FDIC: Deposit Insurance Fund on track to reach statutory minimum before deadline

The federal bank deposit insurer’s Deposit Insurance Fund (DIF) reserve ratio grew from 1.11% June 2023 to 1.15% in December and remains on track to return to its statutory minimum of 1.35% before its statutory deadline of Sept. 30, 2028, the agency said Thursday after no changes were made to a fund restoration plan first adopted in 2020.

The restoration plan update was provided during Thursday’s open meeting of the Federal Deposit Insurance Corp. (FDIC) Board. Staff reported a DIF fund balance of $121.8 billion as of year-end 2023.

The board adopted the restoration plan in September 2020 after the fund reserve ratio (ratio of the fund balance to insured deposits) had dropped to 1.3%; federal law requires such a plan when the fund falls below its statutory minimum. That plan made no change in assessment rate schedules then in place. But in June 2022, with projections suggesting the fund would not meet its required minimum on time, the board amended the plan and increased deposit insurance assessment rates by 2 basis points for all insured institutions. The increase became effective in the first quarterly assessment period of 2023.

By June 2023, however, the DIF ratio had dropped to 1.11%, down from 1.25% at year-end 2022. The FDIC attributed that to increased loss provisions, including for three bank failures last year (of Silicon Valley Bank [SVB] of Santa Clara, Calif., and Signature Bank of New York, N.Y., in 2023 and First Republic Bank of San Francisco in May), coupled with strong insured deposit growth.

To address the failures, the board in November approved a special assessment on 114 banks having large amounts of uninsured deposits.

FDIC Board of Directors Releases Semiannual Update on Restoration Plan

Memorandum to the FDIC Board