Federal Deposit
Insurance Corporation

New York Bankers Association

Michael P. Smith
President
New York Bankers Association
99 Park Avenue, 4th Floor
New York, NY 10016-1502

August 16, 2006

Mr. Robert E. Feldman
Executive Secretary
ATTN: Comments
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429

RE: Assessments-RIN-3064-AD03

Dear Mr. Feldman:

In response to the notice of proposed rule making published in the May 18 Federal Register, The New York Bankers Association is submitting these comments on the proposed amendments to the deposit insurance assessment system designed to make the system react more quickly and accurately to changes in institutions’ risk profiles. The proposal would provide for the collection of assessments after the end of each quarter, rather than in advance, and make other changes designed to reflect actual, rather than projected, deposits subject to assessment. Our Association supports the proposal with two modifications. The New York Bankers Association is comprised of the money center, regional and community commercial banks and thrift institutions doing business in New York State. Our members’ aggregate assets exceed $4 trillion and they have more that 340,000 New York employees.

This proposal arises under the Federal Deposit Insurance Reform Act of 2005 (the Act) and is one of a number designed to upgrade and improve the deposit insurance system. The Act, among other provisions, requires the Federal Deposit Insurance Corporation (The “Corporation” or FDIC”) to revise its current risk-based premium structure. In preparation for the revision, this proposal is designed to provide the Corporation with more accurate and current information on the insured deposit base subject to assessment. Among the proposed changes designed to improve the timeliness of assessment information, the proposal would require institutions in excess of $300 million dollars in deposits to use average daily balances in determining their assessment bases, eliminate the float deduction, simplify rules governing institutions that go out of business, and require newly insured institutions, for the first time, to be assessed for the assessment period during which they become insured. The proposal would also alter the assessment schedule, providing quarterly assessments, rather than the semi-annual assessments that have been statutorily required since the Corporation was created (although the effect has been a quarterly payment system, because assessments were collected in two installments). Other accounting and reporting changes are designed to reflect these proposals.

Our Association believes that the proposed amendments reflect changes in technology that will permit insured institutions to provide more timely and accurate assessment information to the FDIC without creating significant additional paperwork, accounting or reporting burdens. In addition, because most of the changes proposed reflect changes in timing of information reported rather than overall deposit changes, they should not impose additional assessment burdens on insured institutions. Importantly, the proposal should eliminate sources of friction between the FDIC and insured institutions by allowing the Corporation to assess deposit insurance premiums more accurately.

Our Association would suggest two minor modifications in the proposal that will ensure that smaller banks are not inadvertently and unnecessarily burdened by it. First, we would suggest that the cut-off for institutions required to use average daily balances, rather than quarter-end balances, in reporting their insured deposits be increased from $300 million to $1 billion. This increase would be consistent with other FDIC regulations and reporting requirements (such as the threshold for streamlined CRA examinations) and would affect only a very small proportion of insured deposits. We would suggest that banks below $1 billion be authorized to file either on the basis of average daily balances or end-of-quarter balances, at their option, in order to encourage a transition to the use of average daily balances.

In addition, we would suggest that those institutions that continue to file on the basis of end-of-quarter deposits be allowed a continued deduction for float. Filing on an average daily balance basis should account for continued float in the system, but those who file on an end-of-quarter basis, as the corporation’s proposal recognizes, continue to have some level of float in their reported numbers. We would suggest that FDIC determine a level of float consistent with current practices (recognizing that the current 16 2/3% float deduction appears to be outdated) and allow end-of-quarter filers to make use of it.

With these modifications, the New York Bankers Association supports this proposal and urges that it be adopted.

Sincerely,

Michael P. Smith