FDIC Proposes Significant Increases in Deposit Insurance Ratings

The FDIC Today reported an intention to aggressively increase deposit insurance assessment rates, proposing a two basis point increase beginning in the first quarterly assessment period of 2023. The proposed increase, which would remain in effect until the reserve ratio of the Deposit Insurance Fund reaches the FDIC’s long-term goal of 2%—equivalent to a 54% increase in the current average assessment rate.

In a note regarding the increase in the assessment rate, FDIC staff noted that “for the industry as a whole, staff estimate that the estimated annual increase in assessments would average 1% of income, which includes an average of 0.9% for small banks and an average of 1% percent for large, highly complex institutions.”

The FDIC had approved in 2020 a plan to restore the DIF to bring the reserve rate back to the legal minimum of 1.35% in 2028. However, a sustained increase in insured deposits due to the pandemic and significant latent losses in its portfolio of securities caused the reserve ratio to fall. down to 1.23% as of March 31. FDIC staff concluded that the proposed assessment rate increase would provide a buffer to ensure that the DIF meets the 2028 target and accelerate the fund’s capitalization toward the long-term 2% goal.

The proposed amended restoration plan will be open for public comment until August 20. The ABA is carefully reviewing the proposal and will submit its comments in consultation with its members.