Special Assessments Pursuant to Systemic Risk Determination, 32694-32709 [2023-10447]
Download as PDF
<![CDATA[
32694
Federal Register / Vol. 88, No. 98 / Monday, May 22, 2023 / Proposed Rules
endorses, with exceptions, additions,
and clarifications the methods described
in IEEE Std. 382–2019, as an acceptable
process for demonstrating compliance
with the applicable NRC regulations for
the environmental qualification of
safety-related power operated valve
actuators in production and utilization
facilities.
The staff is also issuing for public
comment a draft regulatory analysis
available in ADAMS under Accession
No. ML23055B028. The staff developed
a regulatory analysis to assess the value
of issuing or revising a regulatory guide
as well as alternative courses of action.
As noted in the Federal Register on
December 9, 2022 (87 FR 75671), this
document is being published in the
‘‘Proposed Rules’’ section of the Federal
Register to comply with publication
requirements under chapter I of title 1
of the Code Federal Regulations (CFR).
III. Backfitting, Forward Fitting, and
Issue Finality
Issuance of DG–1386, if finalized,
would not constitute backfitting as
defined in 10 CFR 50.109, ‘‘Backfitting,’’
and as described in NRC Management
Directive (MD) 8.4, ‘‘Management of
Backfitting, Forward Fitting, Issue
Finality, and Information Requests’’;
affect issue finality of any approval
issued under 10 CFR part 52, ‘‘Licenses,
Certificates, and Approvals for Nuclear
Power Plants’’; or constitute forward
fitting as defined in MD 8.4, because, as
explained in this DG, licensees would
not be required to comply with the
positions set forth in this DG.
IV. Submitting Suggestions for
Improvement of Regulatory Guides
ddrumheller on DSK120RN23PROD with PROPOSALS1
A member of the public may, at any
time, submit suggestions to the NRC for
improvement of existing RGs or for the
development of new RGs. Suggestions
can be submitted on the NRC’s public
website at https://www.nrc.gov/readingrm/doc-collections/reg-guides/
contactus.html. Suggestions will be
considered in future updates and
enhancements to the ‘‘Regulatory
Guide’’ series.
Dated: May 17, 2023.
For the Nuclear Regulatory Commission.
Meraj Rahimi,
Chief, Regulatory Guide and Programs
Management Branch, Division of Engineering,
Office of Nuclear Regulatory Research.
[FR Doc. 2023–10834 Filed 5–19–23; 8:45 am]
BILLING CODE 7590–01–P
VerDate Sep<11>2014
17:48 May 19, 2023
Jkt 259001
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 327
RIN 3064–AF93
Special Assessments Pursuant to
Systemic Risk Determination
Federal Deposit Insurance
Corporation (FDIC).
ACTION: Notice of proposed rulemaking.
AGENCY:
The FDIC is seeking comment
on a proposed rule that would impose
special assessments to recover the loss
to the Deposit Insurance Fund (DIF or
Fund) arising from the protection of
uninsured depositors in connection
with the systemic risk determination
announced on March 12, 2023,
following the closures of Silicon Valley
Bank, Santa Clara, CA, and Signature
Bank, New York, NY, as required by the
Federal Deposit Insurance Act (FDI Act).
The assessment base for the special
assessments would be equal to an
insured depository institution’s (IDI)
estimated uninsured deposits, reported
as of December 31, 2022, adjusted to
exclude the first $5 billion in estimated
uninsured deposits from the IDI, or for
IDIs that are part of a holding company
with one or more subsidiary IDIs, at the
banking organization level. The FDIC is
proposing to collect special assessments
at an annual rate of approximately 12.5
basis points, over eight quarterly
assessment periods, which it estimates
will result in total revenue of $15.8
billion. Because the estimated loss
pursuant to the systemic risk
determination will be periodically
adjusted, the FDIC would retain the
ability to cease collection early, extend
the special assessment collection period
one or more quarters beyond the initial
eight-quarter collection period to collect
the difference between actual or
estimated losses and the amounts
collected, and impose a final shortfall
special assessment on a one-time basis
after the receiverships for Silicon Valley
Bank and Signature Bank terminate. The
FDIC is proposing an effective date of
January 1, 2024, with special
assessments collected beginning with
the first quarterly assessment period of
2024 (i.e., January 1 through March 31,
2024, with an invoice payment date of
June 28, 2024).
DATES: Comments must be received on
or before July 21, 2023.
ADDRESSES: Interested parties are
invited to submit written comments,
identified by RIN 3064–AF93, by any of
the following methods:
• Agency Website: https://
www.fdic.gov/resources/regulations/
SUMMARY:
PO 00000
Frm 00002
Fmt 4702
Sfmt 4702
federal-register-publications/. Follow
the instructions for submitting
comments on the agency website.
• Email: comments@fdic.gov. Include
RIN 3064–AF93 in the subject line of
the message.
• Mail: James P. Sheesley, Assistant
Executive Secretary, Attention:
Comments-RIN 3064–AF93, Federal
Deposit Insurance Corporation, 550 17th
Street NW, Washington, DC 20429.
• Hand Delivery: Comments may be
hand delivered to the guard station at
the rear of the 550 17th Street NW
building (located on F Street NW) on
business days between 7 a.m. and 5 p.m.
• Public Inspection: Comments
received, including any personal
information provided, may be posted
without change to https://www.fdic.gov/
resources/regulations/federal-registerpublications/. Commenters should
submit only information that the
commenter wishes to make available
publicly. The FDIC may review, redact,
or refrain from posting all or any portion
of any comment that it may deem to be
inappropriate for publication, such as
irrelevant or obscene material. The FDIC
may post only a single representative
example of identical or substantially
identical comments, and in such cases
will generally identify the number of
identical or substantially identical
comments represented by the posted
example. All comments that have been
redacted, as well as those that have not
been posted, that contain comments on
the merits of this document will be
retained in the public comment file and
will be considered as required under all
applicable laws. All comments may be
accessible under the Freedom of
Information Act.
FOR FURTHER INFORMATION CONTACT:
Division of Insurance and Research:
Michael Spencer, Associate Director,
Financial Risk Management Branch,
202–898–7041, michspencer@fdic.gov;
Kayla Shoemaker, Acting Chief, Banking
and Regulatory Policy, 202–898–6962,
kashoemaker@fdic.gov; Legal Division:
Sheikha Kapoor, Senior Counsel, 202–
898–3960, skapoor@fdic.gov; Ryan
McCarthy, Counsel, 202–898–7301,
rymccarthy@fdic.gov.
SUPPLEMENTARY INFORMATION:
I. Background
On March 10, 2023, Silicon Valley
Bank was closed by the California
Department of Financial Protection and
Innovation, followed by the closure of
Signature Bank by the New York State
Department of Financial Services. The
E:\FR\FM\22MYP1.SGM
22MYP1
Federal Register / Vol. 88, No. 98 / Monday, May 22, 2023 / Proposed Rules
ddrumheller on DSK120RN23PROD with PROPOSALS1
FDIC was appointed as the receiver for
both institutions.1 2
Section 13(c)(4)(G) of the FDI Act
permits the FDIC to take action or
provide assistance to an IDI for which
the FDIC has been appointed receiver as
necessary to avoid or mitigate adverse
effects on economic conditions or
financial stability, following a
recommendation by the FDIC Board of
Directors (Board), with the written
concurrence of the Board of Governors
of the Federal Reserve System (Board of
Governors), and a determination of
systemic risk by the Secretary of the
U.S. Department of Treasury (Treasury)
(in consultation with the President).3
On March 12, 2023, the Secretary of
the Treasury, acting on the
recommendation of the FDIC Board and
Board of Governors and after
consultation with the President,
invoked the statutory systemic risk
exception to allow the FDIC to complete
its resolution of both Silicon Valley
Bank and Signature Bank in a manner
that fully protects all depositors.4 The
full protection of all depositors, rather
than imposing losses on uninsured
depositors, was intended to strengthen
public confidence in the nation’s
banking system.
On March 12 and 13, 2023, the FDIC
transferred all deposits—both insured
and uninsured—and substantially all
assets of these banks to newly created,
full-service FDIC-operated bridge banks,
Silicon Valley Bridge Bank, N.A.
(Silicon Valley Bridge Bank) and
Signature Bridge Bank, N.A. (Signature
Bridge Bank), in an action designed to
protect all depositors of these banks.5
1 FDIC PR–16–2023. ‘‘FDIC Creates a Deposit
Insurance National Bank of Santa Clara to Protect
Insured Depositors of Silicon Valley Bank, Santa
Clara, California.’’ March 10, 2023. https://
www.fdic.gov/news/press-releases/2023/
pr23016.html.
2 FDIC PR–18–2023. ‘‘FDIC Establishes Signature
Bridge Bank, N.A., as Successor to Signature Bank,
New York, NY.’’ March 12, 2023. https://
www.fdic.gov/news/press-releases/2023/
pr23018.html.
3 12 U.S.C. 1823(c)(4)(G). As used in this
proposed rule, the term ‘‘bank’’ is synonymous with
the term ‘‘insured depository institution’’ as it is
used in section 3(c)(2) of the FDI Act, 12 U.S.C.
1813(c)(2).
4 12 U.S.C. 1823(c)(4)(G). See also: FDIC PR–17–
2023. ‘‘Joint Statement by the Department of the
Treasury, Federal Reserve, and FDIC.’’ March 12,
2023. https://www.fdic.gov/news/press-releases/
2023/pr23017.html. See also: ‘‘Remarks by
Chairman Martin J. Gruenberg on Recent Bank
Failures and the Federal Regulatory Response
before the Committee on Banking, Housing, and
Urban Affairs, United States Senate.’’ March 27,
2023. https://www.fdic.gov/news/speeches/2023/
spmar2723.html.
