Significant Increases in Deposit Insurance Assessments Proposed by FDIC

Yesterday the FDIC stated its intent to aggressively raise deposit insurance assessment rates, proposing a two basis-point increase beginning in the first quarterly assessment period of 2023. The proposed increase—which would remain in effect until the Deposit Insurance Fund reserve ratio meets the FDIC’s long-term goal of 2%—would amount to a 54% increase in the current average assessment rate.

In a memo regarding the assessment rate increase, FDIC staff noted that “for the industry as a whole, staff estimate that the estimated annual increase in assessments would average 1% of income, which includes an average of 0.9% for small banks and an average of 1% for large and highly complex institutions.”

The FDIC in 2020 had approved a DIF restoration plan to restore the reserve ratio to the statutory minimum of 1.35% in 2028. However, a sustained increase in insured deposits due to the pandemic and major unrealized losses in its securities portfolio caused the reserve ratio to decline to 1.23% as of March 31. The FDIC staff concluded that raising the assessment rate as proposed would provide a buffer to assure that the DIF achieves the 2028 target and accelerate capitalization of the fund toward the long-term 2% goal.

The OBL is keeping close watch on the decisions made about insurance assessment rates and plans to submit comment before the close of the comment period on August 20, after consulting with members.  To submit feedback with OBL's comment letter, please contact Evan Kleymeyer.