PRESS RELEASE
Federal Deposit Insurance Corporation Each Depositor insured to at least $250,000
FOR IMMEDIATE RELEASE
February 7, 2011
Media Contact:
Andrew Gray
(202) 898-7192
angray@fdic.gov
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-28-2011
FDIC Approves Final Rule of Assessments, Dividends,
Assessment Base and Large Bank Pricing
The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) today
approved a final rule on Assessments, Dividends, Assessment Base and Large Bank
Pricing. The rule implements changes to the deposit insurance assessment system
mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act and
revises the assessment system applicable to large banks to eliminate reliance on debt
issuer ratings and make it more forward looking. Dodd-Frank required that the base on
which deposit insurance assessments are charged be revised from one based on
domestic deposits to one based on assets.
In November 2010, the Board approved a proposed rule to change the assessment
base from adjusted domestic deposits to average consolidated total assets minus
average tangible equity and reissued a proposed rule revising the deposit insurance
assessment system for large institutions that was approved by the FDIC in April 2010.
The Board approved a proposed rule on Assessment Dividends, Assessment Rates and
the Designated Reserve Ratio in October 2010. The final rule encompasses all of these
proposed rules.
FDIC Chairman Sheila C. Bair said, "This final rule accomplishes Dodd-Frank's goal of
better reflecting risks to the deposit insurance fund, while also providing the industry
greater certainty regarding what rates will be over the long run. By changing the
assessment base from deposits to assets minus tangible equity, the Act allows the
FDIC to charge deposit insurance assessments on secured liabilities, which we have
always protected. The rule should keep the overall amount collected from the industry
very close to unchanged, although the amounts that individual institutions pay will be
different."
Federal Deposit Insurance Corporation Each Depositor insured to at least $250,000
FOR IMMEDIATE RELEASE
February 7, 2011
Media Contact:
Andrew Gray
(202) 898-7192
angray@fdic.gov
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-28-2011
FDIC Approves Final Rule of Assessments, Dividends,
Assessment Base and Large Bank Pricing
The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) today
approved a final rule on Assessments, Dividends, Assessment Base and Large Bank
Pricing. The rule implements changes to the deposit insurance assessment system
mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act and
revises the assessment system applicable to large banks to eliminate reliance on debt
issuer ratings and make it more forward looking. Dodd-Frank required that the base on
which deposit insurance assessments are charged be revised from one based on
domestic deposits to one based on assets.
In November 2010, the Board approved a proposed rule to change the assessment
base from adjusted domestic deposits to average consolidated total assets minus
average tangible equity and reissued a proposed rule revising the deposit insurance
assessment system for large institutions that was approved by the FDIC in April 2010.
The Board approved a proposed rule on Assessment Dividends, Assessment Rates and
the Designated Reserve Ratio in October 2010. The final rule encompasses all of these
proposed rules.
FDIC Chairman Sheila C. Bair said, "This final rule accomplishes Dodd-Frank's goal of
better reflecting risks to the deposit insurance fund, while also providing the industry
greater certainty regarding what rates will be over the long run. By changing the
assessment base from deposits to assets minus tangible equity, the Act allows the
FDIC to charge deposit insurance assessments on secured liabilities, which we have
always protected. The rule should keep the overall amount collected from the industry
very close to unchanged, although the amounts that individual institutions pay will be
different."
The new large bank pricing system will result in higher assessment rates for banks with
high-risk asset concentrations, less stable balance sheet liquidity, or potentially higher
loss severity in the event of failure. Over the long term, large institutions that pose
higher risk will pay higher assessments when they assume these risks rather than when
conditions deteriorate.
According to Bair, "The new large bank pricing system in this final rule goes a long way
towards reducing pro-cyclicality by calculating assessment payments using more
forward-looking measures."
The final rule also retains the unsecured debt adjustment, which lowers an institution's
assessment rate to recognize the buffer that long-term unsecured and subordinated
debt provides the Deposit Insurance Fund. This adjustment is recalibrated in the final
rule to ensure that the incentive for issuing this debt remains the same with the change
to a larger assessment base.
"In light of the interest rate environment and the assessment rate benefit we provide, I
encourage banks to issue more long-term unsecured debt to lock in low rates and
provide greater stability to their funding," Bair said.
The final rule also revises the assessment rate schedule effective April 1, 2011, and
adopts additional rate schedules that will go into effect when the Deposit Insurance
Fund (DIF) reserve ratio reaches various milestones. These future rate schedules
should accomplish 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.
"The financial crisis provided ample evidence of the need to improve the assessment
system. The banking industry, the Deposit Insurance Fund and the financial system will
benefit from this rule in both the short and long term," Bair added.
The FDIC sought comment on every aspect of the proposed rules. The FDIC received a
total of 55 written comments on the October NPR, the Assessment Base NPR and the
Large Bank NPR.
Attachment:
Final Rule of Assessments, Dividends, Assessment Base, & Large Bank Pricing - PDF
(PDF Help)
high-risk asset concentrations, less stable balance sheet liquidity, or potentially higher
loss severity in the event of failure. Over the long term, large institutions that pose
higher risk will pay higher assessments when they assume these risks rather than when
conditions deteriorate.
According to Bair, "The new large bank pricing system in this final rule goes a long way
towards reducing pro-cyclicality by calculating assessment payments using more
forward-looking measures."
The final rule also retains the unsecured debt adjustment, which lowers an institution's
assessment rate to recognize the buffer that long-term unsecured and subordinated
debt provides the Deposit Insurance Fund. This adjustment is recalibrated in the final
rule to ensure that the incentive for issuing this debt remains the same with the change
to a larger assessment base.
"In light of the interest rate environment and the assessment rate benefit we provide, I
encourage banks to issue more long-term unsecured debt to lock in low rates and
provide greater stability to their funding," Bair said.
The final rule also revises the assessment rate schedule effective April 1, 2011, and
adopts additional rate schedules that will go into effect when the Deposit Insurance
Fund (DIF) reserve ratio reaches various milestones. These future rate schedules
should accomplish 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.
"The financial crisis provided ample evidence of the need to improve the assessment
system. The banking industry, the Deposit Insurance Fund and the financial system will
benefit from this rule in both the short and long term," Bair added.
The FDIC sought comment on every aspect of the proposed rules. The FDIC received a
total of 55 written comments on the October NPR, the Assessment Base NPR and the
Large Bank NPR.
Attachment:
Final Rule of Assessments, Dividends, Assessment Base, & Large Bank Pricing - PDF
(PDF Help)