5 A bridge bank is a chartered national bank that
operates under a board appointed by the FDIC. It
assumes the deposits and certain other liabilities
and purchases certain assets of a failed bank. The
VerDate Sep<11>2014
17:48 May 19, 2023
Jkt 259001
The transfer of all deposits was
completed under the systemic risk
exception declared on March 12, 2023.
On March 19, 2023, the FDIC
announced it entered into a purchase
and assumption agreement for
substantially all deposits and certain
loan portfolios of Signature Bridge
Bank.6 On March 27, 2023, the FDIC
entered into a purchase and assumption
agreement for all deposits and loans of
Silicon Valley Bridge Bank. This
announcement also disclosed that the
FDIC and First-Citizens Bank & Trust
Company (First Citizens) entered into a
loss-share transaction on the
commercial loans it purchased from
Silicon Valley Bridge Bank.7
II. Legal Authority and Policy
Objectives
Under section 13(c)(4)(G) of the FDI
Act, the loss to the DIF arising from the
use of a systemic risk exception must be
recovered from one or more special
assessments on IDIs, depository
institution holding companies (with the
concurrence of the Secretary of the
Treasury with respect to holding
companies), or both, as the FDIC
determines to be appropriate.8 As
required by the FDI Act, the proposed
special assessment, detailed below, is
intended and designed to recover the
losses to the DIF incurred as the result
of the actions taken by the FDIC to
protect the uninsured depositors of
Silicon Valley Bank and Signature Bank
following a determination of systemic
risk.9
Section 13(c)(4)(G) of the FDI Act
provides the FDIC with discretion in the
design and timeframe for any special
assessments to recover the losses to the
DIF as a result of the systemic risk
determination. As detailed in the
sections that follow, in implementing
special assessments under section
13(c)(4)(G) of the FDI Act, the FDIC
bridge bank structure is designed to ‘‘bridge’’ the
gap between the failure of a bank and the time
when the FDIC can stabilize the institution and
implement an orderly resolution.
6 FDIC PR–21–2023. ‘‘Subsidiary of New York
Community Bancorp, Inc. to Assume Deposits of
Signature Bridge Bank, N.A., From the FDIC.’’
March 19, 2023. https://www.fdic.gov/news/pressreleases/2023/pr23021.html. The purchase and
assumption agreement did not include
approximately $4 billion of deposits related to the
former Signature Bank’s digital-asset banking
business. The FDIC announced that it would
provide these deposits directly to customers whose
accounts are associated with the digital-asset
banking business.
7 FDIC PR–23–2023. ‘‘First-Citizens Bank & Trust
Company, Raleigh, NC, to Assume All Deposits and
Loans of Silicon Valley Bridge Bank, N.A., From the
FDIC.’’ March 26, 2023. https://www.fdic.gov/news/
press-releases/2023/pr23023.html.
8 12 U.S.C. 1823(c)(4)(G)(ii)(I).
9 12 U.S.C. 1823(c)(4)(G)(ii)(III).
PO 00000
Frm 00003
Fmt 4702
Sfmt 4702
32695
considered the types of entities that
benefit from any action taken or
assistance provided under the
determination of systemic risk,
economic conditions, the effects on the
industry, and such other factors as the
FDIC deemed appropriate and relevant
to the action taken or assistance
provided.10
III. Description of the Proposed Rule
A. Summary
The FDIC is seeking comment on a
proposed rule that would impose
special assessments to recover the loss
to the DIF arising from the protection of
uninsured depositors in connection
with the systemic risk determination
announced on March 12, 2023,
following the closures of Silicon Valley
Bank and Signature Bank, as required by
the FDI Act. The total amount collected
for the special assessments would be
approximately equal to the losses
attributable to the protection of
uninsured depositors at these two failed
banks, which are currently estimated to
total $15.8 billion.
The FDIC proposes an annual special
assessment rate of approximately 12.5
basis points. The assessment base for
the special assessments would be equal
to an IDI’s estimated uninsured deposits
as reported in the Consolidated Reports
of Condition and Income (Call Report)
or Report of Assets and Liabilities of
U.S. Branches and Agencies of Foreign
Banks (FFIEC 002) as of December 31,
2022, with certain adjustments. The
special assessments would be collected
over an eight-quarter collection period,
at a quarterly special assessment rate of
3.13 basis points. Over such collection
period, the FDIC estimates that it would
collect an amount sufficient to recover
estimated losses attributable to the
protection of uninsured depositors of
Silicon Valley Bank and Signature Bank,
which are currently estimated to total
$15.8 billion, totaling approximately
$2.0 billion per quarter.
The assessment base for the special
assessments would be adjusted to
exclude the first $5 billion from
estimated uninsured deposits reported
as of December 31, 2022, applicable
either to the IDI, if an IDI is not a
subsidiary of a holding company, or at
the banking organization level, to the
extent that an IDI is part of a holding
company with one or more subsidiary
IDIs.11
10 12
U.S.C. 1823(c)(4)(G)(ii)(III).
used in this proposal, the term ‘‘banking
organization’’ includes IDIs that are not subsidiaries
of a holding company as well as holding companies
with one or more subsidiary IDIs.
11 As
E:\FR\FM\22MYP1.SGM
22MYP1
32696
Federal Register / Vol. 88, No. 98 / Monday, May 22, 2023 / Proposed Rules
ddrumheller on DSK120RN23PROD with PROPOSALS1
If an IDI is part of a holding company
with one or more subsidiary IDIs, the $5
billion deduction would be apportioned
based on its estimated uninsured
deposits as a percentage of total
estimated uninsured deposits held by
all IDI affiliates in the banking
organization.12 13
The estimated loss attributable to the
protection of uninsured depositors
pursuant to the systemic risk
determination is currently estimated to
total $15.8 billion. However, as with all
failed bank receiverships, this estimate
will be periodically adjusted as assets
are sold, liabilities are satisfied, and
receivership expenses are incurred. The
exact amount of losses incurred will be
determined when the FDIC terminates
the receiverships.
If, prior to the end of the eight-quarter
collection period, the FDIC expects the
loss to be lower than the amount it
expects to collect from the special
assessments, the FDIC would cease
collection in the quarter after it has
collected enough to recover actual or
estimated losses. Alternatively, if at the
end of the eight-quarter collection
period, the estimated or actual loss
exceeds the amount collected, the FDIC
would extend the collection period over
one or more quarters, as needed, to
recover the difference between the
amount collected and the estimated or
actual loss, at a rate that would not
exceed the 3.13 basis point quarterly
special assessment rate applied during
the initial eight-quarter collection
period.
Receiverships are terminated once the
FDIC has completed the disposition of
the receivership’s assets and has
resolved all obligations, claims, and
other impediments. The termination of
the receiverships to which the March
12, 2023, systemic risk determination
applied may occur years after the initial
eight-quarter collection period and any
extended collection period. In the likely
event that the final loss amount at the
termination of the receiverships is not
determined until after the special
assessments have been collected, and if
the actual losses calculated as of the
12 As used in this proposal, the term ‘‘affiliate’’
has the same meaning as defined in section 3 of the
FDIC Act, 12 U.S.C. 1813(w)(6), which references
the Bank Holding Company Act (‘‘any company that
controls, is controlled by, or is under common
control with another company’’). See 12 U.S.C.
1841(k).
13 IDIs with less than $1 billion in total assets as
of June 30, 2021, were not required to report the
estimated amount of uninsured deposits on the Call
Report for December 31, 2022. Therefore, for IDIs
that had less than $1 billion in total assets as of June
30, 2021, the amount and share of estimated
uninsured deposits as of December 31, 2022, would
be zero.
VerDate Sep<11>2014
17:48 May 19, 2023
Jkt 259001
termination of the receiverships exceed
the amount collected through such
special assessments, the FDIC would
impose a one-time final shortfall special
assessment to collect the amount of
actual losses in excess of the amount of
special assessments collected, if any.
B. Estimated Special Assessment
Amount
By statute, the FDIC is required to
recover through special assessments any
losses to the DIF incurred as a result of
the actions of the FDIC pursuant to the
determination of systemic risk, which,
in the case of the determination
pursuant to the closures of Silicon
Valley Bank and Signature Bank, was to
protect uninsured depositors.14 To
determine the amount of the cost of the
failures attributable to the cost of
covering uninsured deposits, the FDIC
determined the percentage of deposits
that were uninsured at the time of
failure and applied that percentage to
the total cost of the failure for each
bank. At Signature Bank, for which 67
percent of deposits were uninsured at
the point of failure, the portion of the
total estimated loss of $2.4 billion that
is attributable to the protection of
uninsured depositors is $1.6 billion.
At Silicon Valley Bank, for which 88
percent of deposits were uninsured at
the point of failure, the portion of the
total estimated loss of $16.1 billion that
is attributable to the protection of
uninsured depositors is $14.2 billion.
The cost estimate for the sale of the
Silicon Valley Bridge Bank to First
Citizens has been revised from the
original estimate of $20.0 billion to
approximately $16.1 billion due to a
decrease in the amount of liabilities
assumed by First Citizens relative to the
initial estimate, higher anticipated
recoveries from certain other assets in
receivership, and an increase in the
market value of receivership securities.
This revised cost estimate forms the
basis for the Silicon Valley Bank portion
of the current special assessment
calculation, and, as with all failed bank
receiverships, will be periodically
adjusted as assets are sold, liabilities are
satisfied, and receivership expenses are
incurred. As noted below, the amount of
the special assessment will be adjusted
as the loss estimate changes.
In total, of the $18.5 billion in
estimated losses at the two banks and
incurred by the DIF in the first quarter
of 2023, the estimated loss attributable
to the protection of uninsured
depositors was $15.8 billion.
14 12
PO 00000
U.S.C. 1823(c)(4)(G)(ii).
