This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents. Prices of
new books are listed in the first FEDERAL
REGISTER issue of each week.
Rules and Regulations Federal Register
16059
Vol. 81, No. 58
Friday, March 25, 2016
1 See 80 FR 68780 (Nov. 6, 2015).
2 As used in this final rule, the term ‘‘bank’’ has
the same meaning as ‘‘insured depository
institution’’ as defined in section 3 of the FDI Act,
12 U.S.C. 1813(c)(2).
3 Public Law 111–203, 334, 124 Stat. 1376, 1539
(12 U.S.C. 1817(note)).
4 12 U.S.C. 1817(b)(3)(B). The Dodd-Frank Act
also removed the upper limit on the designated
reserve ratio (which was formerly capped at 1.5
percent).
5 12 U.S.C. 1817(note).
6 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; (2)
eliminated the requirement that the amount in the
DIF in excess of the amount required to maintain
the reserve ratio at 1.5 percent of estimated insured
deposits be paid as dividends; and (3) granted 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).
7 12 U.S.C. 1817(note).
8 12 U.S.C. 1817(b)(5).
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 327
RIN 3064–AE40
Assessments
AGENCY: Federal Deposit Insurance
Corporation (FDIC).
ACTION: Final rule.
SUMMARY: Pursuant to the requirements
of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (Dodd-
Frank Act) and the FDIC’s authority
under section 7 of the Federal Deposit
Insurance Act (FDI Act), the FDIC is
imposing a surcharge on the quarterly
assessments of insured depository
institutions with total consolidated
assets of $10 billion or more. The
surcharge will equal an annual rate of
4.5 basis points applied to the
institution’s assessment base (with
certain adjustments). If the Deposit
Insurance Fund (DIF or fund) reserve
ratio reaches 1.15 percent before July 1,
2016, surcharges will begin July 1, 2016.
If the reserve ratio has not reached 1.15
percent by that date, surcharges will
begin the first day of the calendar
quarter after the reserve ratio reaches
1.15 percent. (Lower regular quarterly
deposit insurance assessment (regular
assessment) rates will take effect the
quarter after the reserve ratio reaches
1.15 percent.) Surcharges will continue
through the quarter that the reserve ratio
first reaches or exceeds 1.35 percent, but
not later than December 31, 2018. The
FDIC expects that surcharges will
commence in the second half of 2016
and that they should be sufficient to
raise the DIF reserve ratio to 1.35
percent in approximately eight quarters,
i.e., before the end of 2018. If the reserve
ratio does not reach 1.35 percent by
December 31, 2018 (provided it is at
least 1.15 percent), the FDIC will
impose a shortfall assessment on March
31, 2019, on insured depository
institutions with total consolidated
assets of $10 billion or more. The FDIC
will provide assessment credits (credits)
to insured depository institutions with
total consolidated assets of less than $10
billion for the portion of their regular
assessments that contribute to growth in
the reserve ratio between 1.15 percent
and 1.35 percent. The FDIC will apply
the credits each quarter that the reserve
ratio is at least 1.38 percent to offset the
regular deposit insurance assessments of
institutions with credits.
DATES: This rule will become effective
on July 1, 2016.
FOR FURTHER INFORMATION CONTACT:
Munsell W. St. Clair, Chief, Banking and
Regulatory Policy Section, Division of
Insurance and Research, (202) 898–
8967; Nefretete Smith, Senior Attorney,
Legal Division, (202) 898–6851; and
James Watts, Senior Attorney, Legal
Division (202) 898–6678.
SUPPLEMENTARY INFORMATION:
I. Notice of Proposed Rulemaking and
Comments
On October 22, 2015, the FDIC’s
Board of Directors (Board) authorized
publication of a notice of proposed
rulemaking (NPR) to impose a surcharge
on the quarterly assessments of insured
depository institutions with total
consolidated assets of $10 billion or
more.
The NPR was published in the
Federal Register on November 6, 2015.1
The FDIC sought comment on every
aspect of the proposed rule and on
alternatives. The FDIC received a total
of eight letters. Of these letters, four
were from trade groups and four were
from banks. Comments are discussed in
the relevant sections below.
