The Federal Deposit Insurance Corporation (FDIC) board proposed a rule to increase deposit insurance assessment rates by 2 basis points for all insured depository institutions.
This increase is proposed to increase the likelihood that the reserve ratio of the Deposit Insurance Fund (DIF) reaches the statutory minimum of 1.35 percent by the statutory deadline of September 2028. The reserve ratio is the ratio of the DIF to all insured deposits in the United States. The FDIC board also adopted an Amended Restoration Plan, which incorporates the increase in assessment rates.
“Better to take prudent but modest action earlier in the statutory 8-year period to reach the minimum reserve ratio of the Deposit Insurance Fund than to delay and potentially have to consider a larger increase in assessments at a later time when banking and economic conditions may be less favorable,” Acting FDIC Chairman Martin Gruenberg said.
The proposed assessment rate schedules would begin with the first assessment period of 2023 and remain in effect unless and until the reserve ratio meets or exceeds 2 percent.
Massive growth in insured deposits during the first and second quarters of 2020 caused the DIF reserve ratio to decline below the statutory minimum of 1.35 percent. As of June 30, 2020, the reserve ratio stood at 1.30 percent. Thus, the board adopted a plan on Sept. 15, 2020, to restore the DIF reserve ratio to at least 1.35 percent by Sept. 30, 2028. The plan also requires the FDIC to update its analysis and projections for the fund balance and reserve ratio at least semiannually.
Since then, insured deposits have continued to grow. As of March 31, 2022, the reserve ratio declined by 4 basis points to 1.23 percent. The Amended Restoration Plan and proposed increase in assessment rates intend to increase the likelihood that the reserve ratio will reach the statutory minimum of 1.35 percent by Sept. 30, 2028. It would also support growth in the DIF toward the long-term goal of a 2 percent Designated Reserve Ratio (DRR).
The FDIC is taking public comment on this proposed rule through Aug. 20.