FDIC continues 2% reserve ratio target for insurance fund

Credits slated for small banks, no more surcharges for big banks expected in 2019

The “designated reserve ratio” for the federal bank deposit insurance fund will remain at 2% in 2019, unchanged from last year, according to a notice published Thursday in the Federal Register.

The designated reserve ratio for the Federal Deposit Insurance Corp. (FDIC) Deposit Insurance Fund (DIF) has been set at 2% since 2010. The DRR, which equals the fund balance divided by estimated insured deposits, is viewed by the agency as both a long-term goal as well as the minimum level needed for the fund to withstand future crises of the magnitude of past ones.

While 2% is the long-term target, the FDIC’s fund is required to be maintained at a ratio of at least 1.35% under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), and it surpassed that level last year, closing September at a ratio of 1.36%.

That’s welcome news for insured banks, as the FDIC said it planned to provide an estimated $750 million in credits to small, federally insured banks and to cease quarterly surcharges for large banks that have $10 billion or more in consolidated assets.

FDIC in a letter to insured institutions, said the $750 million in credits to small banks reflects the portion of the banks’ assessments that contributed to growth in the DIF reserve ratio between 1.15% and 1.35%. It said it planned to notify each small bank of its individual credit amount this January via the secure, online FDICconnect; it also said additional credits would be provided after the fund ratio exceeds 1.38%.

In the meantime, the agency said that large banks’ March 2019 assessment invoices, which cover the assessment period from Oct. 1, 2018, through Dec. 31, 2018, will not include a quarterly surcharge.

Designated Reserve Ratio for 2019 (Federal Register notice)

RR: FDIC plans $750 million in credits to small banks, no more big-bank surcharges (Nov. 28, 2018)

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