II. Policy Objectives
The FDIC maintains a fund in order
to assure the agency’s capacity to meet
its obligations as insurer of deposits and
receiver of failed banks.2 The FDIC
considers the adequacy of the DIF in
terms of the reserve ratio, which is equal
to the DIF balance divided by estimated
insured deposits. A higher minimum
reserve ratio reduces the risk that losses
from bank failures during a downturn
will exhaust the DIF and reduces the
risk of large, procyclical increases in
deposit insurance assessments to
maintain a positive DIF balance.
The Dodd-Frank Act, enacted on July
21, 2010, contained several provisions
to strengthen the DIF.3 Among other
things, it: (1) Raised the minimum
reserve ratio for the DIF to 1.35 percent
(from the former minimum of 1.15
percent); 4 (2) required that the reserve
ratio reach 1.35 percent by September
30, 2020; 5 and (3) required that, in
setting assessments, the FDIC ‘‘offset the
effect of [the increase in the minimum
reserve ratio] on insured depository
institutions with total consolidated
assets of less than $10,000,000,000.’’ 6
Both the Dodd-Frank Act and the FDI
Act grant the FDIC broad authority to
implement the requirement to achieve
the 1.35 percent minimum reserve ratio.
In particular, under the Dodd-Frank Act,
the FDIC is authorized to take such
steps as may be necessary for the reserve
ratio to reach 1.35 percent by September
30, 2020.7 Furthermore, under the
FDIC’s special assessment authority in
section 7(b)(5) of the FDI Act, the FDIC
may impose special assessments in an
amount determined to be necessary for
any purpose that the FDIC may deem
necessary.8
In the FDIC’s view, the Dodd-Frank
Act requirement to raise the reserve
ratio to the minimum of 1.35 percent by
September 30, 2020 reflects the
importance of building the DIF in a
timely manner to withstand future
economic shocks. Increasing the reserve
ratio faster reduces the likelihood of
procyclical assessments, a key policy
VerDate Sep<11>2014 12:26 Mar 24, 2016 Jkt 238001 PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 E:\FR\FM\25MRR1.SGM 25MRR1
jstallworth on DSK7TPTVN1PROD with RULES
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents. Prices of
new books are listed in the first FEDERAL
REGISTER issue of each week.
Rules and Regulations Federal Register
16059
Vol. 81, No. 58
Friday, March 25, 2016
1 See 80 FR 68780 (Nov. 6, 2015).
2 As used in this final rule, the term ‘‘bank’’ has
the same meaning as ‘‘insured depository
institution’’ as defined in section 3 of the FDI Act,
12 U.S.C. 1813(c)(2).
3 Public Law 111–203, 334, 124 Stat. 1376, 1539
(12 U.S.C. 1817(note)).
4 12 U.S.C. 1817(b)(3)(B). The Dodd-Frank Act
also removed the upper limit on the designated
reserve ratio (which was formerly capped at 1.5
percent).
5 12 U.S.C. 1817(note).
6 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; (2)
eliminated the requirement that the amount in the
DIF in excess of the amount required to maintain
the reserve ratio at 1.5 percent of estimated insured
deposits be paid as dividends; and (3) granted 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).
7 12 U.S.C. 1817(note).
8 12 U.S.C. 1817(b)(5).
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 327
RIN 3064–AE40
Assessments
AGENCY: Federal Deposit Insurance
Corporation (FDIC).
ACTION: Final rule.
SUMMARY: Pursuant to the requirements
of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (Dodd-
Frank Act) and the FDIC’s authority
under section 7 of the Federal Deposit
Insurance Act (FDI Act), the FDIC is
imposing a surcharge on the quarterly
assessments of insured depository
institutions with total consolidated
assets of $10 billion or more. The
surcharge will equal an annual rate of
4.5 basis points applied to the
institution’s assessment base (with
certain adjustments). If the Deposit
Insurance Fund (DIF or fund) reserve
ratio reaches 1.15 percent before July 1,
2016, surcharges will begin July 1, 2016.
