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Deposit Insurance Assessment Appeals: Guidelines & Decisions AAC-2000-01 (December 12,
2000)
Decision In December of 1998, the Parent Corporation discovered reporting errors
that affected the calculation of risk-based capital ratios. Call Report
amendments for the subject banks were filed to correct the miscalculations
and, as a result, capital ratios fell below the well-capitalized criteria
thereby changing the CG classifications from Well Capitalized to
Adequately Capitalized for the subject banks.1
Consequently, the
assessment invoice for X Bank for the second quarterly payment of the first
semiannual assessment period of 2000 included prior period adjustments with
interest totaling $6,462,075.49 (this amount included $5,750,089 for X Bank
and $711,985.65 for the Georgia Bank). The Bank claimed that capital ratios are managed ratios and had
management been aware of reporting errors associated with the calculation of
the risk-based capital ratios, sufficient capital was available for pushdown
from the parent company to cover the assessment periods in question. The
Bank further claimed that more than four times the necessary capital was
available to remedy the deficiency for X Bank and more than five times the
necessary capital for the Georgia bank. The Bank also indicated that it is
the holding companys policy to manage its subsidiary banks so that they
meet well capitalized risk-based capital standards at all times and
requested that the FDIC waive the assessment adjustments derived from the
assessment risk classification changes. In a letter dated June 14, 2000, the Associate Director of the Federal
Deposit Insurance Corporations (FDIC) Division of Insurance (DOI)
denied the Banks request to change the CG classifications for the subject
banks. X Bank is appealing that decision. Background X Bank initially requested a review of the CG assignments by letter dated May 10, 2000 to the FDIC. The materials submitted by X Bank were reviewed and the circumstances were found to be either unique nor the application of the regulation to have been inequitable. Analysis and Conclusion In its June 14, 2000 letter of appeal to the Assessment Appeals Committee, X Bank provided no new facts to bolster its assertion that the situation and circumstances are unique and deserve special treatment by the Assessment Appeals Committee. The Bank indicates that sufficient capital was available for pushdown from the parent company to cover the shortfalls. However, the FDIC evaluates each institutions capital position and potential risk to the deposit insurance fund on an individual basis. In determining the capital position of a bank that is a member of a bank holding company, the FDIC evaluates capital according to that which would be required for the bank on its own merit, regardless of its subsidiary position within the holding company. Thus, as a matter of policy, the FDIC cannot consider capital held at the holding company level as part of a subsidiary banks capital base if the capital is not in the bank at the time the institution is being evaluated for deposit insurance assessment purposes. To effectively administer a system such as the risk-related premium system, which covers over 10,000 institutions, consistent application of reasonable rules is extremely important. It is a general belief that 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. For the reasons discussed herein, under authority delegated by the Board of Directors of the Federal Deposit Insurance Corporation, the Committee denies X Banks appeal.
1
Based on the amended data, Georgia Bank reports a Total RBC ratio of 9.73
percent and X Bank reports a Total RBC ratio 9.52 percent periods for the subject
assessment periods.
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Last Updated 06/30/2005 | Legal@fdic.gov |