FDIC plans $750 million in credits to small banks, no more big-bank surcharges

An estimated $750 million in credits are in store for small, federally insured banks now that the federal bank deposit insurance fund has reached, and exceeded, its statutorily required minimum reserve ratio, the Federal Deposit Insurance Corp. (FDIC) announced Wednesday.

Additionally, big banks – defined as those with $10 billion or more in total consolidated assets – will see their last quarterly surcharge from the FDIC Deposit Insurance Fund (DIF) with this month’s assessment invoices, covering the assessment period of July 1 through Sept. 30.

In Wednesday’s Financial Institution Letter 78-2018, FDIC said the Deposit Insurance Fund reserve ratio reached 1.36% Sept. 30, exceeding the statutorily required, 1.35% minimum reserve ratio ahead of the Sept. 30, 2020, deadline set by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).

The $750 million in credits to small banks reflects the portion of the banks’ assessments that contributed to growth in the reserve ratio between 1.15% and 1.35%. FDIC says it plans to notify each small bank of its individual credit amount in January via the secure, online FDICconnect.

FDIC said large banks’ March 2019 assessment invoices, which cover the assessment period from Oct. 1, 2018, through Dec. 31, 2018, no longer will include a quarterly surcharge.

FDIC regulations provide for two changes to deposit insurance assessments upon reaching the minimum: (1) surcharges on insured depository institutions with total consolidated assets of $10 billion or more (large banks) will cease; and (2) small banks will receive assessment credits for the portion of their assessments that contributed to the growth in the reserve ratio from between 1.15% and 1.35%, to be applied when the reserve ratio is at or above 1.38%.

Additionally, the letter notes that:

  • Credits to small banks automatically will be applied each quarter that the reserve ratio is at least 1.38%, up to the full amount of a small bank’s credit or assessment, whichever is less.
  • Assessment rates, which declined for all banks when the reserve ratio first surpassed 1.15% in the third quarter of 2016, will remain unchanged.
  • Assessment rates are scheduled to decrease when the reserve ratio exceeds 2%.

The Financial Institution Letter also links to FDIC final assessment regulations issued in 2011 and 2016 on large-bank pricing and small-bank pricing, surcharges, and the Third Quarter FDIC Quarterly Banking Profile.

FIL-78-2018 (HTML)

FIL-78-2018 (PDF)

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