If the reserve ratio has not reached 1.15
percent by that date, surcharges will
begin the first day of the calendar
quarter after the reserve ratio reaches
1.15 percent. (Lower regular quarterly
deposit insurance assessment (regular
assessment) rates will take effect the
quarter after the reserve ratio reaches
1.15 percent.) Surcharges will continue
through the quarter that the reserve ratio
first reaches or exceeds 1.35 percent, but
not later than December 31, 2018. The
FDIC expects that surcharges will
commence in the second half of 2016
and that they should be sufficient to
raise the DIF reserve ratio to 1.35
percent in approximately eight quarters,
i.e., before the end of 2018. If the reserve
ratio does not reach 1.35 percent by
December 31, 2018 (provided it is at
least 1.15 percent), the FDIC will
impose a shortfall assessment on March
31, 2019, on insured depository
institutions with total consolidated
assets of $10 billion or more. The FDIC
will provide assessment credits (credits)
to insured depository institutions with
total consolidated assets of less than $10
billion for the portion of their regular
assessments that contribute to growth in
the reserve ratio between 1.15 percent
and 1.35 percent. The FDIC will apply
the credits each quarter that the reserve
ratio is at least 1.38 percent to offset the
regular deposit insurance assessments of
institutions with credits.
DATES: This rule will become effective
on July 1, 2016.
FOR FURTHER INFORMATION CONTACT:
Munsell W. St. Clair, Chief, Banking and
Regulatory Policy Section, Division of
Insurance and Research, (202) 898–
8967; Nefretete Smith, Senior Attorney,
Legal Division, (202) 898–6851; and
James Watts, Senior Attorney, Legal
Division (202) 898–6678.
SUPPLEMENTARY INFORMATION:
I. Notice of Proposed Rulemaking and
Comments
On October 22, 2015, the FDIC’s
Board of Directors (Board) authorized
publication of a notice of proposed
rulemaking (NPR) to impose a surcharge
on the quarterly assessments of insured
depository institutions with total
consolidated assets of $10 billion or
more.
The NPR was published in the
Federal Register on November 6, 2015.1
The FDIC sought comment on every
aspect of the proposed rule and on
alternatives. The FDIC received a total
of eight letters. Of these letters, four
were from trade groups and four were
from banks. Comments are discussed in
the relevant sections below.
II. Policy Objectives
The FDIC maintains a fund in order
to assure the agency’s capacity to meet
its obligations as insurer of deposits and
receiver of failed banks.2 The FDIC
considers the adequacy of the DIF in
terms of the reserve ratio, which is equal
to the DIF balance divided by estimated
insured deposits. A higher minimum
reserve ratio reduces the risk that losses
from bank failures during a downturn
will exhaust the DIF and reduces the
risk of large, procyclical increases in
deposit insurance assessments to
maintain a positive DIF balance.
The Dodd-Frank Act, enacted on July
21, 2010, contained several provisions
to strengthen the DIF.3 Among other
things, it: (1) Raised the minimum
reserve ratio for the DIF to 1.35 percent
(from the former minimum of 1.15
percent); 4 (2) required that the reserve
ratio reach 1.35 percent by September
30, 2020; 5 and (3) required that, in
setting assessments, the FDIC ‘‘offset the
effect of [the increase in the minimum
reserve ratio] on insured depository
institutions with total consolidated
assets of less than $10,000,000,000.’’ 6
Both the Dodd-Frank Act and the FDI
Act grant the FDIC broad authority to
implement the requirement to achieve
the 1.35 percent minimum reserve ratio.
