SUMMARY: The Board of Directors of the FDIC (Board) is amending its
regulation governing assessments to change the reporting date used to
determine the capital component of the assessment risk classifications
assigned by the FDIC to insured depository institutions. This change
moves that date closer by one calendar quarter to the semiannual
assessment period for which the capital component is assigned, and it
permits the FDIC to use more up-to-date information in determining
institutions' assessment risk classifications. The new date coincides
with the date currently used to determine the supervisory component of
the assessment risk classification.
To permit the use of more current capital information, the Board is
further amending the assessments regulation to shorten from 30 days to
15 days the prior notice the FDIC sends to institutions advising them
of their assessment risk classifications for the following semiannual
assessment period. The Board is adopting the same reduction for the
invoice sent by the FDIC each quarter showing the amount of the
assessment payment due for the next quarterly collection. At the other
end of the process, the Board is increasing from 30 days to 90 days the
time within which an institution may request review of its assessment
Additionally, to reflect a shift of certain assessment functions
within the FDIC, the Board is revising two of the references to FDIC
offices in the regulation. Also, as proposed, the amendment corrects a
typographical error in the form of a misstated cross-reference to
another FDIC regulation.
Finally, in response to concerns raised by comments that the FDIC
received on the proposal, the final rule is additionally amended to
increase from 15 to 30 days the time between announcement of limited
changes in deposit insurance rates and the date of the assessment
notice sent to insured institutions by the FDIC.
EFFECTIVE DATE: The final rule is effective April 1, 2000.
FOR FURTHER INFORMATION CONTACT: James W. Thornton, Senior Banking
Analyst, Division of Insurance, (202) 898-6707; or Claude A. Rollin,
Senior Counsel, Legal Division, (202) 898-8741, Federal Deposit
Insurance Corporation, Washington, D.C. 20429.
The Proposed Rule
On September 8, 1999, the Board issued for public comment a
proposal to make several revisions to its assessments regulation. 64 FR
48719 (September 8, 1999). The primary change proposed by the Board
involved the reporting date for data used in determining the capital
component of the assessment risk classifications that the FDIC assigns
semiannually to FDIC-insured institutions. At present, the FDIC's risk-
based assessments regulation specifies that the capital component of
the assessment risk classification assigned to an institution for a
semiannual assessment period will be determined on the basis of data
reported by the institution in its Consolidated Reports of Condition
and Income, Thrift Financial Report, or Report of Assets and
Liabilities of U.S. Branches and Agencies of Foreign Banks
(collectively, call report) for the quarter ending six months earlier
(12 CFR 327.4(a)(1)). The Board proposed to amend the regulation by
basing capital-group determinations on data reported by institutions in
their call reports for the period ending three months before the
beginning of the semiannual period to which that data would apply.
To allow use of the more current capital data in assigning
assessment risk classifications, the Board also proposed to shorten--
from 30 days to 15 days--the time between the date institutions are
notified of their assessment risk classifications for the upcoming
assessment period and the date the assessment is collected for the
first quarter of that upcoming period. The same reduction was proposed,
for both the first and second quarters of each semiannual assessment
period, in the time between the date of the quarterly assessment
invoice and date the invoiced amount is collected.
As the Board explained in its proposal, moving the capital
reporting date forward by 90 days would leave the FDIC as little as 15
to 30 days to receive the reported data, scan the reports, input the
information into the FDIC's system, perform capital-group calculations
for more than 10,000 institutions, and prepare and mail the assessment
notices. 64 FR 48720. Because that is not sufficient time for
completing this process, the alternatives are to leave the capital
reporting date as it is or mail the assessment notices somewhat later.
As the Board noted, the proposal anticipated that reduction of the
notice period from 30 to 15 days would not have a significantly adverse
impact on insured institutions, as institutions typically know (or can
anticipate with reasonable certainty) the assessment risk
classification they will be assigned for the next assessment period.
With regard to the assessment the FDIC collects on behalf of the
Financing Corporation (FICO), institutions are also able, under normal
circumstances, to estimate with reasonable accuracy the assessment
amount due for each upcoming payment date. However, the proposal noted
the FDIC's intent, in the event of significant developments that could
cause material changes in the FICO assessment rate, to provide notice
of the changes as early as possible through such means as mailings to
insured institutions. Id.
Another timing change proposed by the Board was an increase in the
period during which an institution may seek review and revision of its
assessment risk classification. Under the existing regulation, an
institution may file a review request within 30 days after the date of
the FDIC notice informing the institution of its assessment risk
classification. The proposal would expand that period to 90 days.
The two remaining changes proposed by the Board were office
redesignations to reflect the shift of certain assessment functions
within the FDIC, and correction of a typographical error in the form of
a misstated cross-reference.
The FDIC received nine comment letters in response to the proposal.
