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Tuesday, June 16, 2015

FDIC Proposes Revision to Premium Assessment Calculations for Small Banks

The FDIC proposed to revise the assessment rate formula for “small” banks at least 5 years old and with less than $10 billion in assets.

Importantly, the change:

  • Is revenue neutral and therefore will not increase the amount of assessments the FDIC collects — although some banks will pay somewhat more and some somewhat less.
  • Would better reflect the actual risk to the FDIC, as it is based on data from recent bank failures, instead of a proxy for failures, as before.
  • Would eliminate the large jumps in assessments for banks that are not well-capitalized and CAMELS I or II by changing to a formula approach.
  • Uses basically the same formula as at present with updated parameters, but adds a factor for the portion of the loan portfolio with assets that proved riskier in the recent recession.

The change would go into effect the quarter after the FDIC insurance fund reaches 1.15 percent of insured deposits (projected for late next year), when assessment rates for banks under $10 billion are set to decline. Dodd-Frank Act §334(e) mandates that, at that point, banks over $10 billion will have primary responsibility to bring the fund to 1.35 percent.

The FDIC provided an assessment calculator under the proposal to allow banks to estimate its impact.

Comments will be due 60 days after publication in the Federal Register, likely in late August.

Read the proposed rule.
Read ABA's summary of the proposal.

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