40838 Federal Register / Vol. 80, No. 133 / Monday, July 13, 2015 / Proposed Rules
1 12 U.S.C. 1817(b). A ‘‘risk-based assessment
system’’ means a system for calculating an insured
depository institution’s assessment based on the
institution’s probability of causing a loss to the DIF
due to the composition and concentration of the
institution’s assets and liabilities, the likely amount
of any such loss, and the revenue needs of the DIF.
See 12 U.S.C. 1817(b)(1)(C).
2 As used in this NPR, the term ‘‘bank’’ is
synonymous with the term ‘‘insured depository
institution’’ as it is used in section 3(c)(2) of the FDI
Act, 12 U.S.C 1813(c)(2).
On January 1, 2007, the FDIC instituted separate
assessment systems for small and large banks. 71 FR
69282 (Nov. 30, 2006). See 12 U.S.C. 1817(b)(1)(D)
(granting the Board the authority to establish
separate risk-based assessment systems for large
and small insured depository institutions).
3 As used in this NPR, the term ‘‘small bank’’ is
synonymous with the term ‘‘small institution’’ as it
is used in 12 CFR 327.8. In general, a ‘‘small bank’’
is one with less than $10 billion in total assets.
4 The common equity tier 1 capital ratio, a new
risk-based capital ratio, was incorporated into the
deposit insurance assessment system effective
January 1, 2015. 79 FR 70427 (November 26, 2014).
Beginning January 1, 2018, a supplementary
leverage ratio will also be used to determine
whether an advanced approaches bank is: (a) well
capitalized, if the bank is subject to the enhanced
supplementary leverage ratio standards under 12
CFR 6.4(c)(1)(iv)(B), 12 CFR 208.43(c)(1)(iv)(B), or
12 CFR 324.403(b)(1)(vi), as each may be amended
from time to time; and (b) adequately capitalized,
if the bank is subject to the advanced approaches
risk-based capital rules under 12 CFR
6.4(c)(2)(iv)(B), 12 CFR 208.43(c)(2)(iv)(B), or 12
CFR 324.403(b)(2)(vi), as each may be amended
from time to time. 79 FR 70427, 70437 (November
26, 2014.) The supplementary leverage ratio is
expected to affect the capital group assignment of
few, if any, small banks.
5 The term ‘‘primary federal regulator’’ is
synonymous with the term ‘‘appropriate federal
banking agency’’ as it is used in section 3(q) of the
FDI Act, 12 U.S.C. 1813(q).
6 A financial institution is assigned a composite
rating based on an evaluation and rating of six
essential components of an institution’s financial
condition and operations. These component factors
address the adequacy of capital (C), the quality of
assets (A), the capability of management (M), the
quality and level of earnings (E), the adequacy of
liquidity (L), and the sensitivity to market risk (S).
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 327
RIN 3064–AE37
Assessments
AGENCY: Federal Deposit Insurance
Corporation (FDIC).
ACTION: Notice of proposed rulemaking
(NPR) and request for comment.
SUMMARY: The FDIC is proposing to
amend 12 CFR part 327 to refine the
deposit insurance assessment system for
small insured depository institutions
that have been federally insured for at
least 5 years (established small banks)
by: revising the financial ratios method
so that it would be based on a statistical
model estimating the probability of
failure over three years; updating the
financial measures used in the financial
ratios method consistent with the
statistical model; and eliminating risk
categories for established small banks
and using the financial ratios method to
determine assessment rates for all such
banks (subject to minimum or maximum
initial assessment rates based upon a
bank’s CAMELS composite rating). The
FDIC does not propose changing the
range of assessment rates that will apply
once the Deposit Insurance Fund (DIF or
fund) reserve ratio reaches 1.15 percent;
thus, under the proposal, as under
current regulations, the range of initial
deposit insurance assessment rates will
fall once the reserve ratio reaches 1.15
percent. The FDIC proposes that a final
rule would go into effect the quarter
after a final rule is adopted; by their
terms, however, the proposed
amendments would not become
operative until the quarter after the DIF
reserve ratio reaches 1.15 percent.
