The Federal Deposit Insurance Corp. (FDIC) board of directors has voted to increase the initial base deposit insurance assessment rate schedules uniformly by 2 basis points beginning first quarter 2023.
The final rule is intended to increase the likelihood that the reserve ratio of the Deposit Insurance Fund (DIF) reaches the statutory minimum of 1.35 percent by the statutory deadline of September 30, 2028, consistent with the Amended Restoration Plan. The final rule also reduces the likelihood that the FDIC would need to consider raising assessment rates when banking and economic conditions may be “less favorable” in the coming year.
“The increased assessment revenue will strengthen the DIF at a time of significant downside risk to the economy and financial system, increasing the likelihood that the reserve ratio will reach the statutory minimum of 1.35 percent while reducing the likelihood of a pro-cyclical increase in the future, and promoting public confidence in federal deposit insurance,” said Acting Chairman Martin Gruenberg in a press release.
According to the FDIC, the increase in assessment rates is projected to have an insignificant effect on institutions’ capital levels, is estimated to reduce income slightly by annual average of 1.2 percent and should not impact lending or credit availability in any meaningful way.
The FDIC also voted to maintain the Designated Reserve Ratio (DRR) for the DIF at 2 percent for 2023. The increase in assessment rate schedules is intended to support growth in the DIF toward the FDIC’s long-term goal of a 2 percent DRR.
“Growing the DIF increases the likelihood of the DIF remaining positive throughout periods of significant losses due to bank failures, consistent with the FDIC’s long-term fund management plan,” the release read. “Therefore, the new assessment rate schedules will remain in effect unless and until the reserve ratio meets or exceeds 2 percent, absent further Board action. Progressively lower assessment rate schedules will take effect when the reserve ratio reaches 2 percent, and again when it reaches 2.5 percent.”