PRESS RELEASE
Federal Deposit Insurance Corporation Each Depositor insured to at least $250,000
FOR IMMEDIATE RELEASE
October 7, 2008
Media Contact:
Andrew Gray: (202) 898-7192
Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's
banking system. It promotes the safety and soundness of these institutions by identifying, monitoring and addressing
risks to which they are exposed. The FDIC receives no federal tax dollars — insured financial institutions fund its
operations.
FDIC press releases and other information are available on the Internet at www.fdic.gov, by subscription electronically
(go to www.fdic.gov/about/subscriptions/index.html) and may also be obtained through the FDIC's Public Information
Center (877-275-3342 or 703-562-2200). PR-94-2008
FDIC Board Adopts Restoration Plan --
Proposes Higher Assessments on Insured Banks
Also, Proposes Improvements to the Risk-based Assessment System
The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) today
voted to adopt a restoration plan accompanied by a notice of proposed rulemaking that
would increase the rates banks pay for deposit insurance, while at the same time
making adjustments to the system that determines what rate a bank pays the FDIC.
"The U.S. banking industry has the willingness and capacity to provide the necessary
backing to the insurance fund," said FDIC Chairman Sheila C. Bair. "The entire capital
of the banking industry stands behind the fund, as does the full faith and credit of the
United States Government. The public can be sure that we will always have enough
money to protect their insured deposits."
Currently, banks pay anywhere from five basis points to 43 basis points for deposit
insurance. Under the proposal, the assessment rate schedule would be raised uniformly
by 7 basis points (annualized) beginning on January 1, 2009. Beginning with 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 a
larger share. Together, the proposed changes would improve the way the system
differentiates risk among insured institutions and help ensure that the reserve ratio
returns to at least 1.15 percent by the end of 2013.
Proposed changes to the assessment system include assessing higher rates to
institutions with a significant reliance on secured liabilities, which generally raises the
FDIC's loss in the event of failure without providing additional assessment revenue. The
proposal also would assess higher rates for institutions with a significant reliance on
brokered deposits but, for well-managed and well-capitalized institutions, only when
accompanied by rapid asset growth. Brokered deposits combined with rapid asset
growth have played a role in a number of costly failures, including some recent ones.
Federal Deposit Insurance Corporation Each Depositor insured to at least $250,000
FOR IMMEDIATE RELEASE
October 7, 2008
Media Contact:
Andrew Gray: (202) 898-7192
Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's
banking system. It promotes the safety and soundness of these institutions by identifying, monitoring and addressing
risks to which they are exposed. The FDIC receives no federal tax dollars — insured financial institutions fund its
operations.
FDIC press releases and other information are available on the Internet at www.fdic.gov, by subscription electronically
(go to www.fdic.gov/about/subscriptions/index.html) and may also be obtained through the FDIC's Public Information
Center (877-275-3342 or 703-562-2200). PR-94-2008
FDIC Board Adopts Restoration Plan --
Proposes Higher Assessments on Insured Banks
Also, Proposes Improvements to the Risk-based Assessment System
The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) today
voted to adopt a restoration plan accompanied by a notice of proposed rulemaking that
would increase the rates banks pay for deposit insurance, while at the same time
making adjustments to the system that determines what rate a bank pays the FDIC.
"The U.S. banking industry has the willingness and capacity to provide the necessary
backing to the insurance fund," said FDIC Chairman Sheila C. Bair. "The entire capital
of the banking industry stands behind the fund, as does the full faith and credit of the
United States Government. The public can be sure that we will always have enough
money to protect their insured deposits."
Currently, banks pay anywhere from five basis points to 43 basis points for deposit
insurance. Under the proposal, the assessment rate schedule would be raised uniformly
by 7 basis points (annualized) beginning on January 1, 2009. Beginning with 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 a
larger share. Together, the proposed changes would improve the way the system
differentiates risk among insured institutions and help ensure that the reserve ratio
returns to at least 1.15 percent by the end of 2013.
Proposed changes to the assessment system include assessing higher rates to
institutions with a significant reliance on secured liabilities, which generally raises the
FDIC's loss in the event of failure without providing additional assessment revenue. The
proposal also would assess higher rates for institutions with a significant reliance on
brokered deposits but, for well-managed and well-capitalized institutions, only when
accompanied by rapid asset growth. Brokered deposits combined with rapid asset
growth have played a role in a number of costly failures, including some recent ones.
The proposal also would provide incentives in the form of a reduction in assessment
rates for institutions to hold long-term unsecured debt and, for smaller institutions, high
levels of Tier 1 capital.
"Like any insurance company, we've identified activities that have increased or reduced
the cost of insurance, and as a result, want to factor them into our determination of
assessment rates," Bair said.
The FDIC Board of Directors also voted to maintain the Designated Reserve Ratio at
1.25 percent as a signal of its long term target for the fund.
Comments on the proposal are due no later than 30 days after publication in
the Federal Register.
# # #
Attachment:
Restoration Plan, Notice of Proposed Rulemaking on Risk-Based Assessments, and
Designated Reserve Ratio for 2009 - PDF 641k (PDF Help)
rates for institutions to hold long-term unsecured debt and, for smaller institutions, high
levels of Tier 1 capital.
"Like any insurance company, we've identified activities that have increased or reduced
the cost of insurance, and as a result, want to factor them into our determination of
assessment rates," Bair said.
The FDIC Board of Directors also voted to maintain the Designated Reserve Ratio at
1.25 percent as a signal of its long term target for the fund.
Comments on the proposal are due no later than 30 days after publication in
the Federal Register.
# # #
Attachment:
Restoration Plan, Notice of Proposed Rulemaking on Risk-Based Assessments, and
Designated Reserve Ratio for 2009 - PDF 641k (PDF Help)