FDIC proposes lower deposit insurance assessment rates and higher asset threshold for banks

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FDIC lowers assessment, raises threshold

Highlights

FDIC board proposes raising the asset threshold for large institution assessments to $30 billion from $10 billion and introducing periodic adjustment via indexing.
The proposal reduces initial base deposit insurance assessment rates by two basis points for small institutions and one basis point for large or highly complex institutions.
A downward adjustment of up to one basis point is offered for large or highly complex institutions that complete virtual data room tests or allow temporary access to key systems.

Proposed assessment changes and comment timeline

As reported by the Federal Deposit Insurance Corporation, the agency’s board has approved a notice of proposed rulemaking to revise assessment regulations for all FDIC-insured institutions.

The proposal would raise the threshold used to distinguish small and large institutions for assessment purposes to $30 billion in assets from $10 billion. It also would add a periodic adjustment mechanism based on an indexing methodology.

The FDIC also proposes cutting initial base deposit insurance assessment rate schedules across the industry. Under the plan, small institutions would see a two-basis-point reduction, while institutions meeting the proposed large-institution definition or classified as highly complex would receive a one-basis-point reduction.

Comments on the proposed rule will be accepted for 60 days after publication in the Federal Register.

Operational incentives and industry impact

The proposal also adds a downward resolution readiness adjustment of up to one basis point for large or highly complex institutions. That adjustment would apply when an institution successfully completes a virtual data room testing exercise and or provides temporary access to certain service providers and internal systems.

The FDIC says those steps can help reduce losses to the Deposit Insurance Fund if an institution fails, because they can speed access to information useful for marketing the institution and give the agency advance access to key systems.

To help banks assess the effect of the changes, FDIC staff have prepared assessment rate calculators on the agency’s website. The tools are intended to estimate assessment rates under the proposed schedule revisions and, where applicable, the resolution readiness adjustment.

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