Financial Institution Letter
FIL-19-2007
February 27, 2007
DEPOSIT INSURANCE ASSESSMENTS
Proposed Assessment Rate Adjustment Guidelines for Large
Institutions and Foreign Branches in Risk Category I
Federal Deposit Insurance Corporation
550 17th Street NW, Washington, D.C. 20429-9990
Summary: The FDIC is seeking comment on the attached proposed guidelines for determining how
adjustments of up to 0.50 basis points would be made to the quarterly assessment rates of insured
institutions defined as large (generally over $10 billion) Risk Category I institutions, and insured foreign
branches in Risk Category I, according to the Final Assessments Rule (71 FR 69282, Nov. 30, 2006).
These guidelines are intended to further clarify the analytical processes and the controls applied to these
processes in making assessment rate adjustments. Comments on these proposed guidelines are due by
March 23, 2007.
Distribution:
All FDIC-Insured Institutions
Suggested Routing:
Chief Executive Officer
President
Chief Financial Officer
Related Topics:
FDIC Assessments Regulations
12 C.F.R. 327
Attachments:
Proposed Guidelines
Contact:
Miguel Browne, Associate Director,
Division of Insurance and Research, on
(202) 898-6789
Highlights:
The FDIC proposes a set of ten guidelines that would govern the
process for determining when an assessment rate adjustment is
appropriate and the magnitude of the adjustment. The proposal
also lists and discusses the types of information that would be
considered in making assessment rate adjustments, as well as
controls over the analytical process to help ensure that any
adjustments are reasonable and well supported.
• Analytical Process: The proposed analytical process
involves comparisons of the risk rankings suggested by an
institution’s initial assessment rate with the risk rankings
suggested by other risk measures.
• Guidelines Governing the Analytical Process: Six of the
guidelines would govern the analytical process and are
intended to provide the greatest degree of transparency
possible in the FDIC’s adjustment decisions.
• Magnitude of Adjustments: When material inconsistencies
between initial assessment rates and other risk indicators
are present, the FDIC proposes to perform additional
analyses to determine the magnitude of adjustment, subject
to the 0.50 basis point limitation, necessary to better align
the assessment rate with that of other institutions with similar
risk profiles.
• Risk Information Sources: Other risk measures that the
FDIC proposes to consider during the analytical process
include both broad-based or comprehensive risk measures
and more focused risk measures.
• Controls over the Analytical Process: The FDIC proposes
four additional guidelines that would ensure assessment rate
adjustments are reasonable, well supported and based on
all relevant information. As examples, the FDIC proposes to
consult with an institution’s primary federal regulator and
state banking supervisor in advance of making an
adjustment, and will also notify institutions in advance of
implementing any upward adjustment in assessment rates.
Note:
FDIC financial institution letters (FILs) may be
accessed from the FDIC’s Web site at
http://www.fdic.gov/news/news/financial/2007/index
.html.
To receive FILs electronically, please visit
http://www.fdic.gov/about/subscriptions/fil.html.
Paper copies of FDIC financial institution letters
may be obtained through the FDIC's Public
Information Center, 3501 N. Fairfax Drive, Room E-
1002, Arlington, VA 22226 (1-877-275-3342 or
703-562-2200).
FIL-19-2007
February 27, 2007
DEPOSIT INSURANCE ASSESSMENTS
Proposed Assessment Rate Adjustment Guidelines for Large
Institutions and Foreign Branches in Risk Category I
Federal Deposit Insurance Corporation
550 17th Street NW, Washington, D.C. 20429-9990
Summary: The FDIC is seeking comment on the attached proposed guidelines for determining how
adjustments of up to 0.50 basis points would be made to the quarterly assessment rates of insured
institutions defined as large (generally over $10 billion) Risk Category I institutions, and insured foreign
branches in Risk Category I, according to the Final Assessments Rule (71 FR 69282, Nov. 30, 2006).
These guidelines are intended to further clarify the analytical processes and the controls applied to these
processes in making assessment rate adjustments. Comments on these proposed guidelines are due by
March 23, 2007.
