rates. Since the current
rates are already 3 basis points uniformly above the base rate schedule
established in the 2006 assessments rule, a new rulemaking is required.
The FDIC is concurrently publishing a notice of proposed rulemaking
that would raise rates and make other changes to the assessment system.
Pursuant to section 7(b)(3)(E) (12 U.S.C. 1817(b)(3)(E)), the
establishes the following restoration plan on October 7, 2008.
1. The accompanying NPR is published elsewhere in this issue
Federal Register as soon as possible. Based upon the projections
contained in the NPR, the assessment rates proposed in the NPR will
return the Deposit Insurance Fund reserve ratio to at least 1.15
percent. Absent extraordinary circumstances, the reserve ratio must be
returned to at least 1.15 percent no later than five years after
establishment of the plan. To determine whether the reserve ratio has
returned to the statutory range, the FDIC will rely on the December 31,
2013, reserve ratio, which is the first date after October 7, 2013, for
which the reserve ratio will be known.
2. Before the FDIC adopts a final rule following the NPR, it
update its loss and income projections for the fund and, if needed to
ensure that the fund reserve ratio reaches 1.15 percent within the
five-year period, will adopt higher assessment rates than those
proposed in the NPR. If consistent with the fund reserve ratio reaching
1.15 percent within the five-year period, the FDIC may also adopt lower
3. At least semiannually thereafter, the FDIC will update its
and income projections for the fund and, if needed to ensure that the
fund reserve ratio reaches 1.15 percent within the five-year period,
will increase assessment rates, following notice-and-comment rulemaking
if required. If consistent with the fund reserve ratio reaching 1.15
percent within the five-year period, the FDIC may also lower assessment
rates, again following notice-and-comment rulemaking if required.
4. Institutions may continue to use assessment credits
additional restriction (other than those imposed by law) during the
term of the Restoration Plan, since the few remaining credits should
have only a minimal effect on fund revenue.
5. This Restoration Plan shall be implemented immediately
establishment by the FDIC.
Dated at Washington, DC, this 7th day of October, 2008.
By order of the Board of Directors.
Federal Deposit Insurance Corporation.
Valerie J. Best,