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Deposit Insurance Fund

Fund Management

Last Updated: July 14, 2021

Fund Management

The FDIC manages the level of the Deposit Insurance Fund (DIF) to maintain public confidence in the U.S. financial system and to resolve failed banks.

Fund Size

The FDIC set out a comprehensive, long-range management plan for the DIF that was designed: (1) to reduce pro-cyclicality in the risk-based assessment system by allowing moderate, steady assessment rates throughout economic and credit cycles; and (2) to maintain a positive fund balance even during a banking crisis by setting an appropriate target fund size and a strategy for assessment rates and dividends. The current DIF balance and Fund Management are published in the Quarterly Banking Profile.

Designated Reserve Ratio

The Federal Deposit Insurance Act requires the FDIC's Board of Directors to set a target or Designated Reserve Ratio (DRR) for the DIF annually. The DRR is the total of the DIF divided by the total estimated insured deposits of the industry. Under the long-range plan, the FDIC set the DRR at 2.0 percent and set a schedule of assessment rates that would progressively decrease when the Fund Management exceeds 2.0 percent and 2.5 percent. Since 2010, the Board as adopted a 2.0 percent DRR each year. An analysis using historical fund loss and simulated income data from 1950 to 2010 showed that the DRR would had to have exceeded 2.0 percent before the onset of the two crises that occurred during the past 30 years to have maintained both a positive fund balance and stable assessment rates throughout both crises. The FDIC views the 2.0 percent DRR as a long-term goal and the minimum level needed to withstand future crises of the magnitude of past crises.

The DIF balance and reserve ratio are published in the Quarterly Banking Profile.

Dividends

Although the Dodd-Frank Act allows the FDIC's Board to issue dividends from the DIF if the reserve ratio exceeds 1.5 percent, the Board has suspended dividends indefinitely under the comprehensive plan to increase the probability that the reserve ratio will reach a level sufficient to withstand a future crisis. In lieu of dividends, the Board adopted a set of progressively lower assessment rates when the reserve ratio exceeds 2.0 percent and 2.5 percent. These lower rates serve much the same function as dividends, but provide more stable and predictable effective assessment rates.

Restoration Plan

Extraordinary growth in insured deposits during the first and second quarters of 2020 caused the reserve ratio to decline below the statutory minimum to 1.30 percent as of June 30, 2020. The decline in the reserve ratio during the first half of 2020 was solely a result of extraordinary insured deposit growth, as the DIF balance grew and did not experience material losses over this period. On September 15, 2020, the FDIC adopted a Restoration Plan to restore the reserve ratio to at least 1.35 percent within 8 years.

Under the newly adopted Restoration Plan, the FDIC will monitor deposit balance trends, potential losses, and other factors that affect the reserve ratio and provide updates on DIF loss and income projections at least semiannually. The Restoration Plan states that the FDIC will maintain the current schedule of assessment rates for all IDIs. Based on a range of reasonable estimates of future losses and assuming a return to normal insured deposit growth, the reserve ratio under the Plan would return to the statutory minimum level of 1.35 percent without further action by the FDIC before the statutory deadline of September 30, 2028.

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