The Board of Directors of the Federal Deposit Insurance Corporation, or FDIC, 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 Act and revises the assessment system applicable to large banks to eliminate reliance on debt issuer ratings and make it more forward looking. The Dodd-Frank Act 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.
This final rule is intended to better reflect 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 Dodd-Frank Act allows the FDIC to charge deposit insurance assessments on secured liabilities, which the FDIC has always protected. The rule is meant to keep the overall amount collected from the industry very close to unchanged, although the amounts that individual institutions pay will be different.
The FDIC believes 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.
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