In particular, under the Dodd-Frank Act,
the FDIC is authorized to take such
steps as may be necessary for the reserve
ratio to reach 1.35 percent by September
30, 2020.7 Furthermore, under the
FDIC’s special assessment authority in
section 7(b)(5) of the FDI Act, the FDIC
may impose special assessments in an
amount determined to be necessary for
any purpose that the FDIC may deem
necessary.8
In the FDIC’s view, the Dodd-Frank
Act requirement to raise the reserve
ratio to the minimum of 1.35 percent by
September 30, 2020 reflects the
importance of building the DIF in a
timely manner to withstand future
economic shocks. Increasing the reserve
ratio faster reduces the likelihood of
procyclical assessments, a key policy
VerDate Sep<11>2014 12:26 Mar 24, 2016 Jkt 238001 PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 E:\FR\FM\25MRR1.SGM 25MRR1
jstallworth on DSK7TPTVN1PROD with RULES
16060 Federal Register / Vol. 81, No. 58 / Friday, March 25, 2016 / Rules and Regulations
9 In 2011, the FDIC Board of Directors adopted a
comprehensive, long-range management plan for
the DIF that is designed to reduce procyclicality in
the deposit insurance assessment system. Input
from bank executives and industry trade group
representatives favored steady, predictable
assessments and found high assessment rates
during crises objectionable. In addition, economic
literature points to the role of regulatory policy in
minimizing procyclical effects. See, for example: 75
FR 66272 and George G. Pennacchi, 2004. ‘‘Risk-
Based Capital Standards, Deposit Insurance and
Procyclicality,’’ FDIC Center for Financial Research
Working Paper No. 2004–05.
10 12 U.S.C. 1817(b)(3)(A)(i).
11 A DRR of 2 percent was based on a historical
analysis as well as on the statutory factors that the
FDIC must consider when setting the DRR. In its
historical analysis, the FDIC analyzed historical
fund losses and used simulated income data from
1950 to 2010 to determine how high the reserve
ratio would have to have been before the onset of
the two banking crises that occurred during this
period to maintain a positive fund balance and
stable assessment rates.
12 12 U.S.C. 1817(b)(3)(E).
13 75 FR 66293 (Oct. 27, 2010).
14 See 76 FR 10673, 10683 (Feb. 25, 2011).
15 76 FR at 10683. The Restoration Plan originally
stated that the FDIC would pursue rulemaking on
the offset in 2011, 75 FR 66293 (Oct. 27, 2010), but
in 2011 the Board decided to postpone rulemaking
until a later date.
16 76 FR at 10717; see also 12 CFR 327.10(b). The
FDIC adopted this schedule of lower assessment
rates following its historical analysis of the long-
term assessment rates that would be needed to
ensure that the DIF would remain positive without
raising assessment rates even during a banking
crisis of the magnitude of the two banking crises of
the past 30 years. On June 16, 2015, the Board
adopted a notice of proposed rulemaking that
would revise the risk-based pricing methodology for
established small institutions. See 80 FR 40838
(July 13, 2015). On January 21, 2016, the Board
adopted a second notice of proposed rulemaking
that would revise parts of the proposal adopted by
the Board in 2015. The revised proposal would
leave the overall range of initial assessment rates
and the assessment revenue expected to be
generated unchanged from the current assessment
system for established small institutions. See 81 FR
6108 (Feb. 4, 2016).
17 12 U.S.C. 1817.
18 As discussed below, this rule will become
effective on July 1, 2016. If the reserve ratio reaches
1.15 percent before that date, surcharges will begin
July 1, 2016. If the reserve ratio has not reached
1.15 percent by that date, surcharges will begin the
first day of the calendar quarter after the reserve
ratio reaches 1.15 percent.
19 As with regular assessments, surcharges will be
paid one quarter in arrears, based on the bank’s
previous quarter data and will be due on the 30th
day of the last month of the quarter. (If the payment
date is not a business day, the collection date will
be the previous business day.) Thus, for example,
if the surcharge is in effect for the first quarter of
2017, the FDIC will notify banks that are subject to
the surcharge of the amount of each bank’s
surcharge obligation no later than June 15, 2017, 15
days before the first quarter 2017 surcharge
payment due date of June 30, 2017 (which is also
the payment due date for first quarter 2017 regular
assessments). The notice may be included in the
banks’ invoices for their regular assessment.