DATES: Comments must be received by
the FDIC no later than September 11,
2015.
ADDRESSES: You may submit comments
on the notice of proposed rulemaking
using any of the following methods:
• Agency Web site: http://www.fdic.
gov/regulations/laws/federal/. Follow
the instructions for submitting
comments on the agency Web site.
• Email: comments@fdic.gov. Include
RIN 3064–AE37 on the subject line of
the message.
• Mail: Robert E. Feldman, Executive
Secretary, Attention: Comments, Federal
Deposit Insurance Corporation, 550 17th
Street NW., Washington, DC 20429.
• Hand Delivery: Comments may be
hand delivered to the guard station at
the rear of the 550 17th Street Building
(located on F Street) on business days
between 7 a.m. and 5 p.m.
• Public Inspection: All comments
received, including any personal
information provided, will be posted
generally without change to http://www.
fdic.gov/regulations/laws/federal.
FOR FURTHER INFORMATION CONTACT:
Munsell St.Clair, Chief, Banking and
Regulatory Policy, Division of Insurance
and Research, 202–898–8967; Nefretete
Smith, Senior Attorney, Legal Division,
202–898–6851; Thomas Hearn, Counsel,
Legal Division, 202–898–6967.
SUPPLEMENTARY INFORMATION:
I. Policy Objectives
The Federal Deposit Insurance Act
(FDI Act) requires that the FDIC Board
of Directors (Board) establish a risk-
based deposit insurance assessment
system.1 Pursuant to this requirement,
the FDIC adopted a risk-based deposit
insurance assessment system effective
in 1993 that applied to all banks.2 A
risk-based assessment system reduces
the subsidy that lower-risk banks
provide higher-risk banks and provides
incentives for banks to monitor and
reduce risks that could increase
potential losses to the DIF. Since 1993,
the FDIC has met its statutory mandate
and has pursued these policy goals by
periodically introducing improvements
in the deposit insurance assessment
system’s ability to differentiate for risk.
The primary purpose of the proposals in
this NPR is to improve the risk-based
deposit insurance assessment system
applicable to small banks to more
accurately reflect risk.3
II. Background
Risk-Based Deposit Insurance
Assessments for Small Banks
Since 2007, assessment rates for small
banks have been determined by placing
each bank into one of four risk
categories, Risk Categories I, II, III, and
IV. These four risk categories are based
on two criteria: capital levels and
supervisory ratings. The three capital
groups—well capitalized, adequately
capitalized, and undercapitalized—are
based on the leverage ratio and three
risk-based capital ratios used for
regulatory capital purposes.4 The three
supervisory groups, termed A, B, and C,
are based upon supervisory evaluations
by the small bank’s primary federal
regulator, state regulator or the FDIC.5
Group A consists of financially sound
institutions with only a few minor
weaknesses (generally, banks with
CAMELS 6 composite ratings of 1 or 2);
Group B consists of institutions that
demonstrate weaknesses that, if not
corrected could result in significant
deterioration of the institution and
increased risk of loss to the DIF
(generally, banks with CAMELS
composite ratings of 3); and Group C
consists of institutions that pose a
substantial probability of loss to the DIF
unless effective corrective action is
taken (generally, banks with CAMELS
composite ratings of 4 or 5). An
institution’s capital and supervisory
group determine its risk category as set
out in Table 1 below.
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1 12 U.S.C. 1817(b). A ‘‘risk-based assessment
system’’ means a system for calculating an insured
depository institution’s assessment based on the
institution’s probability of causing a loss to the DIF
due to the composition and concentration of the
institution’s assets and liabilities, the likely amount
of any such loss, and the revenue needs of the DIF.
See 12 U.S.C. 1817(b)(1)(C).
