Agency holds the line at 2% designated reserve ratio for bank insurance fund

The “designated reserve ratio” (DRR) for the federal bank deposit insurance fund will remain at 2% in 2020, unchanged from last year and the nine years preceding that, according to filings Tuesday by the Federal Deposit Insurance Corp. (FDIC) in the Federal Register.

The DRR for the FDIC’s 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.

“Because analysis shows that a reserve ratio higher than 2% increases the chance that the fund will remain positive during such a crisis, the 2% DRR should not be treated as a cap on the size of the fund,” the agency said in a memo.

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).

Designated Reserve Ratio for 2020