Frm 00004
Fmt 4702
Sfmt 4702
C. Rate for the Special Assessments
Under the proposal, the FDIC would
impose a special assessment equal to
approximately 12.5 basis points
annually. The special assessment rate
was derived by dividing the current loss
estimate attributable to the protection of
uninsured depositors of $15.8 billion by
the proposed assessment base calculated
for all IDIs subject to special
assessments as of December 31, 2022,
totaling $6.3 trillion. As described in
detail below, the proposed assessment
base is equal to estimated uninsured
deposits reported as of December 31,
2022, after applying the $5 billion
deduction. The resulting rate is then
divided by two to reflect the two year
(eight-quarter) collection period, as
described below, resulting in an annual
rate of approximately 12.5 basis points,
or a quarterly rate of 3.13 basis points.
The special assessment rate is subject to
change prior to any final rule depending
on any adjustments to the loss estimate,
mergers or failures, or amendments to
reported estimates of uninsured
deposits.15 Over the eight-quarter
collection period, the FDIC estimates
that it would collect an amount
sufficient to recover estimated losses
attributable to the protection of
uninsured depositors of Silicon Valley
Bank and Signature Bank, which are
currently estimated to total $15.8
billion, totaling approximately $2.0
billion per quarter.
D. Assessment Base for the Special
Assessments
Under the proposal, each IDI’s
assessment base for the special
assessments would be equal to
estimated uninsured deposits as
reported in the Call Report or FFIEC 002
as of December 31, 2022, with certain
adjustments.16 The assessment base for
the special assessments would be
adjusted to exclude the first $5 billion
from estimated uninsured deposits
reported as of December 31, 2022,
applicable either to the IDI, if an IDI is
not a subsidiary of a holding company,
15 Estimates of the special assessment rate and
expected effects in this proposed rule generally
reflect any amendments to data reported through
February 21, 2023, for the reporting period ending
December 31, 2022. Given the closure of First
Republic Bank, San Francisco, CA announced on
May 1, 2023, estimates in this proposed rule
exclude First Republic Bank in addition to Silicon
Valley Bank and Signature Bank. See FDIC: PR–34–
2023. ‘‘JPMorgan Chase Bank, National Association,
Columbus, Ohio Assumes All the Deposits of First
Republic Bank, San Francisco, California.’’ May 1,
2023. https://www.fdic.gov/news/press-releases/
2023/pr23034.html.
16 Estimated uninsured deposits are reported in
Memoranda Item 2 on Schedule RC–O, Other Data
for Deposit Insurance Assessments of both the Call
Report and FFIEC 002.
E:\FR\FM\22MYP1.SGM
22MYP1
Federal Register / Vol. 88, No. 98 / Monday, May 22, 2023 / Proposed Rules
or at the banking organization level, to
the extent that an IDI is part of a holding
company with one or more subsidiary
IDIs. Estimated uninsured deposits as of
December 31, 2022, are the most
recently available data reflecting the
amount of uninsured deposits in each
institution near or at the time the
determination of systemic risk was
made and the uninsured depositors of
the failed institutions were protected.
Using estimated uninsured deposits as
of December 31, 2022, in calculating
special assessments would result in
institutions that had the largest amounts
of uninsured deposits at the time of the
determination of systemic risk paying a
larger share of the special assessments.
Defining the assessment base for the
special assessment as estimated
uninsured deposits reported as of
December 31, 2022, and deducting $5
billion from an IDI or banking
organization’s assessment base, would
have the result that any banking
organization that reported less than $5
billion in uninsured deposits would not
be subject to the special assessment.
In general, large banks and regional
banks, and particularly those with large
amounts of uninsured deposits, were
the banks most exposed to and likely
would have been the most affected by
uninsured deposit runs. Indeed, shortly
after Silicon Valley Bank was closed, a
number of institutions with large
amounts of uninsured deposits reported
that depositors had begun to withdraw
their funds. The failure of Silicon Valley
Bank and the impending failure of
Signature Bank raised concerns that,
absent immediate assistance for
uninsured depositors, there could be
negative knock-on consequences for
similarly situated institutions,
depositors and the financial system
more broadly. Generally speaking, larger
banks benefited the most from the
stability provided to the banking
industry under the systemic risk
determination.
With the rapid collapse of Silicon
Valley Bank and Signature Bank in the
space of 48 hours, concerns arose that
risk could spread more widely to other
institutions and that the financial
32697
system as a whole could be placed at
risk. Shortly after Silicon Valley Bank
was closed on March 10, 2023, a
number of institutions with large
amounts of uninsured deposits reported
that depositors had begun to withdraw
their funds. The extent to which IDIs
rely on uninsured deposits for funding
varies significantly. Uninsured deposits
were used to fund nearly three-quarters
of assets at Silicon Valley Bank and
Signature Bank.
On average, the largest banking
organizations by asset size fund a larger
share of assets with uninsured deposits,
as depicted in Table 1 below, based on
data as of December 31, 2022. Among
banking organizations that report
uninsured deposits, those with total
assets between $1 billion and $5 billion
are generally the least reliant on
uninsured deposits for funding, with
uninsured deposits averaging 28.1
percent of assets, compared with the
largest banking organizations with total
assets greater than $250 billion, which
had uninsured deposits that averaged
35.8 percent of assets.
TABLE 1—AVERAGE SHARE OF ASSETS FUNDED BY UNINSURED DEPOSITS, BY BANKING ORGANIZATION ASSET SIZE
[Percent]
Average share of
assets funded by
uninsured deposits
(percent)
Asset size of banking organization
$1 to $5 Billion .........................................................................................................................................................................
$5 to $10 Billion .......................................................................................................................................................................
$10 to $50 Billion .....................................................................................................................................................................
$50 to $250 Billion ...................................................................................................................................................................
Greater than $250 Billion .........................................................................................................................................................
Deposits are the most common
funding source for many institutions;
however, other liability sources such as
borrowings can also provide funding.
Deposits and other liability sources are
often differentiated by their stability and
customer profile characteristics. While
some uninsured deposit relationships
remain stable when a bank is in good
condition, such relationships might
become less stable due to their
uninsured status if a bank experiences
financial problems or if the banking
industry experiences stress events.
Uninsured deposit concentrations of
IDIs, meaning the percentage of
domestic deposits that are uninsured,
also vary significantly. At Silicon Valley
Bank, 88 percent of deposits were
uninsured at the point of failure
compared to 67 percent at Signature
Bank. On average, the largest banking
organizations by asset size reported
significantly greater uninsured deposit
concentrations relative to smaller
28.1
28.9
32.1
34.2
35.8
banking organizations, as illustrated in
Table 2 below, based on data as of
December 31, 2022. Banking
organizations with total assets between
$1 billion and $5 billion generally
reported the lowest percentage of
uninsured deposits to total domestic
deposits, averaging 33.2 percent,
compared with the largest banking
organizations with total assets greater
than $250 billion, which averaged 51.8
percent.
ddrumheller on DSK120RN23PROD with PROPOSALS1
TABLE 2—UNINSURED DEPOSITS AS A PERCENTAGE OF TOTAL DOMESTIC DEPOSITS, BY BANKING ORGANIZATION ASSET
SIZE
[Percent]
Ratio of uninsured
deposits to total
domestic deposits
(percent)
Asset size of banking organization
$1 to $5 Billion .........................................................................................................................................................................
$5 to $10 Billion .......................................................................................................................................................................
$10 to $50 Billion .....................................................................................................................................................................
VerDate Sep<11>2014
17:48 May 19, 2023
Jkt 259001
PO 00000
Frm 00005
Fmt 4702
Sfmt 4702
E:\FR\FM\22MYP1.SGM
22MYP1
33.2
35.0
39.9
32698
Federal Register / Vol. 88, No. 98 / Monday, May 22, 2023 / Proposed Rules
TABLE 2—UNINSURED DEPOSITS AS A PERCENTAGE OF TOTAL DOMESTIC DEPOSITS, BY BANKING ORGANIZATION ASSET
SIZE—Continued
[Percent]
Ratio of uninsured
deposits to total
domestic deposits
(percent)
Asset size of banking organization
$50 to $250 Billion ...................................................................................................................................................................
Greater than $250 Billion .........................................................................................................................................................
Based on Federal Reserve data
reported by a sample of domestically
chartered banks, domestic deposits
declined by over 2 percent during the
first two months of 2023, predominately
among the top 25 commercial banks by
asset size. This followed similar
declines in domestic deposits over the
prior three quarters, likely driven by the
shift of certain types of deposits into
higher-yielding alternatives. Following
the March 2023 bank failures and the
determination of systemic risk, deposits
of the top 25 commercial banks grew
slightly while deposit outflows rapidly
accelerated, with banks outside of the
top 25 experiencing a four percent
decline in two weeks. Since late March,
Federal Reserve data indicates that
deposit flows have stabilized, with some
reversal of prior outflows.17 First
quarter earnings releases of select
regional banks confirmed sizeable
outflows of deposits, while other large
and regional banks reported more
modest declines or inflows.
Following the announcement of the
systemic risk determination, the FDIC
observed a significant slowdown in
uninsured deposits leaving certain
institutions, evidence that the systemic
risk determination helped stem the
outflow of these deposits while
providing stability to the banking
industry.
Under the proposal, the banks that
benefited most from the assistance
provided under the systemic risk
determination would be charged special
assessments to recover losses to the DIF
44.2
51.8
resulting from the protection of
uninsured depositors, with banks of
larger asset sizes and that hold greater
amounts of uninsured deposits paying
higher special assessments.
For banking organizations that have
more than one subsidiary IDI, the
assessment base for the special
assessments would be equal to its total
estimated uninsured deposits reported
as of December 31, 2022, less its share
of the $5 billion deduction, which
would be based on its share of total
estimated uninsured deposits held by
all IDI affiliates in the banking
organization. 18 19 Table 3 provides an
example of the calculation of special
assessments for a banking organization
with three subsidiary IDIs.
