FDIC Approves Final Rule on Deposit Insurance Assessments | Practical Law

FDIC Approves Final Rule on Deposit Insurance Assessments | Practical Law

An update on the FDIC's final rule implementing changes to the deposit insurance assessment system under the Dodd-Frank Act.

FDIC Approves Final Rule on Deposit Insurance Assessments

Practical Law Legal Update 8-504-7512 (Approx. 3 pages)

FDIC Approves Final Rule on Deposit Insurance Assessments

by PLC Finance
Published on 08 Feb 2011 • USA (National/Federal)
An update on the FDIC's final rule implementing changes to the deposit insurance assessment system under the Dodd-Frank Act.
On February 7, 2011, the FDIC approved a final rule, effective April 1, 2011, implementing changes to the deposit insurance assessment system as mandated by the Dodd-Frank Act. The aim of the changes is to maintain a positive Deposit Insurance Fund (DIF) balance, even during a banking crisis, and provide steady and moderate assessment rates for insured depository institutions. The FDIC previously proposed rules relating to deposit insurance in October 2010 and November 2010, which are incorporated into this final rule. For more information on these proposed rules, see Legal Updates, FDIC Adopts New Restoration Plan and Notice of Proposed Rulemaking and FDIC Issues Rules on Deposit Insurance and Certain Transaction Accounts.
The final rule:
  • Changes the definition of an institution's insurance assessment base to be consistent with the requirements of the Dodd-Frank Act.
  • Adopts a new large bank pricing system that places higher assessment rates on banks with high-risk asset concentrations and unsteady balance sheet liquidity. The higher assessment will be paid when the bank assumes the risks rather than when conditions deteriorate.
  • Provides an unsecured debt adjustment, which lowers an institution's assessment rate to reflect the lower risk to the DIF posed by an institution that relies on long-term unsecured and subordinated debt as sources of funds.
  • Revises the assessment rate schedule and adopts additional schedules for when the DIF reserve ratio reaches specified milestones.
For more information on the final rule, see the FDIC's press release.
For more information on FDIC deposit insurance, see Practice Note, Understanding FDIC Deposit Insurance.
For more information on the resolution of failing financial institutions under Dodd-Frank, see Practice Notes, Summary of the Dodd-Frank Act: Resolution of Failing Financial Institutions and Road Map to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010: Resolution of Failing Financial Institutions.