2 As used in this NPR, the term ‘‘bank’’ is
synonymous with the term ‘‘insured depository
institution’’ as it is used in section 3(c)(2) of the FDI
Act, 12 U.S.C 1813(c)(2).
On January 1, 2007, the FDIC instituted separate
assessment systems for small and large banks. 71 FR
69282 (Nov. 30, 2006). See 12 U.S.C. 1817(b)(1)(D)
(granting the Board the authority to establish
separate risk-based assessment systems for large
and small insured depository institutions).
3 As used in this NPR, the term ‘‘small bank’’ is
synonymous with the term ‘‘small institution’’ as it
is used in 12 CFR 327.8. In general, a ‘‘small bank’’
is one with less than $10 billion in total assets.
4 The common equity tier 1 capital ratio, a new
risk-based capital ratio, was incorporated into the
deposit insurance assessment system effective
January 1, 2015. 79 FR 70427 (November 26, 2014).
Beginning January 1, 2018, a supplementary
leverage ratio will also be used to determine
whether an advanced approaches bank is: (a) well
capitalized, if the bank is subject to the enhanced
supplementary leverage ratio standards under 12
CFR 6.4(c)(1)(iv)(B), 12 CFR 208.43(c)(1)(iv)(B), or
12 CFR 324.403(b)(1)(vi), as each may be amended
from time to time; and (b) adequately capitalized,
if the bank is subject to the advanced approaches
risk-based capital rules under 12 CFR
6.4(c)(2)(iv)(B), 12 CFR 208.43(c)(2)(iv)(B), or 12
CFR 324.403(b)(2)(vi), as each may be amended
from time to time. 79 FR 70427, 70437 (November
26, 2014.) The supplementary leverage ratio is
expected to affect the capital group assignment of
few, if any, small banks.
5 The term ‘‘primary federal regulator’’ is
synonymous with the term ‘‘appropriate federal
banking agency’’ as it is used in section 3(q) of the
FDI Act, 12 U.S.C. 1813(q).
6 A financial institution is assigned a composite
rating based on an evaluation and rating of six
essential components of an institution’s financial
condition and operations. These component factors
address the adequacy of capital (C), the quality of
assets (A), the capability of management (M), the
quality and level of earnings (E), the adequacy of
liquidity (L), and the sensitivity to market risk (S).
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 327
RIN 3064–AE37
Assessments
AGENCY: Federal Deposit Insurance
Corporation (FDIC).
ACTION: Notice of proposed rulemaking
(NPR) and request for comment.
SUMMARY: The FDIC is proposing to
amend 12 CFR part 327 to refine the
deposit insurance assessment system for
small insured depository institutions
that have been federally insured for at
least 5 years (established small banks)
by: revising the financial ratios method
so that it would be based on a statistical
model estimating the probability of
failure over three years; updating the
financial measures used in the financial
ratios method consistent with the
statistical model; and eliminating risk
categories for established small banks
and using the financial ratios method to
determine assessment rates for all such
banks (subject to minimum or maximum
initial assessment rates based upon a
bank’s CAMELS composite rating). The
FDIC does not propose changing the
range of assessment rates that will apply
once the Deposit Insurance Fund (DIF or
fund) reserve ratio reaches 1.15 percent;
thus, under the proposal, as under
current regulations, the range of initial
deposit insurance assessment rates will
fall once the reserve ratio reaches 1.15
percent. The FDIC proposes that a final
rule would go into effect the quarter
after a final rule is adopted; by their
terms, however, the proposed
amendments would not become
operative until the quarter after the DIF
reserve ratio reaches 1.15 percent.
DATES: Comments must be received by
the FDIC no later than September 11,
2015.
ADDRESSES: You may submit comments
on the notice of proposed rulemaking
using any of the following methods:
• Agency Web site: http://www.fdic.
gov/regulations/laws/federal/. Follow
the instructions for submitting
comments on the agency Web site.