TABLE 3—CALCULATION OF SPECIAL ASSESSMENTS WITHIN A BANKING ORGANIZATION WITH MORE THAN ONE INSURED
DEPOSITORY INSTITUTION SUBSIDIARY
[Dollar amounts in millions]
Column A
Column B
Estimated
uninsured
deposits as
reported as of
December 31, 2022
IDI share of
banking
organization
estimated
uninsured
deposits
(percent)
ddrumheller on DSK120RN23PROD with PROPOSALS1
IDI A .........................
IDI B .........................
IDI C .........................
$50,000
40,000
10,000
Column C
Column D
Column E
IDI share of
$5 billion deduction
(Column B * $5 billion)
Assessment base
for special
assessment
(Column A ¥ Column C)
IDI Share of
special
assessments
(Column D * 25 basis
points)/current
loss estimate
(percent)
50
40
10
$2,500
2,000
500
$47,500
38,000
9,500
0.75
0.60
0.15
The adjustments to the assessment
base for the special assessments would
serve several purposes. First, IDIs
without affiliates and banking
organizations, that reported $5 billion or
less in estimated uninsured deposits as
of December 31, 2022, would not
contribute to the special assessments.
IDIs and banking organizations that
reported more than $5 billion in
estimated uninsured deposits would
pay based on the marginal amounts of
uninsured deposits they reported,
helping to mitigate a ‘‘cliff effect’’ that
might otherwise apply if a different
method, such as an asset size threshold,
were used to determine applicability,
and thereby ensuring more equitable
treatment. Otherwise, a banking
organization just over a particular size
threshold would pay special
assessments, while a banking
organization just below such size
threshold would pay none. In general,
large banks and regional banks, and
particularly those with large amounts of
uninsured deposits, were the banks
most exposed to and likely would have
been the most affected by uninsured
deposit runs. Indeed, shortly after
17 Board of Governors of the Federal Reserve
System. Assets and Liabilities of Commercial Banks
in the United States—H.8. Available at: https://
www.federalreserve.gov/releases/h8/default.htm.
18 As used in this NPR, the term ‘‘affiliate’’ has
the same meaning as defined in section 3 of the
FDIC Act, 12 U.S.C. 1813(w)(6), which references
the Bank Holding Company Act (‘‘any company that
controls, is controlled by, or is under common
control with another company’’). See 12 U.S.C.
1841(k).
19 IDIs with less than $1 billion in total assets as
of June 30, 2021, were not required to report the
estimated amount of uninsured deposits on the Call
Report for December 31, 2022. Therefore, for IDIs
that had less than $1 billion in total assets as of June
30, 2021, and that are part of a banking organization
with more than one IDI subsidiary, the amount and
share of estimated uninsured deposits as of
December 31, 2022, would be zero.
VerDate Sep<11>2014
17:48 May 19, 2023
Jkt 259001
PO 00000
Frm 00006
Fmt 4702
Sfmt 4702
E:\FR\FM\22MYP1.SGM
22MYP1
32699
Federal Register / Vol. 88, No. 98 / Monday, May 22, 2023 / Proposed Rules
Silicon Valley Bank was closed, a
number of institutions with large
amounts of uninsured deposits reported
that depositors had begun to withdraw
their funds. The failure of Silicon Valley
Bank and the impending failure of
Signature Bank raised concerns that,
absent immediate assistance for
uninsured depositors, there could be
negative knock-on consequences for
similarly situated institutions,
depositors and the financial system
more broadly. Generally speaking, larger
banks benefited the most from the
stability provided to the banking
industry under the systemic risk
determination. With the adjustments to
the assessment base, the banks that
benefited the most—banks of larger
asset sizes and that hold greater
amounts of uninsured deposits—would
be responsible for paying special
assessments.
Second, the proposed methodology
also would result in most small IDIs and
IDIs that are part of a small banking
organization not paying anything
towards the special assessments. As
proposed, the FDIC estimates that the
special assessments would not be
applicable to any banking organizations
with total assets under $5 billion.
Based on data reported as of
December 31, 2022, and as illustrated in
Table 4 below, the FDIC estimates that
113 banking organizations, which
include IDIs that are not subsidiaries of
a holding company and holding
companies with one or more subsidiary
IDIs and which comprise 83.0 percent of
industry assets, would be subject to
special assessments, including 48
banking organizations with total assets
over $50 billion and 65 banking
organizations with total assets between
$5 and $50 billion. No banking
organizations with total assets under $5
billion would pay special assessments,
based on data as of December 31, 2022.
The number of banking organizations
subject to special assessments may
change prior to any final rule depending
on any adjustments to the loss estimate,
mergers or failures, or amendments to
reported estimates of uninsured
deposits.
TABLE 4—BANKING ORGANIZATIONS REQUIRED TO PAY SPECIAL ASSESSMENTS, BASED ON DATA REPORTED AS OF
DECEMBER 31, 2022
Number of
banking
organizations
required to
pay special
assessments
ddrumheller on DSK120RN23PROD with PROPOSALS1
Asset size of banking organization
Percentage
of banking
organizations
required to
pay special
assessments
(percent)
Share of
special
assessments
(percent)
Share of
industry
assets
(percent)
Greater than $50 billion ...............................................................................
Between $5 and $50 billion .........................................................................
Under $5 billion ............................................................................................
48
65
0
1.1
1.5
0.0
95.2
4.8
0.0
76.0
7.0
0.0
Total ......................................................................................................
113
2.6
100.0
83.0
Finally, deducting $5 billion from the
assessment base of estimated uninsured
deposits at the banking organization
level for those with more than one IDI
would ensure that banking
organizations with similar amounts of
estimated uninsured deposits pay a
similar special assessment. For example,
a banking organization with multiple
IDIs with large amounts of estimated
uninsured deposits would not have an
advantage over other similarlypositioned IDIs that are not subsidiaries
of a holding company because instead of
excluding $5 billion of estimated
uninsured deposits for each IDI in one
banking organization, the $5 billion
deduction would be distributed across
multiple affiliated IDIs.
The proposed methodology ensures
that the banks that benefited most from
the assistance provided under the
systemic risk determination would be
charged special assessments to recover
losses to the DIF resulting from the
protection of uninsured depositors, with
banks of larger asset sizes and that hold
greater amounts of uninsured deposits
paying higher special assessments.
VerDate Sep<11>2014
17:48 May 19, 2023
Jkt 259001
E. Collection Period for Special
Assessments
Under the proposal, the special
assessments would be collected
beginning with the first quarterly
assessment period of 2024 (i.e., January
1 through March 31, 2024, with an
invoice payment date of June 28, 2024).
In order to preserve liquidity at IDIs,
and in the interest of consistent and
predictable assessments, the special
assessments would be collected over
eight quarters.
The estimated loss attributable to the
protection of uninsured depositors
pursuant to the systemic risk
determination is currently estimated to
total $15.8 billion. However, loss
estimates for failed banks are
periodically adjusted as assets are sold,
liabilities are satisfied, and receivership
expenses are incurred.
The FDIC would review and consider
any revisions to loss estimates each
quarter of the collection period. If, prior
to the end of the eight-quarter collection
period, the FDIC expects the loss to be
lower than the amount it expects to
collect from the special assessments, the
FDIC would cease collection of special
assessments before the end of the initial
eight-quarter collection period, in the
PO 00000
Frm 00007
Fmt 4702
Sfmt 4702
quarter after it has collected enough to
recover actual or estimated losses. The
FDIC would provide notice of the
cessation of collections at least 30 days
before the next payment is due.
The FDIC is required by statute to
place the excess funds collected through
special assessments in the DIF.20 By
spreading out the collection period over
eight quarters, a length of time that
would enable the FDIC to develop a
more precise estimate of loss, and
allowing for early cessation after the
FDIC has collected enough to recover
actual or estimated losses, the FDIC
mitigates the risk of over collecting.
F. Extended Special Assessment Period
If, at the end of the eight-quarter
collection period, the estimated or
actual loss exceeds the amount
collected, the FDIC would extend the
collection period over one or more
quarters as needed in order to collect
the difference between the amount
collected and the estimated or actual
loss at the end of the eight-quarter
collection period, (the shortfall amount),
after providing notice of at least 30 days
20 12
E:\FR\FM\22MYP1.SGM
U.S.C. 1823(c)(4)(G)(ii)(III).
22MYP1
32700
Federal Register / Vol. 88, No. 98 / Monday, May 22, 2023 / Proposed Rules
ddrumheller on DSK120RN23PROD with PROPOSALS1
before the first payment of any extended
special assessment is due.
In the event that extended special
assessments are needed, the FDIC would
collect the shortfall amount on a
quarterly basis. In the interest of
consistency and predictability, the
quarterly rate would not exceed the 3.13
basis point quarterly special assessment
rate applied during the initial eightquarter collection period, and such
extended special assessments would be
collected for the minimum number of
quarters needed to recover the shortfall
amount at such quarterly rates.
The assessment base for such
extended special assessment would be
as described above, based on estimated
uninsured deposits reported as of
December 31, 2022, with a $5 billion
deduction for each banking
organization. However, each banking
organization’s assessment base for such
extended special assessments may differ
from its assessment base for special
assessments over the initial eightquarter collection period, due to
mergers or failures that occurred during
the eight-quarter collection period.
G. One-Time Final Shortfall Special
Assessment
The FDIC is required by statute to
recover the loss to the DIF attributable
to protecting uninsured depositors of
Silicon Valley Bank and Signature
Bank.21 The exact amount of losses will
be determined when the FDIC
terminates the receiverships.
Receiverships are terminated once the
FDIC has completed the disposition of
the receivership’s assets and has
resolved all obligations, claims, and
other impediments. The termination of
the receiverships to which the March
12, 2023, systemic risk determination
applied may occur years after the initial
eight-quarter collection period and any
extended collection period.