Distribution:
All FDIC-Insured Institutions
Suggested Routing:
Chief Executive Officer
President
Chief Financial Officer
Related Topics:
FDIC Assessments Regulations
12 C.F.R. 327
Attachments:
Proposed Guidelines
Contact:
Miguel Browne, Associate Director,
Division of Insurance and Research, on
(202) 898-6789
Highlights:
The FDIC proposes a set of ten guidelines that would govern the
process for determining when an assessment rate adjustment is
appropriate and the magnitude of the adjustment. The proposal
also lists and discusses the types of information that would be
considered in making assessment rate adjustments, as well as
controls over the analytical process to help ensure that any
adjustments are reasonable and well supported.
• Analytical Process: The proposed analytical process
involves comparisons of the risk rankings suggested by an
institution’s initial assessment rate with the risk rankings
suggested by other risk measures.
• Guidelines Governing the Analytical Process: Six of the
guidelines would govern the analytical process and are
intended to provide the greatest degree of transparency
possible in the FDIC’s adjustment decisions.
• Magnitude of Adjustments: When material inconsistencies
between initial assessment rates and other risk indicators
are present, the FDIC proposes to perform additional
analyses to determine the magnitude of adjustment, subject
to the 0.50 basis point limitation, necessary to better align
the assessment rate with that of other institutions with similar
risk profiles.
• Risk Information Sources: Other risk measures that the
FDIC proposes to consider during the analytical process
include both broad-based or comprehensive risk measures
and more focused risk measures.
• Controls over the Analytical Process: The FDIC proposes
four additional guidelines that would ensure assessment rate
adjustments are reasonable, well supported and based on
all relevant information. As examples, the FDIC proposes to
consult with an institution’s primary federal regulator and
state banking supervisor in advance of making an
adjustment, and will also notify institutions in advance of
implementing any upward adjustment in assessment rates.
Note:
FDIC financial institution letters (FILs) may be
accessed from the FDIC’s Web site at
http://www.fdic.gov/news/news/financial/2007/index
.html.
To receive FILs electronically, please visit
http://www.fdic.gov/about/subscriptions/fil.html.
Paper copies of FDIC financial institution letters
may be obtained through the FDIC's Public
Information Center, 3501 N. Fairfax Drive, Room E-
1002, Arlington, VA 22226 (1-877-275-3342 or
703-562-2200).
Financial Institution Letter
FIL-19-2007
February 27, 2007
DEPOSIT INSURANCE ASSESSMENTS
Proposed Assessment Rate Adjustment Guidelines for Large Institutions and Insured Foreign
Branches in Risk Category I
The FDIC is seeking comment on the attached proposed guidelines for determining how adjustments of
up to 0.50 basis points would be made to the quarterly assessment rates of insured institutions defined as
large Risk Category I institutions, and insured foreign branches in Risk Category I, according to the Final
Assessments Rule (71 FR 69282, Nov. 30, 2006). These guidelines are intended to further clarify the
analytical processes and the controls applied to these processes in making assessment rate adjustment
determinations. Comments on these proposed guidelines are due by March 23, 2007.
Objective of Assessment Rate Adjustments
As indicated in the Final Assessments Rule, the initial assessment rates of large institutions in Risk
Category I will be determined by a combination of supervisory ratings, long-term debt issuer ratings, and
financial ratios for institutions that have no long-term debt issuer ratings. The Final Assessment Rule also
indicated that FDIC may determine, in consultation with the primary federal regulator, whether limited
adjustments to these initial assessment rates are wa rranted based upon considerat ion of additional risk
information. Although the FDIC expect s that such adjustments will be made relatively infrequently and
for a limited number of institutions, adjustments may on occasion be necessary to preserve consistency in
the orderings of risk indicated by these assessment rates, ensure fairness among all large institutions, and
ensure that assessment rates take into account all available information that is relevant to the FDIC’s risk-
based assessment decision.
