We appreciate that the FDIC considered all of our issues with the earlier proposal and incorporated several of our suggestions. We are evaluating the latest version to see if it now fairly allocates assessments by risk.
In response to numerous comments from bankers across the country, the revised proposal would not factor core deposit funding into assessments (which would punish banks for funding with reciprocal deposits or Federal Home Loan Bank advances). Under the updated proposal, funding with brokered deposits — not counting reciprocal deposits for well capitalized banks with CAMELS ratings of 1 or 2 — in excess of 10% of assets would lead to higher assessments (and the existing “brokered deposit adjustment” would be eliminated).
As supported by ABA, the revised proposal would also adopt a fairer standard for assessing growth; assets would have to grow more than 10% over a one-year period to trigger higher assessments, meaning that fewer banks will be penalized for healthy, well-managed growth.
The new proposal would not alter the loan portfolio factor from the earlier proposal, which ABA criticized as being “of questionable value” in forecasting bank failures, since it does not account for the quality of credit underwriting, portfolio management and risk hedging. However, the proposal would cap assessment rates by CAMELS rating, which ABA supported, potentially limiting the impact of the loan portfolio factor and the weighting for the tier 1 core capital ratio, which ABA also objected to earlier.
The FDIC will accept comments on the proposal for 30 days following publication in the Federal Register, and posted a calculator for bankers to test the impact on their assessments.
Access the calculator.