In the likely event that a final loss
amount at the termination of the
receiverships is not determined until
after the initial special assessments and
any extended special assessments have
been collected, and if losses at the
termination of the receiverships exceed
the amount collected through such
special assessments (the final shortfall
amount), the FDIC would impose a onetime final shortfall special assessment.
The assessment base for such onetime final shortfall special assessment
would be as described above, based on
estimated uninsured deposits reported
as of December 31, 2022, with a $5
billion deduction for each banking
organization. However, each banking
21 12
U.S.C. 1823(c)(4)(G)(ii).
VerDate Sep<11>2014
17:48 May 19, 2023
Jkt 259001
organization’s assessment base for the
one-time final shortfall special
assessment may differ from its
assessment base for previous special
assessments collections, due to mergers
or failures that occurred up to the
determination of the shortfall amount.
The FDIC would determine the
assessment rate for the one-time final
shortfall special assessment based on
the amount needed to recover the final
shortfall amount and the total amount of
estimated uninsured deposits reported
as of December 31, 2022, after applying
the $5 billion deduction to banking
organizations as of the date that the final
shortfall is calculated.
The entire final shortfall amount
would be collected in one quarter so
that there are no missed amounts due to
mergers or other arrangements, and to
streamline the operational impact on
banking organizations. The FDIC would
provide banking organizations notice of
at least 45 days before payment of the
one-time shortfall special assessment is
due and would consider the statutory
factors, including economic conditions
and the effects on the industry, in
deciding on the timing of such
payments.
The FDIC would notify each IDI
subject to a one-time shortfall special
assessment of the final shortfall special
assessment rate and its share of the final
shortfall assessment no later than 15
days before payment is due. The notice
would be included in the IDI’s invoice
for its regular quarterly deposit
insurance assessment.
H. No Prior Period Amendments
Each IDI’s assessment base for the
special assessments would be based on
its estimated uninsured deposits
reported on its Call Report for December
31, 2022. Amendments to an IDI’s Call
Report for the December 31, 2022,
reporting period made after the date of
adoption of any final rule would not
affect an institution’s rate or base for the
special assessments. While the rule
would not change existing reporting
policies and procedures around prior
period amendments, the FDIC would
use data on estimated uninsured
deposits for the quarter ending
December 31, 2022, reported as of the
date of adoption of any final rule to
calculate special assessments for the
duration of the collection period.
I. Collection of Special Assessments and
Any Shortfall Special Assessment
The special assessments and any
shortfall special assessment would be
collected at the same time and in the
same manner as an IDI’s regular
quarterly deposit insurance assessment.
PO 00000
Frm 00008
Fmt 4702
Sfmt 4702
Invoices for an IDI’s regular quarterly
deposit insurance assessment would
disclose the amount of any special
assessments or shortfall special
assessments due.
J. Payment Mechanism for the Special
Assessments and Shortfall Special
Assessment
Each IDI would be required to take
any actions necessary to allow the FDIC
to debit its special assessment and
shortfall special assessment from the
bank’s designated deposit account used
for payment of its regular assessment.
Before the dates that payments are due,
each IDI would have to ensure that
sufficient funds to pay its obligations
are available in the designated account
for direct debit by the FDIC. Failure to
take any such action or to fund the
account would constitute nonpayment
of the special assessment. Penalties for
nonpayment would be as provided for
nonpayment of an IDI’s regular
assessment.22
K. Mergers, Consolidations and
Terminations of Deposit Insurance
First, under existing regulations, an
IDI that is not the resulting or surviving
IDI in a merger or consolidation must
file a quarterly Call Report for every
assessment period prior to the
assessment period in which the merger
or consolidation occurs. The surviving
or resulting IDI is responsible for
ensuring that these Call Reports are
filed. The surviving or resulting IDI is
also responsible and liable for any
unpaid assessments on the part of the
IDI that is not the resulting or surviving
IDI.23 The FDIC proposes that unpaid
assessments would also include any
unpaid special assessments and any
shortfall special assessments.
Second, if an IDI acquires—through
merger or consolidation—another IDI
during the collection period of the
special assessments, the acquiring IDI
would be required to pay the acquired
IDI’s special assessments, if any, in
addition to its own special assessments
from the quarter of the acquisition
through the remainder of the collection
period. The FDIC would not adjust the
acquiring institution’s special
assessments. The FDIC also would not
adjust the calculation of the acquired
institution’s special assessments. Any
shortfall special assessments following
the eight-quarter collection period
would be calculated as described above,
based on estimated uninsured deposits
reported as of December 31, 2022.
However, to ensure full recovery of the
22 See
23 12
E:\FR\FM\22MYP1.SGM
12 CFR 327.3(c).
CFR 327.6(a).
22MYP1
Federal Register / Vol. 88, No. 98 / Monday, May 22, 2023 / Proposed Rules
difference between amounts collected
and losses related to the systemic risk
determination, each organization’s
extended special assessments or final
shortfall special assessments would
reflect mergers, consolidations, failures,
or other terminations of deposit
insurance that occurred between
December 31, 2022, and the date in
which such extended special
assessments or final shortfall special
assessments are determined.
Third, existing regulations provide
that, when the insured status of an IDI
is terminated and the deposit liabilities
of the IDI are not assumed by another
IDI, the IDI whose insured status is
terminating must, among other things,
continue to pay assessments for the
assessment periods that its deposits are
insured, but not thereafter.24 The FDIC
proposes that these provisions would
also apply to the special assessments
and any shortfall special assessments.
Finally, in the case of one or more
transactions in which one IDI
voluntarily terminates its deposit
insurance under the FDI Act and sells
certain assets and liabilities to one or
more other IDIs, each IDI must report
the increase or decrease in assets and
liabilities on the Call Report due after
the transaction date and be assessed
accordingly under existing FDIC
assessment regulations. The IDI whose
insured status is terminating must,
among other things, continue to pay
assessments for the assessment periods
that its deposits are insured.25 The FDIC
proposes that the same process would
also apply to the special assessments
and any shortfall special assessments.
ddrumheller on DSK120RN23PROD with PROPOSALS1
L. Accounting Treatment
Each institution should account for
the special assessment in accordance
with U.S. generally accepted accounting
principles (GAAP). In accordance with
Financial Accounting Standards Board
Accounting Standards Codification
Topic 450, Contingencies (FASB ASC
Topic 450), an estimated loss from a loss
contingency shall be accrued by a
charge to income if information
indicates that it is probable that a
liability has been incurred and the
amount of loss is reasonably
estimable.26 Therefore, an institution
would recognize in the Call Report and
other financial statements the accrual of
a liability and estimated loss (i.e.,
expense) from a loss contingency for the
special assessment when the institution
24 12
CFR 327.6(c).
CFR 327.6(c).
26 FASB ASC paragraph 450–20–25–2.
25 12
VerDate Sep<11>2014
17:48 May 19, 2023
Jkt 259001
determines that the conditions for
accrual under GAAP have been met.
Similarly, each institution should
account for any shortfall special
assessment in accordance with FASB
ASC Topic 450 when the conditions for
accrual under GAAP have been met.
M. Request for Revisions
An IDI may submit a written request
for revision of the computation of any
special assessment or shortfall special
assessment pursuant to existing
regulation 12 U.S.C. 327.3(f).27
IV. Analysis and Expected Effects
A. Analysis of the Statutory Factors
Section 13(c)(4)(G) of the FDI Act
provides the FDIC with discretion in the
design and timeframe for any special
assessments to recover the losses from
the systemic risk determination. As
detailed in the sections that follow, and
as required by the FDI Act, the FDIC has
considered the types of entities that
benefit from any action taken or
assistance provided under the
determination of systemic risk, effects
on the industry, economic conditions,
and any such other factors as the
Corporation deems appropriate and
relevant to the action taken or the
assistance provided.28
The Types of Entities That Benefit
In implementing special assessments
under section 13(c)(4)(G) of the FDI Act,
the FDIC is required to consider the
types of entities that benefit from any
action taken or assistance provided
pursuant to determination of systemic
risk.29
With the rapid collapse of Silicon
Valley Bank and Signature Bank in the
space of 48 hours, concerns arose that
risk could spread more widely to other
institutions and that the financial
system as a whole could be placed at
risk. Shortly after Silicon Valley Bank
was closed on March 10, 2023, a
number of institutions with large
amounts of uninsured deposits reported
that depositors had begun to withdraw
their funds. The extent to which IDIs
rely on uninsured deposits for funding
27 Consistent with Section M above, amendments
filed by an IDI to its Call Report or FFIEC 002 after
the date of adoption of the final rule by the Board,
would not be eligible as a basis for a request for
revision under 12 U.S.C 327.3(f). Existing regulation
12 U.S.C. 327.4(c) allows an IDI to submit a request
for review of the IDI’s risk assignment. Because the
amount of an IDI’s special assessment or shortfall
special assessment is not determined based on the
IDI’s risk assignment as proposed, the request for
review provision under 12 U.S.C. 327.4(c) would
not be applicable to an IDI’s special assessment or
shortfall special assessment.
28 12 U.S.C. 1823(c)(4)(G)(ii)(III).
29 12 U.S.C. 1823(c)(4)(G)(ii)(III).
PO 00000
Frm 00009
Fmt 4702
Sfmt 4702
32701
varies significantly. Uninsured deposits
were used to fund nearly three-quarters
of the assets at Silicon Valley Bank and
Signature Bank. On March 12, 2023, the
FDIC Board and the Board of Governors
voted unanimously to recommend, and
the Treasury Secretary, in consultation
with the President, determined that the
FDIC could use emergency systemic risk
authorities under the FDI Act to
complete its resolution of both Silicon
Valley Bank and Signature Bank in a
manner that fully protects all
depositors.30 The full protection of all
depositors, rather than imposing losses
on uninsured depositors, was intended
to strengthen public confidence in the
nation’s banking system.
