The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) today voted to propose a comprehensive, long-range plan for deposit insurance fund management with the goals of maintaining a positive fund balance, even during periods of large fund losses, and maintaining steady, predictable assessment rates throughout economic and credit cycles. This plan was formulated in response to changes to the FDIC’s authority to manage the Deposit Insurance Fund contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act.
As part of the fund management plan, the Board adopted a new Restoration Plan to ensure that the fund reserve ratio reaches 1.35 percent by September 30, 2020, as required by Dodd-Frank. The Restoration Plan also foregoes the uniform 3 basis point assessment rate increase previously scheduled to go into effect January 1, 2011, and keeps the current rate schedule in effect. The Board’s decision was informed by an updated FDIC analysis that forecasts somewhat lower losses from 2010 through 2014.
The Board also adopted a notice of proposed rulemaking based upon an FDIC historical analysis of fund losses demonstrating that, to maintain a positive fund balance and steady, predictable assessment rates, the Deposit Insurance Fund reserve ratio must be at least 2 percent before a period of large fund losses and average assessment rates over time must be approximately 8.5 basis points. The notice of proposed rulemaking would:
- Set the designated reserve ratio at 2 percent as a long-term, minimum goal;
- Adopt a lower assessment rate schedule when the reserve ratio reaches 1.15 percent so that the average rate over time should be about 8.5 basis points; and
- In lieu of dividends, adopt lower rate schedules when the reserve ratio reaches 2 percent and 2.5 percent so that average rates will decline about 25 percent and 50 percent, respectively.