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Tuesday, April 26, 2016

FDIC Adopts Small Bank Assessments Final Rule

The FDIC has approved a final rule that amends the way banks with less than $10 billion in assets – that have been FDIC insured for at least five years – are assessed for deposit insurance. It updates the data and revises the methodology that the FDIC uses to determine risk-based assessments for these institutions in three key ways: by basing the financial ratios method on a statistical model estimating the probability of failure over three years; by updating the financial measures used in the financial ratios method consistent with the statistical model; and by eliminating risk categories for established small banks and using the financial ratios method to determine assessment rates for all such banks.

FDIC Chairman Martin J. Gruenberg said
This rule will allow future assessments to better differentiate riskier banks from safer banks. Using the FDIC's experience during the recent financial crisis, this rule will better allocate the costs of maintaining a strong Deposit Insurance Fund. Taken together with the overall decline in rates approved by the Board in 2011 that will occur once the reserve ratio reaches 1.15%, more than 93% of small banks will pay lower assessment rates.

The final rule is revenue neutral, so that aggregate assessment revenue collected from established small banks is expected to be approximately the same as it would have been otherwise. The FDIC has revised the online assessment calculator to reflect this change.

The final rule will be used to determine assessment rates for small banks beginning the quarter after the Deposit Insurance Fund reserve ratio reaches 1.15%, but no earlier than the third quarter of this year.

Read the final rule

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