• Email: comments@fdic.gov. Include
RIN 3064–AE37 on the subject line of
the message.
• Mail: Robert E. Feldman, Executive
Secretary, Attention: Comments, Federal
Deposit Insurance Corporation, 550 17th
Street NW., Washington, DC 20429.
• Hand Delivery: Comments may be
hand delivered to the guard station at
the rear of the 550 17th Street Building
(located on F Street) on business days
between 7 a.m. and 5 p.m.
• Public Inspection: All comments
received, including any personal
information provided, will be posted
generally without change to http://www.
fdic.gov/regulations/laws/federal.
FOR FURTHER INFORMATION CONTACT:
Munsell St.Clair, Chief, Banking and
Regulatory Policy, Division of Insurance
and Research, 202–898–8967; Nefretete
Smith, Senior Attorney, Legal Division,
202–898–6851; Thomas Hearn, Counsel,
Legal Division, 202–898–6967.
SUPPLEMENTARY INFORMATION:
I. Policy Objectives
The Federal Deposit Insurance Act
(FDI Act) requires that the FDIC Board
of Directors (Board) establish a risk-
based deposit insurance assessment
system.1 Pursuant to this requirement,
the FDIC adopted a risk-based deposit
insurance assessment system effective
in 1993 that applied to all banks.2 A
risk-based assessment system reduces
the subsidy that lower-risk banks
provide higher-risk banks and provides
incentives for banks to monitor and
reduce risks that could increase
potential losses to the DIF. Since 1993,
the FDIC has met its statutory mandate
and has pursued these policy goals by
periodically introducing improvements
in the deposit insurance assessment
system’s ability to differentiate for risk.
The primary purpose of the proposals in
this NPR is to improve the risk-based
deposit insurance assessment system
applicable to small banks to more
accurately reflect risk.3
II. Background
Risk-Based Deposit Insurance
Assessments for Small Banks
Since 2007, assessment rates for small
banks have been determined by placing
each bank into one of four risk
categories, Risk Categories I, II, III, and
IV. These four risk categories are based
on two criteria: capital levels and
supervisory ratings. The three capital
groups—well capitalized, adequately
capitalized, and undercapitalized—are
based on the leverage ratio and three
risk-based capital ratios used for
regulatory capital purposes.4 The three
supervisory groups, termed A, B, and C,
are based upon supervisory evaluations
by the small bank’s primary federal
regulator, state regulator or the FDIC.5
Group A consists of financially sound
institutions with only a few minor
weaknesses (generally, banks with
CAMELS 6 composite ratings of 1 or 2);
Group B consists of institutions that
demonstrate weaknesses that, if not
corrected could result in significant
deterioration of the institution and
increased risk of loss to the DIF
(generally, banks with CAMELS
composite ratings of 3); and Group C
consists of institutions that pose a
substantial probability of loss to the DIF
unless effective corrective action is
taken (generally, banks with CAMELS
composite ratings of 4 or 5). An
institution’s capital and supervisory
group determine its risk category as set
out in Table 1 below.
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40839Federal Register / Vol. 80, No. 133 / Monday, July 13, 2015 / Proposed Rules
7 New small banks in Risk Category I, however,
are charged the highest initial assessment rate in
effect for that risk category. Subject to exceptions,
a new bank is one that has been federally insured
for less than five years as of the last day of any
quarter for which it is being assessed. 12 CFR
327.8(j).
8 In 2011, the Board revised and approved regular
assessment rate schedules. See 76 FR 10672 (Feb.
25, 2011); 12 CFR 327.10.
9 The weights applied to CAMELS components
are as follows: 25 percent each for Capital and
Management; 20 percent for Asset quality; and 10
percent each for Earnings, Liquidity, and Sensitivity
to market risk. These weights reflect the view of the
FDIC regarding the relative importance of each of
the CAMELS components for differentiating risk
among institutions for deposit insurance purposes.
The FDIC and other bank supervisors do not use
such a system to determine CAMELS composite
ratings.
