FDIC proposes deposit insurance assessment system changes for CECL transition

A proposed change to the federal deposit insurance assessment system for banks that would eliminate the double counting of some optional portions of capital related to the transition to the current expected credit losses (CECL) accounting standard is out for comment until Jan. 6.

The proposal, published in Monday’s Federal Register, was approved by the Federal Deposit Insurance Corp. (FDIC) by notation vote Nov. 17.

The proposed rule, the agency said, would amend the risk-based deposit insurance assessment system applicable to all large insured depository institutions (IDIs), including highly complex IDIs, to address the temporary deposit insurance assessment effects resulting from certain optional regulatory capital transition provisions relating to the implementation of CECL. It would amend the assessment regulations to remove the double counting of a specified portion of the CECL transitional amount or the modified CECL transition amount (as applicable) in certain financial measures that are calculated using the sum of Tier 1 capital and reserves and that are used to determine assessment rates for large and highly complex IDIs.

The proposal also would adjust the calculation of the loss severity measure to remove the double counting of a specified portion of the CECL transitional amounts for a large or highly complex IDI, according to the agency.

The FDIC said the proposed rule would not affect regulatory capital or the regulatory capital relief provided in the form of transition provisions that allow banking organizations to phase in the effects of CECL on their regulatory capital ratios.

Federal Register notice