On October 7, the Board of Directors of the Federal Deposit Insurance Corporation (FDIC) voted to adopt a restoration plan accompanied by a notice of proposed rulemaking to increase the rates banks pay for deposit insurance while at the same time adjusting the system that determines the deposit insurance rate a bank pays to the FDIC.
Under the current deposit insurance system, banks pay between 5 basis points and 43 basis points for deposit insurance. Under the proposal by the FDIC Board, the assessment rate schedule would be raised uniformly by 7 basis points (annualized) beginning on January 1, 2009. In addition, under the proposal, beginning in the second quarter of 2009, changes would be made to the deposit insurance assessment system to make the increase in assessments fairer by requiring riskier institutions to pay higher deposit insurance assessments. The FDIC Board believes that these changes would differentiate risk between insured institutions and help ensure that the reserve ratio returns to at least 1.15 percent by the end of 2013.
The proposed revisions to the assessment system include, among other provisions, assessing higher rates to institutions with significant reliance on secured liabilities and assessing higher rates on institutions with significant reliance on brokered deposits, although such higher rates for well-managed and well-capitalized institutions would only be imposed when reliance on brokered deposits is accompanied by rapid asset growth.
Comments on the proposal are due no later than 30 days after publication in the Federal Register.