10 See 71 FR 41910, 41913 (July 24, 2006).
11 Insured branches of foreign banks are deemed
small banks for purposes of the deposit insurance
assessment system.
12 12 U.S.C. 1817(e) (granting the Board the
discretion to suspend or limit dividends).
13 12 U.S.C. 1817(b)(3)(B).
14 Public Law 111–203, 334(d), 124 Stat. 1376,
1539 (12 U.S.C. 1817(note)).
15 Public Law 111–203, 334(e), 124 Stat. 1376,
1539 (12 U.S.C. 1817(note)). The Dodd-Frank Act
also: (1) eliminated the requirement that the FDIC
provide dividends from the fund when the reserve
ratio is between 1.35 percent and 1.5 percent, 12
U.S.C. 1817(e), and (2) continued the FDIC’s
authority to declare dividends when the reserve
ratio at the end of a calendar year is at least 1.5
percent, but granted the FDIC sole discretion in
determining whether to suspend or limit the
declaration of payment or dividends, 12 U.S.C.
1817(e)(2)(A)–(B).
16 See 76 FR 10672.
TABLE 1—DETERMINATION OF RISK CATEGORY
Capital group
Supervisory group
A
CAMELS 1 or 2 B
CAMELS 3 C
CAMELS 4 or 5
Well Capitalized ............................. Risk Category I.
Adequately Capitalized .................. Risk Category II Risk Category III.
Under Capitalized .......................... Risk Category III Risk Category IV
To further differentiate risk within
Risk Category I (which includes most
small banks), the FDIC uses the
financial ratios method, which
combines supervisory CAMELS
component ratings with current
financial ratios to determine a small
Risk Category I bank’s initial assessment
rate.7
Within Risk Category I, those
institutions that pose the least risk are
charged a minimum initial assessment
rate and those that pose the greatest risk
are charged an initial assessment rate
that is four basis points higher than the
minimum. All other banks within Risk
Category I are charged a rate that varies
between these rates. In contrast, all
banks in Risk Category II are charged the
same initial assessment rate, which is
higher than the maximum initial rate for
Risk Category I. A single, higher, initial
assessment rate applies to each bank in
Risk Category III and another, higher,
rate to each bank in Risk Category IV.8
The financial ratios method
determines the assessment rates in Risk
Category I using a combination of
weighted CAMELS component ratings
and the following financial ratios:
• Tier 1 Leverage Ratio;
• Net Income before Taxes/Risk-
Weighted Assets;
• Nonperforming Assets/Gross
Assets;
• Net Loan Charge-Offs/Gross Assets;
• Loans Past Due 30–89 days/Gross
Assets;
• Adjusted Brokered Deposit Ratio;
and
• Weighted Average CAMELS
Composite Rating.9
To determine a Risk Category I bank’s
initial assessment rate, the weighted
CAMELS components and financial
ratios are multiplied by statistically
derived pricing multipliers, the
products are summed, and the sum is
added to a uniform amount that applies
to all Risk Category I banks. If, however,
the rate is below the minimum initial
assessment rate for Risk Category I, the
bank will pay the minimum initial
assessment rate; if the rate derived is
above the maximum initial assessment
rate for Risk Category I, then the bank
will pay the maximum initial rate for
the risk category.
The financial ratios used to determine
rates come from a statistical model that
predicts the probability that a Risk
Category I institution will be
downgraded from a composite CAMELS
rating of 1 or 2 to a rating of 3 or worse
within one year. The probability of a
CAMELS downgrade is intended as a
proxy for the bank’s probability of
failure. When the model was developed
in 2006, the FDIC decided not to
attempt to determine a bank’s
probability of failure because of the lack
of bank failures in the years between the
end of the bank and thrift crisis in the
early 1990s and 2006.10
The financial ratios method does not
apply to new small banks or to insured
branches of foreign banks (insured
branches).11 The manner in which
assessment rates for these institutions is
determined is described further below.
