On Friday, February 27, 2009, the FDIC took two actions designed to allow the Deposit Insurance Fund to withstand the existing problems in the banking industry. The first was the imposition of a special emergency assessment on all insured banks and savings associations. The second was the adoption of previously proposed changes to its risk-based assessment system.
The FDIC adopted an interim final rule imposing the special assessment on insured institutions due to recent failures, which have reduced the Deposit Insurance Fund to $18.9 billion at December 31, 2009, compared to $52.4 billion at December 31, 2007. The fund’s reserve ratio at December 31, 2008, was .40%, the lowest since 1993. Although the FDIC has a substantial line of credit with the U.S. Treasury, it expressed the belief that allowing the reserve ratio to decline further could undermine public confidence in the federal deposit insurance system.
The emergency assessment will amount to 20 basis points of insured deposits as of June 30, 2009. The assessment will be collected on September 30, 2009, at the same time that the risk-based assessment for second quarter 2009 is collected.
The FDIC also extended the period for raising the Deposit Insurance Fund reserve ratio to 1.15% in its previously adopted and statutorily required Restoration Plan. The time frame was increased from five to seven years. The FDIC took that step in view of the extraordinary circumstances facing the banking industry.
According to the FDIC, the 20 basis point emergency assessment should increase the reserve ratio by 32 basis points and, along with its risk-based assessment scale, allow a return to the targeted 1.15% ratio by year end 2015. However, the FDIC acknowledged the uncertainty of its projections and alluded to the possibility of further emergency special assessments of up to ten basis points after June 30, 2009, if deemed necessary. Any such special assessment would be imposed on the last day of the applicable quarter and collected three months later.
The FDIC also adopted a final rule revising its risk-based assessment system, effective April 1, 2009. The changes to the assessment system, which were first proposed in October 2008, involve adjustments to the risk-based calculation for an institution’s unsecured debt, secured liabilities and brokered deposits. The revisions effectively result in a range of possible assessments under the risk-based system of 7 to 77.5 basis points. Basic assessments for Risk Category I, applicable to the least risky institutions, range from 12 to 16 basis points, but can be adjusted to from 7 to 24 basis points under the revised system.