20 The trade groups noted that leaving the current
assessment rate schedule in place when the reserve
ratio reaches 1.15 percent would be roughly
equivalent to an annual surcharge of no more than
2.25 basis points to reach 1.35 percent in 14
quarters.
goal of the FDIC that is supported in the
academic literature and acknowledged
by banks.9
The purpose of the final rule is to
meet the Dodd-Frank Act requirements
in a manner that appropriately balances
several considerations, including the
goal of reaching the minimum reserve
ratio reasonably promptly in order to
strengthen the fund and reduce the risk
of pro-cyclical assessments, the goal of
maintaining stable and predictable
assessments for banks over time, and the
projected effects on bank capital and
earnings. The primary mechanism
described below for meeting the
statutory requirements—surcharges on
regular assessments—will ensure that
the reserve ratio reaches 1.35 percent
without inordinate delay (likely in
2018) and will ensure that assessments
are allocated equitably among banks
responsible for the cost of reaching the
minimum reserve ratio.
III. Background
The Dodd-Frank Act gave the FDIC
greater discretion to manage the DIF
than it had previously, including greater
discretion in setting the target reserve
ratio, or designated reserve ratio (DRR),
which the FDIC must set annually.10
The Board has set a 2 percent DRR for
each year starting with 2011.11 The
Board views the 2 percent DRR as a
long-term goal.
By statute, the FDIC also operates
under a Restoration Plan while the
reserve ratio remains below 1.35
percent.12 The Restoration Plan,
originally adopted in 2008 and
subsequently revised, is designed to
ensure that the reserve ratio will reach
1.35 percent by September 30, 2020.13
In February 2011, the FDIC adopted a
final rule that, among other things,
contained a schedule of deposit
insurance assessment rates that apply to
regular assessments that banks pay. The
FDIC noted when it adopted these rates
that, because of the requirement making
banks with $10 billion or more in assets
responsible for increasing the reserve
ratio from 1.15 percent to 1.35 percent,
‘‘assessment rates applicable to all
insured depository institutions need
only be set high enough to reach 1.15
percent’’ before the statutory deadline of
September 30, 2020.14 The February
2011 final rule left to a later date the
method for assessing banks with $10
billion or more in assets for the amount
needed to reach 1.35 percent.15
In the February 2011 final rule, the
FDIC also adopted a schedule of lower
regular assessment rates that will go into
effect once the reserve ratio of the DIF
reaches 1.15 percent.16 These lower
regular assessment rates will apply to all
banks’ regular assessments. Regular
assessments paid under the schedule of
lower rates are intended to raise the
reserve ratio gradually to the long-term
goal of 2 percent.
The FDIC expects that, under the
current assessment rate schedule, the
DIF reserve ratio will reach 1.15 percent
in the first half of 2016.
IV. Description of the Final Rule
A. Surcharges
Surcharge Rate and Duration
As proposed in the NPR, to
implement the requirements of the
Dodd-Frank Act, and pursuant to the
FDIC’s authority in section 7 of the FDI
Act,17 the FDIC is adding a surcharge to
the regular assessments of banks with
$10 billion or more in assets. Also as
proposed in the NPR, the surcharge will
begin the quarter after the DIF reserve
ratio first reaches or exceeds 1.15
percent and will continue until the
reserve ratio first reaches or exceeds
1.35 percent, but no later than the fourth
quarter of 2018.18 For each quarter, the
FDIC will notify banks that will be
subject to the surcharge and inform
those banks of the amount of the
surcharge within the timeframe that
applies to notification of regular
assessment amounts.19
As proposed in the NPR, the annual
surcharge rate will be 4.5 basis points,
which the FDIC expects will be
sufficient to raise the reserve ratio from
1.15 percent to 1.35 percent in 8
quarters, before the end of 2018.
Comments Received
The FDIC received several comments
on the surcharge rate and estimated
surcharge period. In a joint comment
letter, three trade groups stated that a
‘‘strong’’ majority of large banks that
they surveyed favored an alternative
discussed in the NPR of charging lower
surcharges over a longer period and
imposing a shortfall assessment only if
the reserve ratio has not reached 1.35
percent by a date nearer the statutory
deadline. Specifically, the trade groups
proposed an annual surcharge of no
more than 2.25 basis points to reach
1.35 percent in 14 quarters, and a
shortfall, if needed, to be assessed in the
first quarter of 2020.20 A few other
commenters supported the three trade
groups’ proposal.
