FDIC continues 2% reserve ratio target for insurance fund

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)