Assessment Rates Under Current Rules
The Dodd-Frank Wall Street Reform
and Consumer Protection Act (the
Dodd-Frank Act), enacted in July 2010,
revised the statutory authorities
governing the FDIC’s management of the
DIF. The Dodd-Frank Act granted the
FDIC authority to manage the fund in a
manner that would help maintain a
positive fund balance during a banking
crisis and promote moderate, steady
assessment rates throughout economic
credit cycles.12
Among other things, the Dodd-Frank
Act: (1) raised the minimum designated
reserve ratio (DRR), which the FDIC
must set each year, to 1.35 percent (from
the former minimum of 1.15 percent)
and removed the upper limit on the
DRR (which was formerly capped at 1.5
percent); 13 (2) required that the fund
reserve ratio reach 1.35 percent by
September 30, 2020 (rather than 1.15
percent by the end of 2016, as formerly
required); 14 and (3) required that, in
setting assessments, the FDIC ‘‘offset the
effect of [requiring that the reserve ratio
reach 1.35 percent by September 30,
2020 rather than 1.15 percent by the end
of 2016] on insured depository
institutions with total consolidated
assets of less than $10,000,000,000.’’ 15
In 2011, the FDIC adopted a schedule
of assessment rates designed to ensure
that the reserve ratio reaches 1.15
percent by September 30, 2020.16 In the
near future, the FDIC plans to propose
a rule to implement the Dodd-Frank Act
requirement that the cost of raising the
reserve ratio from 1.15 percent to 1.35
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7 New small banks in Risk Category I, however,
are charged the highest initial assessment rate in
effect for that risk category. Subject to exceptions,
a new bank is one that has been federally insured
for less than five years as of the last day of any
quarter for which it is being assessed. 12 CFR
327.8(j).
8 In 2011, the Board revised and approved regular
assessment rate schedules. See 76 FR 10672 (Feb.
25, 2011); 12 CFR 327.10.
9 The weights applied to CAMELS components
are as follows: 25 percent each for Capital and
Management; 20 percent for Asset quality; and 10
percent each for Earnings, Liquidity, and Sensitivity
to market risk. These weights reflect the view of the
FDIC regarding the relative importance of each of
the CAMELS components for differentiating risk
among institutions for deposit insurance purposes.
The FDIC and other bank supervisors do not use
such a system to determine CAMELS composite
ratings.
10 See 71 FR 41910, 41913 (July 24, 2006).
11 Insured branches of foreign banks are deemed
small banks for purposes of the deposit insurance
assessment system.
12 12 U.S.C. 1817(e) (granting the Board the
discretion to suspend or limit dividends).
13 12 U.S.C. 1817(b)(3)(B).
14 Public Law 111–203, 334(d), 124 Stat. 1376,
1539 (12 U.S.C. 1817(note)).
15 Public Law 111–203, 334(e), 124 Stat. 1376,
1539 (12 U.S.C. 1817(note)). The Dodd-Frank Act
also: (1) eliminated the requirement that the FDIC
provide dividends from the fund when the reserve
ratio is between 1.35 percent and 1.5 percent, 12
U.S.C. 1817(e), and (2) continued the FDIC’s
authority to declare dividends when the reserve
ratio at the end of a calendar year is at least 1.5
percent, but granted the FDIC sole discretion in
determining whether to suspend or limit the
declaration of payment or dividends, 12 U.S.C.
1817(e)(2)(A)–(B).
16 See 76 FR 10672.
TABLE 1—DETERMINATION OF RISK CATEGORY
Capital group
Supervisory group
A
CAMELS 1 or 2 B
CAMELS 3 C
CAMELS 4 or 5
Well Capitalized ............................. Risk Category I.
Adequately Capitalized .................. Risk Category II Risk Category III.
