With two years to spare before the statutory deadline, the Federal Deposit Insurance Corporation (FDIC) reported that its Deposit Insurance Fund (DIF) is above the 1.35 percent reserve ratio mandated by the Dodd-Frank Act. The fact that it hit that mark ahead of the Sept. 30, 2020 statutory deadline means an end to quarterly surcharges for large banks.
The report indicates that banks quickly are approaching the ratio level at which they stand to receive an estimated $750 million in refunds from the FDIC.
The reserve ratio — the amount in the Deposit Insurance Fund relative to insured deposits — was 1.36 percent on Sept. 30, representing a 1.33 percent increase from the end of the previous quarter.
The agency also reported a $2.6 billion quarter-to-quarter increase in the fund’s balance, putting it at 100.2 billion at the end of the third quarter of 2018.
FDIC Director of the Division of Insurance and Research Diane Ellis said during a press conference, alongside FDIC Chairwoman Jelena McWilliams and other FDIC officials that the increase in the fund largely was driven by assessment income.
“Since the reserve ratio was 1.36 percent on Sept. 30, it has achieved the minimum reserve ratio of 1.35 percent that is required by law,” Ellis said. “As a result, the third quarter of 2018 marks the last period that large banks will be assessed quarterly surcharges by the FDIC.
“When the reserve ratio is at or above 1.38 percent, small banks will receive credits for the portion of their assessments that contributed to growth in the reserve ratio from 1.15 percent to 1.35 percent. We estimate these credits to be approximately $750 million in aggregate,” she added.
Ellis also noted that estimated insured deposits at the end of September totaled $7.4 trillion, representing a quarter-to-quarter increase of 0.3 percent and a year-over-year increase of 3.8 percent.