Three of the letters were from depository institutions, two from state
associations of bankers, three from national associations of bankers,
and one from a state banking regulator. In general, these commenters
supported the proposal. However, one commenter--a state association of
bankers--neither supported nor opposed the proposal itself, but
expressed its views on the proposal's implications for agricultural
banks. This comment letter is not included in the discussion
immediately below but rather is addressed separately, following the
The remaining eight commenters expressed unanimous support for the
use of more current capital data. The seven commenters addressing the
proposed extension of the deadline for filing requests for review of
assessment risk classifications all supported that proposal. Of the two
commenters specifically addressing either or both of the proposals to
correct the typographical error and to revise two of the references in
the regulation to FDIC offices, both supported those changes as well.
Thus, the Board has decided to adopt each of these four amendments as
The remaining element of the proposal is reduction of the
assessment notice period from 30 to 15 days. In the proposal, the Board
specifically requested comment on any adverse impact the shorter notice
period might have. Comment was further requested on any alternative
means of permitting the use of more current capital data without
shortening the notice period.
The eight commenters either generally supported or did not
separately address the proposed reduction. None of the commenters
offered an alternative to the reduction. Two of the commenters
expressly recognized a necessary connection between the use of more
current capital data and a reduction in the assessment notice period.
Six commenters concluded that the proposed reduction in the notice
period would not have a significant adverse impact. However, two of the
eight expressed certain concerns. These two commenters--both of which
are national associations of bankers--agreed that the proposed
reduction generally would not present a problem. However, one noted
that a shorter notice period could potentially present problems if
assessment rates increase or become more complex, or in the event of
volatile economic conditions. The other commenter suggested that the
proposal be revised to require the FDIC to notify institutions of any
changes in the assessment rate schedule at least 30 days before the
assessment notice date, and that the FDIC be required to notify an
institution of any changes in its supervisory category no later than 30
days prior to each assessment collection date. This same commenter
further recommended that the FDIC provide notice of any material
changes in the FICO assessment rate at least 30 days before the
relevant assessment payment date, including any advance notice of
material changes in the rate expected for subsequent quarters.
The Board appreciates the concerns expressed regarding the
shortened notice period. At the same time, the Board believes that--as
was suggested in the proposal and as more than one commenter expressly
recognized--a reduction in the notice period is necessary if more
current capital data is to be used. The eight commenters addressing the
proposal unanimously supported the use of more up-to-date capital data,
and only limited concerns were expressed by commenters regarding the
reduced notice period. Accordingly, the Board has decided to adopt the
proposed notice reduction.
With regard to the concern that a 15-day notice period might not be
sufficient for institutions for which there is a change in the
supervisory category from one semiannual assessment period to the next,
the FDIC is willing to consider what refinements might be warranted and
feasible to address any significant problems. To this end, the FDIC
will monitor implementation of the new notice schedule in June 2000 to
determine any adverse impact. The results will be reviewed and
alternative means of addressing any significant problems will be
In response to the concern raised by one commenter regarding
material changes in the FICO assessment, the Board reiterates its
intention, as noted in the proposal, that in instances in which
significant developments are likely to result in material changes in
FICO assessment rates, the FDIC will provide notice as early as
possible, through mailings to insured institutions or similar means. 64
The remaining issue raised by commenters regarding the reduced
assessment notice period concerned notice of changes in the assessment
rate schedule. At present, the assessments regulation requires that any
change in the assessment rate schedule be announced by the FDIC at
least 15 days before the date the assessment notice is to be provided
to institutions for the first quarter of each semiannual assessment
period.\1\ Thus, for example, under the existing regulation, an
adjustment for the assessment period beginning July 1 would be
announced by no later than May 16, which is 15 days before the existing
assessment notice date of May 31.
\1\ 12 CFR 327.9(c)(4). This provision applies only to
adjustment (either increase or decrease) of the rate schedule up to
a maximum of five basis points. Any change that exceeds this level
would first be announced in the form of a proposal on which public
comment would be invited.
Because, in this example, the final rule moves the applicable
assessment notice date to June 15, the amendment as proposed would have
had the effect of moving the deadline for the rate-change announcement
to May 31. However, if the announcement period were increased from 15
to 30 days prior to the assessment notice date, that change, in
conjunction with the reduction of the assessment notice period to 15
days, would restore the announcement deadline to May 16, which is the
Under these circumstances, the Board believes a revision of the
existing announcement date is warranted. This change would serve merely
to continue the existing situation, by adapting the announcement date
to accommodate the new change in the assessment notice date.
Accordingly, the Board is further amending the assessments regulation
to require that any adjustment in the assessment rate schedule under
this provision of the regulation be announced at least 30 days before
the date the assessment notice is to be provided to institutions for
the first quarter of each semiannual assessment period.
As indicated above, one of the nine comment letters received by the
FDIC in response to the proposal neither supported nor opposed any
aspect of the proposal itself but expressed its views of the proposal's
implications for agricultural banks. As noted in the letter, the focus
of the comments ``is the need to address the adverse impacts of
substantial increases in assessments if well-managed ag banks
experience significant capital reductions because of ag loan losses''.