Under Capitalized .......................... Risk Category III Risk Category IV
To further differentiate risk within
Risk Category I (which includes most
small banks), the FDIC uses the
financial ratios method, which
combines supervisory CAMELS
component ratings with current
financial ratios to determine a small
Risk Category I bank’s initial assessment
rate.7
Within Risk Category I, those
institutions that pose the least risk are
charged a minimum initial assessment
rate and those that pose the greatest risk
are charged an initial assessment rate
that is four basis points higher than the
minimum. All other banks within Risk
Category I are charged a rate that varies
between these rates. In contrast, all
banks in Risk Category II are charged the
same initial assessment rate, which is
higher than the maximum initial rate for
Risk Category I. A single, higher, initial
assessment rate applies to each bank in
Risk Category III and another, higher,
rate to each bank in Risk Category IV.8
The financial ratios method
determines the assessment rates in Risk
Category I using a combination of
weighted CAMELS component ratings
and the following financial ratios:
• Tier 1 Leverage Ratio;
• Net Income before Taxes/Risk-
Weighted Assets;
• Nonperforming Assets/Gross
Assets;
• Net Loan Charge-Offs/Gross Assets;
• Loans Past Due 30–89 days/Gross
Assets;
• Adjusted Brokered Deposit Ratio;
and
• Weighted Average CAMELS
Composite Rating.9
To determine a Risk Category I bank’s
initial assessment rate, the weighted
CAMELS components and financial
ratios are multiplied by statistically
derived pricing multipliers, the
products are summed, and the sum is
added to a uniform amount that applies
to all Risk Category I banks. If, however,
the rate is below the minimum initial
assessment rate for Risk Category I, the
bank will pay the minimum initial
assessment rate; if the rate derived is
above the maximum initial assessment
rate for Risk Category I, then the bank
will pay the maximum initial rate for
the risk category.
The financial ratios used to determine
rates come from a statistical model that
predicts the probability that a Risk
Category I institution will be
downgraded from a composite CAMELS
rating of 1 or 2 to a rating of 3 or worse
within one year. The probability of a
CAMELS downgrade is intended as a
proxy for the bank’s probability of
failure. When the model was developed
in 2006, the FDIC decided not to
attempt to determine a bank’s
probability of failure because of the lack
of bank failures in the years between the
end of the bank and thrift crisis in the
early 1990s and 2006.10
The financial ratios method does not
apply to new small banks or to insured
branches of foreign banks (insured
branches).11 The manner in which
assessment rates for these institutions is
determined is described further below.
Assessment Rates Under Current Rules
The Dodd-Frank Wall Street Reform
and Consumer Protection Act (the
Dodd-Frank Act), enacted in July 2010,
revised the statutory authorities
governing the FDIC’s management of the
DIF. The Dodd-Frank Act granted the
FDIC authority to manage the fund in a
manner that would help maintain a
positive fund balance during a banking
crisis and promote moderate, steady
assessment rates throughout economic
credit cycles.12
Among other things, the Dodd-Frank
Act: (1) raised the minimum designated
reserve ratio (DRR), which the FDIC
must set each year, to 1.35 percent (from
the former minimum of 1.15 percent)
and removed the upper limit on the
DRR (which was formerly capped at 1.5
percent); 13 (2) required that the fund
reserve ratio reach 1.35 percent by
September 30, 2020 (rather than 1.15
percent by the end of 2016, as formerly
required); 14 and (3) required that, in
setting assessments, the FDIC ‘‘offset the
effect of [requiring that the reserve ratio
reach 1.35 percent by September 30,
2020 rather than 1.15 percent by the end
of 2016] on insured depository
institutions with total consolidated
assets of less than $10,000,000,000.’’ 15
In 2011, the FDIC adopted a schedule
of assessment rates designed to ensure
that the reserve ratio reaches 1.15
percent by September 30, 2020.16 In the
near future, the FDIC plans to propose
a rule to implement the Dodd-Frank Act
requirement that the cost of raising the
reserve ratio from 1.15 percent to 1.35
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