In the weeks that followed the
determination of systemic risk, efforts to
stabilize the banking system and stem
potential contagion from the failures of
Silicon Valley Bank and Signature Bank
ensured that depositors would continue
to have access to their savings, that
small businesses and other employers
could continue to make payrolls, and
that other banks could continue to
extend credit to borrowers and serve as
a source of support.
In general, large banks and regional
banks, and particularly those with large
amounts of uninsured deposits, were
the banks most exposed to and likely
would have been the most affected by
uninsured deposit runs. Indeed, shortly
after Silicon Valley Bank was closed, a
number of institutions with large
amounts of uninsured deposits reported
that depositors had begun to withdraw
their funds. The failure of Silicon Valley
Bank and the impending failure of
Signature Bank raised concerns that,
absent immediate assistance for
uninsured depositors, there could be
negative knock-on consequences for
similarly situated institutions,
depositors and the financial system
more broadly. Generally speaking, larger
banks benefited the most from the
stability provided to the banking
industry under the systemic risk
determination. Under the proposal, the
banks that benefited most from the
assistance provided under the systemic
risk determination would be charged
special assessments to recover losses to
the DIF resulting from the protection of
uninsured depositors, with banks of
larger asset sizes and that hold greater
amounts of uninsured deposits paying
higher special assessments.
30 12 U.S.C. 1823(c)(4)(G). See also: FDIC PR–17–
2023. ‘‘Joint Statement by the Department of the
Treasury, Federal Reserve, and FDIC.’’ March 12,
2023. https://www.fdic.gov/news/press-releases/
2023/pr23017.html.
E:\FR\FM\22MYP1.SGM
22MYP1
32702
Federal Register / Vol. 88, No. 98 / Monday, May 22, 2023 / Proposed Rules
Effects on the Industry
In calculating the assessment base for
the special assessments, the FDIC would
deduct $5 billion from each IDI or
banking organization’s aggregate
estimated uninsured deposits reported
as of December 31, 2022. As a result,
any institution that did not report any
uninsured deposits as of December 31,
2022, would not be subject to the
special assessment. Additionally, most
small IDIs and IDIs that are part of a
small banking organization would not
pay anything towards the special
assessment. Some small and mid-size
IDIs would be subject to the special
assessment if they were subsidiaries of
a banking organization with more than
$5 billion in uninsured deposits and
such IDIs reported positive amounts of
uninsured deposits after application of
the deduction, or if they directly held
more than $5 billion in estimated
uninsured deposits as of December 31,
2022, which for smaller institutions
would constitute heavy reliance on
uninsured deposits.
Based on data reported as of
December 31, 2022, and as captured in
Table 4 above, the FDIC estimates that
113 banking organizations would be
subject to special assessments,
including 48 banking organizations with
total assets over $50 billion and 65
banking organizations with total assets
between $5 and $50 billion. No banking
organizations with total assets under $5
billion would pay special assessments,
based on data reported as of December
31, 2022.31 It is anticipated that the
same banking organizations subject to
special assessments would also be
subject to any extended special
assessments or final shortfall special
assessment, absent the effects of any
mergers, consolidations, failures, or
other terminations of deposit insurance
that occur through the determination of
such extended special assessments or
final shortfall special assessment.
ddrumheller on DSK120RN23PROD with PROPOSALS1
Capital and Earnings Analysis
The FDIC has analyzed the effect of
the special assessments on the capital
and earnings of banking organizations,
including IDIs that are not subsidiaries
of a holding company. This analysis
incorporates data on estimated
uninsured deposits reported by banking
organizations as of December 31, 2022,
and assumes that pre-tax income for the
quarter in which a banking organization
31 The number of banking organizations subject to
special assessments may change prior to any final
rule depending on any adjustments to the loss
estimate, mergers or failures, or similar activities, or
amendments to reported estimates of uninsured
deposits.
VerDate Sep<11>2014
17:48 May 19, 2023
Jkt 259001
would recognize the accrual of a
liability and an estimated loss (i.e.,
expense) from a loss contingency for the
special assessments, will equal the
average of their pre-tax income from
January 1, 2022, through December 31,
2022.32
To avoid the possibility of
underestimating effects on bank
earnings or capital, the analysis also
assumes that the effects of the special
assessments are not transferred to
customers in the form of changes in
borrowing rates, deposit rates, or service
fees. Because special assessments are a
tax-deductible operating expense for all
institutions, increases in the assessment
expense can lower taxable income.33
The analysis considers the effective pretax cost of special assessments in
calculating the effect on capital.34
A banking organization’s earnings
retention and dividend policies
influence the extent to which special
assessments affect equity levels. If a
banking organization maintains the
same dollar amount of dividends when
it recognizes the accrual of a liability
and an estimated loss (i.e., expense)
from a loss contingency for the special
assessments or shortfall special
assessment as proposed, equity
(retained earnings) will be reduced by
the full amount of the pre-tax cost of the
special assessments or shortfall special
assessment. This analysis instead
assumes that a banking organization
will maintain its dividend rate (that is,
dividends as a percentage of net
income) unchanged from the weighted
average rate reported over the four
quarters ending December 31, 2022. In
the event that the ratio of Tier 1 capital
to assets falls below four percent,
however, this assumption is modified
such that a banking organization retains
the amount necessary to reach a four
percent minimum and distributes any
32 All income statement items used in this
analysis were adjusted for the effect of mergers.
Institutions for which four quarters of non-zero
earnings data were unavailable, including insured
branches of foreign banks, were excluded from this
analysis.
33 The Tax Cuts and Jobs Act of 2017 placed a
limitation on tax deductions for FDIC premiums for
banks with total consolidated assets between $10
and $50 billion and disallowed the deduction
entirely for banks with total assets of $50 billion or
more. However, the definition of FDIC premiums
under the Act is limited to any assessment imposed
under section 7(b) of the FDI Act (12 U.S.C.
1817(b)), and therefore does not include special
assessments required under section 13(c)(4)(G) of
the FDI Act. See the Tax Cuts and Jobs Act, Public
Law 115–97 (Dec. 22, 2017).
34 The analysis does not incorporate any tax
effects from an operating loss carry forward or carry
back.
PO 00000
Frm 00010
Fmt 4702
Sfmt 4702
remaining funds according to the
dividend payout rate.35
As proposed, the FDIC estimates that
it would collect the estimated loss from
protecting uninsured depositors at
Silicon Valley Bank and Signature Bank
of approximately $15.8 billion, over the
eight-quarter collection period. Banking
organizations would recognize the
accrual of a liability and an estimated
loss (i.e., expense) from a loss
contingency for the special assessment
when the institution determines that the
conditions for accrual under GAAP have
been met. This analysis assumes that the
effects on capital and income of the
entire amount of the special assessments
to be collected over eight quarters
would occur in one quarter only.
Given this estimate and the
assumptions in the analysis, the FDIC
estimates that, on average, the proposed
special assessments would decrease the
dollar amount of Tier 1 capital of
banking organizations that would be
required to pay special assessments by
an estimated 61 basis points.36 No
banking organizations are estimated to
fall below the minimum capital
requirement (a four percent Tier 1
capital-to-assets ratio) as a result of the
proposed special assessments.
The banking industry reported fullyear 2022 net income lower than full35 The analysis uses four percent as the threshold
because IDIs generally need to maintain a Tier 1
leverage ratio of 4.0 percent or greater to be
considered ‘‘adequately capitalized’’ under Prompt
Corrective Action Standards, in addition to the
following requirements: (i) total risk-based capital
ratio of 8.0 percent or greater; (ii) Tier 1 risk-based
capital ratio of 6.0 percent or greater; (iii) common
equity tier 1 capital ratio of 4.5 percent or greater;
and (iv) does not meet the definition of ‘‘well
capitalized.’’ Beginning January 1, 2018, an
advanced approaches or Category III FDICsupervised institution will be deemed to be
‘‘adequately capitalized’’ if it satisfies the above
criteria and has a supplementary leverage ratio of
3.0 percent or greater, as calculated in accordance
with 12 CFR 324.10. See 12 CFR 324.403(b)(2).
Additionally, Federal Reserve Board-regulated
institutions must generally must maintain a Tier 1
leverage ratio of 4.0 percent or greater to meet the
minimum capital requirements, in addition to the
following requirements: (i) total capital ratio of 8.0
percent; (ii) Tier 1 capital ratio of 6.0; (iii) common
equity tier 1 capital ratio of 4.5; and (iv) for
advanced approaches Federal Reserve Boardregulated institutions, or for Category III Federal
Reserve Board-regulated institutions, a
supplementary leverage ratio of 3 percent. See 12
CFR 217.10(a)(1). For purposes of this analysis, Tier
1 capital to assets is used as the measure of capital
adequacy.
36 Estimated effects on capital are calculated
based on data reported as of December 31, 2022, on
the Call Report and the Consolidated Financial
Statements for Holding Companies (FR Y–9C),
respectively, for IDIs that are not subsidiaries of a
holding company or that are part of a banking
organization with only one subsidiary IDI required
to pay special assessments, and for banking
organizations, to the extent that an IDI is part of a
holding company with more than one subsidiary
IDI required to pay special assessments.
E:\FR\FM\22MYP1.SGM
22MYP1
Federal Register / Vol. 88, No. 98 / Monday, May 22, 2023 / Proposed Rules
year 2021 net income, but still above the
pre-pandemic average. The effect of the
proposed special assessments on a
banking organization’s income is
measured by calculating the amount of
the special assessments as a percent of
pre-tax income (hereafter referred to as
‘‘income’’). This income measure is
used in order to eliminate the
potentially transitory effects of taxes on
profitability.