Purpose of the Proposed Guidelines
The Final Assessments Rule acknowledged the need to further clarify its processes for making assessment
rate adjustments and indicated no adjustments would be made until these additional guidelines were
approved by the FDIC’s Board. The attached proposal contains a set of guidelines intended to provide
transparency to the analytical process for determining whether assessment rate adjustments are warranted.
The attached proposal also contains guidelines relating to controls over the assessment rate adjustment
process, a listing of the types of comprehensive and focused risk measures used in the analytical process,
and an illustrative example of the proposed analytical process.
Overview of the Assessment Rate Adjustment Process
• Analytical Process: The proposed analytical process involves comparisons of the risk rankings
suggested by an institution’s initial assessment rate with the risk rankings suggested by other risk
measures. The purpose of these comparisons is to identify inconsistencies in the rank orderings
between the initial assessment rate and other risk indicators.
• Guidelines Governing the Analytical Process: A number of guidelines would govern the analytical
process to ensure the greatest degree of transparency possible in the FDIC’s adjustment decisions. As
examples, adjustment decisions would place more emphasis on comprehensive risk measures than on
focused risk measures, would generally be made only when multiple risk factors support the need for
the adjustment, and will take into account normal variations in financial performance measures by
institutions with differing business focuses.
FIL-19-2007
February 27, 2007
DEPOSIT INSURANCE ASSESSMENTS
Proposed Assessment Rate Adjustment Guidelines for Large Institutions and Insured Foreign
Branches in Risk Category I
The FDIC is seeking comment on the attached proposed guidelines for determining how adjustments of
up to 0.50 basis points would be made to the quarterly assessment rates of insured institutions defined as
large Risk Category I institutions, and insured foreign branches in Risk Category I, according to the Final
Assessments Rule (71 FR 69282, Nov. 30, 2006). These guidelines are intended to further clarify the
analytical processes and the controls applied to these processes in making assessment rate adjustment
determinations. Comments on these proposed guidelines are due by March 23, 2007.
Objective of Assessment Rate Adjustments
As indicated in the Final Assessments Rule, the initial assessment rates of large institutions in Risk
Category I will be determined by a combination of supervisory ratings, long-term debt issuer ratings, and
financial ratios for institutions that have no long-term debt issuer ratings. The Final Assessment Rule also
indicated that FDIC may determine, in consultation with the primary federal regulator, whether limited
adjustments to these initial assessment rates are wa rranted based upon considerat ion of additional risk
information. Although the FDIC expect s that such adjustments will be made relatively infrequently and
for a limited number of institutions, adjustments may on occasion be necessary to preserve consistency in
the orderings of risk indicated by these assessment rates, ensure fairness among all large institutions, and
ensure that assessment rates take into account all available information that is relevant to the FDIC’s risk-
based assessment decision.
Purpose of the Proposed Guidelines
The Final Assessments Rule acknowledged the need to further clarify its processes for making assessment
rate adjustments and indicated no adjustments would be made until these additional guidelines were
approved by the FDIC’s Board. The attached proposal contains a set of guidelines intended to provide
transparency to the analytical process for determining whether assessment rate adjustments are warranted.
The attached proposal also contains guidelines relating to controls over the assessment rate adjustment
process, a listing of the types of comprehensive and focused risk measures used in the analytical process,
and an illustrative example of the proposed analytical process.
Overview of the Assessment Rate Adjustment Process
• Analytical Process: The proposed analytical process involves comparisons of the risk rankings
suggested by an institution’s initial assessment rate with the risk rankings suggested by other risk
measures. The purpose of these comparisons is to identify inconsistencies in the rank orderings
between the initial assessment rate and other risk indicators.
• Guidelines Governing the Analytical Process: A number of guidelines would govern the analytical
process to ensure the greatest degree of transparency possible in the FDIC’s adjustment decisions. As
examples, adjustment decisions would place more emphasis on comprehensive risk measures than on
focused risk measures, would generally be made only when multiple risk factors support the need for
the adjustment, and will take into account normal variations in financial performance measures by
institutions with differing business focuses.