One commenter supported an
alternative discussed in the NPR of
foregoing surcharges entirely and, if the
reserve ratio does not reach 1.35 percent
by a deadline sometime near the
statutory deadline, imposing a delayed
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jstallworth on DSK7TPTVN1PROD with RULES
9 In 2011, the FDIC Board of Directors adopted a
comprehensive, long-range management plan for
the DIF that is designed to reduce procyclicality in
the deposit insurance assessment system. Input
from bank executives and industry trade group
representatives favored steady, predictable
assessments and found high assessment rates
during crises objectionable. In addition, economic
literature points to the role of regulatory policy in
minimizing procyclical effects. See, for example: 75
FR 66272 and George G. Pennacchi, 2004. ‘‘Risk-
Based Capital Standards, Deposit Insurance and
Procyclicality,’’ FDIC Center for Financial Research
Working Paper No. 2004–05.
10 12 U.S.C. 1817(b)(3)(A)(i).
11 A DRR of 2 percent was based on a historical
analysis as well as on the statutory factors that the
FDIC must consider when setting the DRR. In its
historical analysis, the FDIC analyzed historical
fund losses and used simulated income data from
1950 to 2010 to determine how high the reserve
ratio would have to have been before the onset of
the two banking crises that occurred during this
period to maintain a positive fund balance and
stable assessment rates.
12 12 U.S.C. 1817(b)(3)(E).
13 75 FR 66293 (Oct. 27, 2010).
14 See 76 FR 10673, 10683 (Feb. 25, 2011).
15 76 FR at 10683. The Restoration Plan originally
stated that the FDIC would pursue rulemaking on
the offset in 2011, 75 FR 66293 (Oct. 27, 2010), but
in 2011 the Board decided to postpone rulemaking
until a later date.
16 76 FR at 10717; see also 12 CFR 327.10(b). The
FDIC adopted this schedule of lower assessment
rates following its historical analysis of the long-
term assessment rates that would be needed to
ensure that the DIF would remain positive without
raising assessment rates even during a banking
crisis of the magnitude of the two banking crises of
the past 30 years. On June 16, 2015, the Board
adopted a notice of proposed rulemaking that
would revise the risk-based pricing methodology for
established small institutions. See 80 FR 40838
(July 13, 2015). On January 21, 2016, the Board
adopted a second notice of proposed rulemaking
that would revise parts of the proposal adopted by
the Board in 2015. The revised proposal would
leave the overall range of initial assessment rates
and the assessment revenue expected to be
generated unchanged from the current assessment
system for established small institutions. See 81 FR
6108 (Feb. 4, 2016).
17 12 U.S.C. 1817.
18 As discussed below, this rule will become
effective on July 1, 2016. If the reserve ratio reaches
1.15 percent before that date, surcharges will begin
July 1, 2016. If the reserve ratio has not reached
1.15 percent by that date, surcharges will begin the
first day of the calendar quarter after the reserve
ratio reaches 1.15 percent.
19 As with regular assessments, surcharges will be
paid one quarter in arrears, based on the bank’s
previous quarter data and will be due on the 30th
day of the last month of the quarter. (If the payment
date is not a business day, the collection date will
be the previous business day.) Thus, for example,
if the surcharge is in effect for the first quarter of
2017, the FDIC will notify banks that are subject to
the surcharge of the amount of each bank’s
surcharge obligation no later than June 15, 2017, 15
days before the first quarter 2017 surcharge
payment due date of June 30, 2017 (which is also
the payment due date for first quarter 2017 regular
assessments). The notice may be included in the
banks’ invoices for their regular assessment.
20 The trade groups noted that leaving the current
assessment rate schedule in place when the reserve
ratio reaches 1.15 percent would be roughly
equivalent to an annual surcharge of no more than
2.25 basis points to reach 1.35 percent in 14
quarters.
goal of the FDIC that is supported in the
academic literature and acknowledged
by banks.9
The purpose of the final rule is to
meet the Dodd-Frank Act requirements
in a manner that appropriately balances
several considerations, including the
goal of reaching the minimum reserve
ratio reasonably promptly in order to
strengthen the fund and reduce the risk
of pro-cyclical assessments, the goal of
maintaining stable and predictable
assessments for banks over time, and the
projected effects on bank capital and
earnings. The primary mechanism
described below for meeting the
statutory requirements—surcharges on
regular assessments—will ensure that
the reserve ratio reaches 1.35 percent
without inordinate delay (likely in
2018) and will ensure that assessments
are allocated equitably among banks
responsible for the cost of reaching the
minimum reserve ratio.