While special assessments are
allocated based on estimated uninsured
deposits reported at the banking
organization level, IDIs will be
responsible for payment of the special
assessments. The FDIC analyzed the
effect of the special assessments on
income reported at the IDI-level for IDIs
subject to special assessments that are
not subsidiaries of a holding company
or that are subsidiaries of a holding
company with only one IDI subsidiary.
For IDIs that are subsidiaries of a
holding company with more than one
IDI subsidiary, the FDIC analyzed the
effect of the special assessments by
aggregating the income reported by all
IDIs subject to special assessments
within each banking organization since
the IDIs will be responsible for payment.
The FDIC analyzed the impact of the
special assessments on banking
organizations that were profitable based
on their average quarterly income from
January 1, 2022, to December 31,
2022.37
The effects on income of the entire
amount of special assessments to be
collected over eight quarters are
32703
assumed to occur in one quarter only.
Given the assumptions and the
estimated loss amount, the FDIC
estimates that the proposed special
assessments would result in an average
one-quarter reduction in income of 17.5
percent for banking organizations
subject to special assessments.38
Table 5 shows that approximately 66
percent of profitable banking
organizations subject to the proposal are
projected to have special assessments of
less than 20 percent of income,
including 23 percent with special
assessments of less than 5 percent of
income. Another 34 percent of
profitable banking organizations subject
to the proposal are projected to have
special assessments equal to or
exceeding 20 percent of income.
TABLE 5—ESTIMATED ONE-QUARTER EFFECT OF ENTIRE AMOUNT OF SPECIAL ASSESSMENTS ON INCOME FOR
PROFITABLE BANKING ORGANIZATIONS SUBJECT TO SPECIAL ASSESSMENTS 1
Number of
banking
organizations
Special assessments as percent of income
Percent of
banking
organizations
Assets of
banking
organizations
($ billions)
Percent of
assets
Over 30% .....................................................................................................
20% to 30% .................................................................................................
10% to 20% .................................................................................................
5% to 10% ...................................................................................................
Less than 5% ...............................................................................................
13
25
34
14
26
12
22
30
13
23
4,455
10,713
2,577
307
1,117
23
56
13
2
6
Total ......................................................................................................
112
100
19,170
100
1 Income is defined as quarterly pre-tax income. Quarterly income is assumed to equal the average of income from January 1, 2022, through
December 31, 2022. For purposes of this analysis, the effects on income of the entire amount of special assessments to be collected over eight
quarters are assumed to occur in one quarter only. Special assessments as a percent of income is an estimate of the one-time accrual of a full
eight quarters of special assessments as a percent of a single quarter’s income. Profitable banking organizations are defined as those having
positive average income for the 12 months ending December 31, 2022. Excludes two insured U.S. branches of one foreign banking organization
subject to special assessments. Some columns do not add to total due to rounding.
On February 28, 2023, the FDIC
released the results of the Quarterly
Banking Profile, which provided a
comprehensive summary of financial
results for all FDIC-insured institutions
for the fourth quarter of 2022. Overall,
key banking industry metrics remained
favorable in the quarter.39
Loan growth continued, net interest
income grew, and asset quality
measures remained favorable. Further,
the industry remained well capitalized
and highly liquid, but the report also
highlighted a key weakness in elevated
levels of unrealized losses on
investment securities due to rapid
increases in market interest rates.
Unrealized losses on available-for-sale
and held-to-maturity securities totaled
$620 billion as of December 31, 2022,
and unrealized losses on available-forsale securities have meaningfully
reduced the reported equity capital of
the banking industry. The combination
of a high level of longer-term asset
maturities and a moderate decline in
total deposits underscored the risk that
unrealized losses could become actual
losses should banks need to sell
securities to meet liquidity needs.
The financial system continues to face
significant downside risks from the
effects of inflation, rising market interest
rates, and a weak economic outlook.
Credit quality and profitability may
weaken due to these risks, potentially
resulting in tighter loan underwriting,
slower loan growth, higher provision
expenses, and liquidity constraints.
Additional short-term interest rate
increases, combined with longer asset
maturities may continue to increase
unrealized losses on securities and
affect bank balance sheets in coming
quarters.
Despite these downside risks, in the
weeks that followed the failure of
Silicon Valley Bank and Signature Bank,
the state of the U.S. financial system
remained sound and institutions are
37 There were no banking organizations that
would be required to pay special assessments that
were unprofitable based on average quarterly
income from January 1, 2022, to December 31, 2022.
38 Earnings or income are quarterly income before
assessments and taxes. Quarterly income is
assumed to equal average income from January 1,
2022, through December 31, 2022.
39 FDIC Quarterly Banking Profile, Fourth Quarter
2022. https://www.fdic.gov/analysis/quarterlybanking-profile/qbp/2022dec/.
In order to preserve liquidity at IDIs,
and in the interest of consistent and
predictable assessments, the special
assessments would be collected over
eight quarters. The proposed special
assessments would be applicable no
earlier than the first quarterly
assessment period of 2024, providing
time for institutions to prepare and plan
for the special assessments.
ddrumheller on DSK120RN23PROD with PROPOSALS1
Economic Conditions
VerDate Sep<11>2014
17:48 May 19, 2023
Jkt 259001
PO 00000
Frm 00011
Fmt 4702
Sfmt 4702
E:\FR\FM\22MYP1.SGM
22MYP1
32704
Federal Register / Vol. 88, No. 98 / Monday, May 22, 2023 / Proposed Rules
well positioned to absorb a special
assessment.40
B. Alternatives Considered
While the FDIC is required by statute
to recover the loss to the DIF arising
from the use of a systemic risk
determination through one or more
special assessments, the FDI Act in
Section 13(c)(4)(G) provides the FDIC
with discretion in the design and
timeframe for any special assessments to
recover the losses from the systemic risk
determination.41 The FDIC has
considered alternatives to this proposal
to collect special assessments to recover
the loss to the DIF arising from the
protection of all uninsured depositors in
connection with the systemic risk
determination announced on March 12,
2023, as required by the FDI Act. The
FDIC identified six potentially effective
and reasonably feasible alternatives to
the proposed rule. These alternatives are
discussed in detail below.
ddrumheller on DSK120RN23PROD with PROPOSALS1
Alternative 1: One-Time Special
Assessment
As an alternative to the proposal, the
FDIC considered imposing a one-time
special assessment at the end of the
quarter following the effective date. The
FDIC would impose the one-time
special assessment in the quarter ending
March 31, 2024, and collect payment for
such special assessment on June 28,
2024, at the same time and in the same
manner as an IDI’s regular quarterly
deposit insurance assessment. The
aggregate amount of a one-time special
assessment would equal the entire
initial loss estimate. Calculation of the
special assessments, including the
special assessment rate, would be the
same as proposed, but instead of
collecting the amount over eight
quarters, the FDIC would collect the
entire amount in one quarter.
Once actual losses are determined as
of the termination of the receiverships,
and if the actual losses exceeded the
amount collected under the one-time
special assessment, the FDIC would
impose a shortfall special assessment to
collect the amount of losses in excess of
40 Statement of Martin J. Gruenberg, Chairman of
the FDIC on ‘‘Recent Bank Failures and the Federal
Regulatory Response,’’ before the United States
Senate Committee on Banking, Housing, and Urban
Affairs. March 28, 2023. https://
www.banking.senate.gov/imo/media/doc/
Gruenberg%20Testimony%203-28-23.pdf.
41 12 U.S.C. 1823(c)(4)(G)(ii)(I). In implementing
special assessments, the FDIC is required to
consider the types of entities that benefit from any
action taken or assistance provided under the
determination of systemic risk, effects on the
industry, economic conditions, and any such other
factors as the FDIC deems appropriate and relevant
to the action taken or the assistance provided. See
12 U.S.C. 1823(c)(4)(G)(ii)(III).
VerDate Sep<11>2014
17:48 May 19, 2023
Jkt 259001
the amount collected. Collection of the
entire shortfall special assessment
would also occur in one quarter.
Conversely, if the amount collected
under the one-time special assessment
exceeded actual losses, the FDIC is
required by statute to place the excess
funds collected in the DIF.42
While under both the proposal and
this alternative, the estimated amount of
the special assessment would be
recognized with the accrual of a liability
and an estimated loss (i.e., expense)
from a loss contingency when the
institution determines that the
conditions for accrual under GAAP have
been met, which impacts capital and
earnings, this alternative would
additionally require payment of the
entire amount in the second quarter of
2024, and would impact liquidity
significantly in one quarter. The FDIC
rejected this alternative in the interest of
liquidity preservation in a period of
uncertainty and to mitigate the risk of
over collecting.
Alternative 2: Asset Size Applicability
Threshold
As an alternative to deducting the first
$5 billion in estimated uninsured
deposits in calculating an IDI or banking
organization’s assessment base for the
special assessment, the FDIC considered
basing applicability on an asset size
threshold.
As described previously, in
implementing special assessments, the
FDI Act requires the FDIC to consider
the types of entities that benefit from
any action taken or assistance provided
pursuant to determination of systemic
risk.43 Large banks and regional banks,
and particularly those with large
amounts of uninsured deposits, were
the banks most exposed to and likely
would have been the most affected by
uninsured deposit runs had those
occurred as a result of the bank failures.
Larger banks also benefited the most
from the stability provided to the
banking industry under the systemic
risk determination.
While both the proposal, including
the $5 billion deduction from estimated
uninsured deposits, and an asset-sizebased applicability threshold would
effectively remove the smallest
institutions from eligibility, the
proposed deduction of $5 billion from
each banking organization’s estimated
uninsured deposits in calculating the
special assessment would help to
mitigate a ‘‘cliff effect’’ relative to
applying a different threshold for
applicability, such as applying an asset
42 12
43 12
PO 00000
U.S.C. 1823(c)(4)(G)(ii)(III).