The commenter ``does not challenge the concept that deposit assessments
should be founded on the most current available data'' but does note
that one of the effects of using more current information is that the
assessments of a bank with declining capital is a more rapid increase
in risk-based deposit insurance assessments. The commenter suggested
that the assessment process be reviewed to determine whether additional
revisions are necessary to reflect the likelihood that increased
deposit assessments may increase, rather than reduce, the risk that
some banks will fail.
The commenter further suggested that the FDIC consider providing a
means by which banks can benefit from funds paid as increased
assessments in connection with loan losses from economic contraction
rather than from poor management practices.
In response, the Board notes that refinements to the risk-based
assessment system are continually under consideration and that these
comments will be reviewed and carefully considered in connection with
that on-going process.
The Final Rule
For the reasons stated above, the Board is adopting the amendments
as proposed, with one addition. That addition is the revision of
Sec. 327.9 to increase from 15 to 30 days the time by which an
announcement of a limited adjustment to the assessment rate schedule
must precede the date of the assessment notice sent to FDIC-insured
institutions prior to the beginning of a semiannual assessment period.
The date changes made by the final rule will be implemented with
the assessment period beginning July 1, 2000. The following chart
illustrates the new dates, as compared to the existing dates, using
that initial assessment period as an example.
Semiannual Assessment Period Beginning July 1, 2000
Controlling announcing Assessment Start of Deadline to
call report limited rate notification Payment date assessment request a
date change date period review
Old Dates......................................... 12-31-1999 5-16-2000 5-31-2000
6-30-2000 7-1-2000 6-30-2000
New Dates......................................... 3-31-2000 5-16-2000 6-15-2000 6-30-2000
Regulatory Flexibility Act
The Board hereby certifies that the final rule will not have a
significant economic impact on a substantial number of small entities
within the meaning of the Regulatory Flexibility Act (5 U.S.C. 601 et
seq.). No new or increased reporting, recordkeeping, or other
compliance requirements are imposed by the rule. Of the amendments
adopted by the Board, only one--lengthening the time for filing
requests for review of assessment risk classifications--addresses
actions to be initiated by insured institutions. The remaining
amendments address actions to be undertaken by the FDIC. The amendments
addressing actions to be initiated by institutions relax an existing
time restriction, and it is expected that any impact on insured
institutions, of whatever size, will be favorable rather than adverse.
Assessment of Impact of Federal Regulation on Families
The FDIC has determined that this amendment will not affect family
well-being within the meaning of section 654 of the Treasury Department
Appropriations Act, 1999, enacted as part of the Omnibus Consolidated
and Emergency Supplemental Appropriations Act, 1999 (Pub. L. 105-277,
112 Stat. 2681).
List of Subjects in 12 CFR Part 327
Assessments, Bank deposit insurance, Banks, banking, Reporting and
recordkeeping requirements, Savings associations.
For the reasons stated in the preamble, 12 CFR part 327 is amended
1. The authority citation for part 327 continues to read as
2. Section 327.3 is amended by removing the phrase ``30 days'' and
adding in its place the phrase ``15 days'' in paragraphs (c)(1) and
3. Section 327.4 is amended by removing the citation
``309.5(c)(8)'' in paragraph (e) and adding in its place the citation
``309.5(g)(8)'', and revising paragraphs (a)(1) introductory text and
(d) to read as follows:
Sec. 327.4 Annual assessment rate.
(a) * * *
(1) Capital factors. Institutions will be assigned to one of the
following three capital groups on the basis of data reported in the
institution's Consolidated Reports of Condition and Income, Report of
Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks,
or Thrift Financial Report dated as of March 31 for the assessment
period beginning the following July and as of September 30 for the
assessment period beginning the following January 1.
* * * * *
(d) Requests for review. An institution may submit a written
request for review of its assessment risk classification. Any such
request must be submitted within 90 days of the date of the assessment
risk classification notice provided by the Corporation pursuant to
paragraph (a) of this section. The request shall be submitted to the
Corporation's Director of the Division of Insurance in Washington,
D.C., and shall include documentation sufficient to support the
reclassification sought by the institution. If additional information
is requested by the Corporation, such information shall be provided by
the institution within 21 days of the date of the request for
additional information. Any institution submitting a timely request for
review will receive written notice from the Corporation regarding the
outcome of its request. Upon completion of a review, the Director of
the Division of Insurance (or designee) or the Director of the Division
of Supervision (or designee), as appropriate, shall promptly notify the
institution in writing of his or her determination of whether
reclassification is warranted. Notice of the procedures applicable to
reviews will be included with the assessment risk classification notice
to be provided pursuant to paragraph (a) of this section.
Sec. 327.9 [Amended]
4. Section 327.9 is amended by removing the phrase ``15 days'' and
adding in its place the phrase ``30 days'' in paragraph (c)(4).
By order of the Board of Directors.
Dated at Washington, DC, this 6th day of December, 1999.
Federal Deposit Insurance Corporation.
James D. LaPierre,
Deputy Executive Secretary.
[FR Doc. 99-32587 Filed 12-15-99; 8:45 am]
BILLING CODE 6714-01-P