III. Background
The Dodd-Frank Act gave the FDIC
greater discretion to manage the DIF
than it had previously, including greater
discretion in setting the target reserve
ratio, or designated reserve ratio (DRR),
which the FDIC must set annually.10
The Board has set a 2 percent DRR for
each year starting with 2011.11 The
Board views the 2 percent DRR as a
long-term goal.
By statute, the FDIC also operates
under a Restoration Plan while the
reserve ratio remains below 1.35
percent.12 The Restoration Plan,
originally adopted in 2008 and
subsequently revised, is designed to
ensure that the reserve ratio will reach
1.35 percent by September 30, 2020.13
In February 2011, the FDIC adopted a
final rule that, among other things,
contained a schedule of deposit
insurance assessment rates that apply to
regular assessments that banks pay. The
FDIC noted when it adopted these rates
that, because of the requirement making
banks with $10 billion or more in assets
responsible for increasing the reserve
ratio from 1.15 percent to 1.35 percent,
‘‘assessment rates applicable to all
insured depository institutions need
only be set high enough to reach 1.15
percent’’ before the statutory deadline of
September 30, 2020.14 The February
2011 final rule left to a later date the
method for assessing banks with $10
billion or more in assets for the amount
needed to reach 1.35 percent.15
In the February 2011 final rule, the
FDIC also adopted a schedule of lower
regular assessment rates that will go into
effect once the reserve ratio of the DIF
reaches 1.15 percent.16 These lower
regular assessment rates will apply to all
banks’ regular assessments. Regular
assessments paid under the schedule of
lower rates are intended to raise the
reserve ratio gradually to the long-term
goal of 2 percent.
The FDIC expects that, under the
current assessment rate schedule, the
DIF reserve ratio will reach 1.15 percent
in the first half of 2016.
IV. Description of the Final Rule
A. Surcharges
Surcharge Rate and Duration
As proposed in the NPR, to
implement the requirements of the
Dodd-Frank Act, and pursuant to the
FDIC’s authority in section 7 of the FDI
Act,17 the FDIC is adding a surcharge to
the regular assessments of banks with
$10 billion or more in assets. Also as
proposed in the NPR, the surcharge will
begin the quarter after the DIF reserve
ratio first reaches or exceeds 1.15
percent and will continue until the
reserve ratio first reaches or exceeds
1.35 percent, but no later than the fourth
quarter of 2018.18 For each quarter, the
FDIC will notify banks that will be
subject to the surcharge and inform
those banks of the amount of the
surcharge within the timeframe that
applies to notification of regular
assessment amounts.19
As proposed in the NPR, the annual
surcharge rate will be 4.5 basis points,
which the FDIC expects will be
sufficient to raise the reserve ratio from
1.15 percent to 1.35 percent in 8
quarters, before the end of 2018.
Comments Received
The FDIC received several comments
on the surcharge rate and estimated
surcharge period. In a joint comment
letter, three trade groups stated that a
‘‘strong’’ majority of large banks that
they surveyed favored an alternative
discussed in the NPR of charging lower
surcharges over a longer period and
imposing a shortfall assessment only if
the reserve ratio has not reached 1.35
percent by a date nearer the statutory
deadline. Specifically, the trade groups
proposed an annual surcharge of no
more than 2.25 basis points to reach
1.35 percent in 14 quarters, and a
shortfall, if needed, to be assessed in the
first quarter of 2020.20 A few other
commenters supported the three trade
groups’ proposal.
One commenter supported an
alternative discussed in the NPR of
foregoing surcharges entirely and, if the
reserve ratio does not reach 1.35 percent
by a deadline sometime near the
statutory deadline, imposing a delayed
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