FDIC Board to review progress of insurance fund restoration plan

A briefing on the restoration plan for the fund insuring bank deposits is one of two discussion items on the agenda for a meeting next week of the board of the insurance agency.

The Federal Deposit Insurance Corp. (FDIC) said the meeting on Tuesday (June 15, starting at 10 a.m.) will also include consideration of a resolution setting up an advisory council on innovation for the agency.

In September 2020, the FDIC Board adopted a restoration plan for its Deposit Insurance Fund (DIF), which had been diluted by the massive influx of savings during the height of the coronavirus crisis.

Notably, the restoration plan only called for the DIF to be restored to at least 1.35% of reserves to total insured funds within eight years, as required under federal law. However, the board left assessment rates unchanged for insured banks, a key provision in the plan.

Last fall, the agency said the action it was taking was because the reserve ratio for the fund had dropped to 1.3% (from a peak of 1.41% at the end of last year). The decline in the ratio, the agency said, was solely attributable to “extraordinary” growth in the base of insured savings. Instead of increasing the assessment rate to shore up the fund’s reserves, the board decided, it would over the next eight years: monitor deposit balance trends, potential losses, and other factors that affect the reserve ratio; maintain the current schedule of assessment rates for insured banks and other institutions; and provide updates to its loss and income projections at least semiannually.

Board Chairman Jelena McWilliams acknowledged last year that these were “highly uncertain times” and that the agency would, from time to time, provide updates on the plan. Next week’s meeting appears to be such an update.

On the innovation front: The agency in February announced the hiring of its first “chief innovation officer” (Sultan Meghji), which was part of the agency’s overall commitment to promote adoption of “innovative technologies across the financial services sector.” The creation of an advisory council appears to be another step in that direction for the FDIC.

Other, non-discussion agenda items (that is, summary agenda components) include:

  • Notice of proposed rulemaking on real estate lending standards;
  • Final policy statement regarding minority depository institutions.

FDIC Board meeting agenda for June 15