U.S.C. 1823(c)(4)(G)(ii)(III).
Frm 00012
Fmt 4702
Sfmt 4702
size threshold, thereby ensuring more
equitable treatment. With an asset size
threshold, an IDI just above such
threshold would pay a significant
amount in special assessments, while an
IDI just below such threshold would pay
none. The FDIC rejected this alternative
for these reasons.
Alternative 3: Assessment Base Equal to
All Uninsured Deposits, Without $5
Billion Deduction
A third alternative would be to
eliminate the proposed $5 billion
deduction from the assessment base for
the special assessment, and therefore
allocate the special assessments among
IDIs based on each IDI or banking
organization’s estimated uninsured
deposits as of December 31, 2022. This
alternative would result in special
assessments imposed on every IDI that
reported a non-zero amount of estimated
uninsured deposits as of December 31,
2022, or nearly 100 percent of all IDIs
with total assets of $1 billion or more.44
Relative to the proposal, more IDIs
would pay special assessments under
this alternative, and IDIs with greater
amounts of uninsured deposits would
generally pay lower special assessments
relative to the proposal since the special
assessments would be allocated across a
significantly larger number of
institutions.
However, given the FDIC’s statutory
requirement to consider the types of
entities that benefit from any action
taken or assistance provided under the
determination of systemic risk in
implementing special assessments, the
FDIC rejected this alternative in favor of
allocating the special assessments to
larger institutions with the largest
amounts of uninsured deposits, with the
result that smaller institutions would
not have to contribute to the special
assessments. In general, large banks and
regional banks, and particularly those
with large amounts of uninsured
deposits, were the banks most exposed
to and likely would have been the most
affected by uninsured deposit runs.
Generally speaking, larger banks
benefited the most from the stability
provided to the banking industry under
the systemic risk determination.
44 IDIs with less than $1 billion in total assets as
of June 30, 2021, were not required to report the
estimated amount of uninsured deposits on the Call
Report for December 31, 2022. Therefore, for IDIs
that had less than $1 billion in total assets as of June
30, 2021, the amount and share of estimated
uninsured deposits as of December 31, 2022, would
be zero.
E:\FR\FM\22MYP1.SGM
22MYP1
Federal Register / Vol. 88, No. 98 / Monday, May 22, 2023 / Proposed Rules
ddrumheller on DSK120RN23PROD with PROPOSALS1
Alternative 4: Special Assessments
Based on Each Institution’s Percentage
of Uninsured Deposits to Total Deposits
A fourth alternative would be to
allocate the special assessments among
IDIs based on each IDI’s estimated
uninsured deposits as a percentage of
their total domestic deposits reported as
of December 31, 2022, as a proxy for
reliance on uninsured deposits at the
time the determination of systemic risk
was made and uninsured depositors of
the failed institutions were protected.
Similar to the third alternative, this
would result in a special assessment
imposed on every IDI that reported a
non-zero amount of estimated
uninsured deposits as of December 31,
2022, or nearly 100 percent of IDIs with
total assets of $1 billion or more.45
Under this alternative, IDIs with a
greater reliance on uninsured deposits
would generally pay the greatest amount
of special assessments; however, the
special assessments would be allocated
across a large number of institutions.
This alternative would result in
institutions of vastly different asset sizes
paying a similar dollar amount of
special assessments. It also would result
in some smaller IDIs and banking
organizations, paying potentially
significant amounts of special
assessments, and the larger banks that
have high amounts of uninsured
deposits and benefited the most from
the stability provided to the banking
industry under the systemic risk
determination, but that do not have high
uninsured deposit concentrations,
paying a smaller share of special
assessments.
In general, large banks and regional
banks, and particularly those with large
amounts of uninsured deposits, were
the banks most exposed to and likely
would have been the most affected by
uninsured deposit runs. Generally
speaking, larger banks benefited the
most from the stability provided to the
banking industry under the systemic
risk determination. The FDIC rejected
this alternative for these reasons and
because the proposed methodology
results in larger special assessments for
similarly sized banking organizations
reporting greater concentrations of
uninsured deposits.
45 IDIs with less than $1 billion in total assets as
of June 30, 2021, were not required to report the
estimated amount of uninsured deposits on the Call
Report for December 31, 2022. Therefore, for IDIs
that had less than $1 billion in total assets as of June
30, 2021, the amount and share of estimated
uninsured deposits as of December 31, 2022, would
be zero.
VerDate Sep<11>2014
17:48 May 19, 2023
Jkt 259001
Alternative 5: Charge IDIs for 50 Percent
of Special Assessment in Year One
Based on Uninsured Deposits as of
December 31, 2022; Charge for the
Remainder in Year Two Based on
Uninsured Deposits Reported as of
December 31, 2023
Under the proposal and all
alternatives described, the special
assessments would initially be
calculated based on an estimated
amount of losses, as the exact amount of
losses will not be known until the FDIC
terminates the two receiverships. A final
alternative would be to collect 50
percent of the special assessments
during the initial four-quarter collection
period based on estimated uninsured
deposits reported by all IDIs as of
December 31, 2022, and collect the
remaining special assessments for an
additional four quarter collection period
based on an updated estimate of losses
pursuant to the systemic risk
determination and estimated uninsured
deposits reported by all IDIs as of
December 31, 2023.
Under this alternative, for the initial
four-quarter collection period the
special assessment would be allocated
to all IDIs based on each IDI or banking
organization’s estimated uninsured
deposits as a share of estimated
uninsured deposits reported by all IDIs
as of December 31, 2022, as a proxy for
the amount of uninsured deposits in
each institution at the time the
determination of systemic risk was
made and uninsured depositors of the
failed institutions were protected. Such
methodology would allocate the special
assessments to the institutions that had
the largest amounts of uninsured
deposits at the time of the determination
of systemic risk.
The remaining special assessments
would be based on an updated estimate
of losses as of December 31, 2023, and
would be allocated to IDIs with total
assets of $1 billion or more, based on
each IDI or banking organization’s
estimated uninsured deposits as a share
of estimated uninsured deposits
reported by all IDIs as of December 31,
2023, in order to reflect amounts of
uninsured deposits that did not run off
following the determination of systemic
risk.
The FDIC rejected this alternative
given the potential incentives for IDIs to
reduce their amount of uninsured
deposits ahead of the December 31,
2023, reporting date, which may result
in unintended market dislocations and
reduced liquidity in the banking sector.
This alternative may also change the
timing of accrual of the contingent
liability by banks. The proposal’s
PO 00000
Frm 00013
Fmt 4702
Sfmt 4702
32705
allocation methodology based on
amounts of uninsured deposits as of
December 31, 2022, would result in
transparent and consistent payments,
and a more simplified framework for
calculating special assessments.
Alternative 6: Apply Special
Assessment Rate to Regular Assessment
Base, With or Without Application of a
$5 Billion Deduction
A sixth alternative would be to apply
a special assessment rate to an
institution’s regular quarterly deposit
insurance assessment base (regular
assessment base) for that quarter, with
or without applying a $5 billion
deduction. Generally, an IDI’s
assessment base equals its average
consolidated total assets minus its
average tangible equity.46 Under this
alternative, the FDIC estimates that it
would need to charge an annual
assessment rate of 3.76 basis points over
two years to recover estimated losses
without the $5 billion deduction, or
4.57 basis points with the $5 billion
deduction; however, a significantly
larger number of banking organizations
would be subject to the special
assessments relative to the proposal.
Under this alternative, the IDIs with
the largest assessment base would pay
the greatest amount of special
assessments. IDIs for which certain
assets are excluded in the calculation of
the regular assessment base would pay
lower special assessments due to their
smaller assessment base.
This alternative would result in
smaller IDIs and banking organizations,
regardless of reliance on uninsured
deposits for funding, paying potentially
significant amounts of special
assessments. Further, IDIs engaged in
trust activities, or with fiduciary and
custody and safekeeping assets, and for
which certain assets are excluded from
their regular assessment base, would
pay lower amounts of special
assessments due to these exclusions,
despite holding significant amounts of
uninsured deposits. The FDIC rejected
this alternative for these reasons.
The FDIC requests comments on the
proposal and the alternative approaches
considered. The FDIC has carefully
weighed the available options in
fulfilling the statutory requirement to
recover the loss to the DIF arising from
the use of a systemic risk determination
through one or more special
assessments.
In the FDIC’s view, the proposal
reflects an appropriate balancing of the
goal of applying special assessments to
the types of entities that benefited the
46 See
E:\FR\FM\22MYP1.SGM
12 CFR 327.5.
22MYP1
32706
Federal Register / Vol. 88, No. 98 / Monday, May 22, 2023 / Proposed Rules
most from the protection of uninsured
depositors provided under the
determination of systemic risk while
ensuring equitable, transparent, and
consistent treatment based on amounts
of uninsured deposits at the time of the
determination of systemic risk. The
proposal also allows for payments to be
collected over an extended period of
time in order to mitigate the liquidity
effects of the special assessments by
requiring smaller, consistent quarterly
payments. On balance, in the FDIC’s
view, the proposal best promotes
maintenance of liquidity, which will
allow institutions to absorb any
potential unexpected setbacks while
continuing to meet the credit needs of
the U.S. economy.
ddrumheller on DSK120RN23PROD with PROPOSALS1
C. Comment Period, Effective Date, and
Application Date
The FDIC is issuing this proposal with
an opportunity for public comment
through July 21, 2023. Following the
comment period, the FDIC expects to
issue a final rule with an effective date
of January 1, 2024. The special
assessment would be collected
beginning with the first quarterly
assessment period of 2024 (i.e., January
1 through March 31, 2024, with an
invoice payment date of June 28, 2024),
and would continue to be collected for
an anticipated total of eight quarterly
assessment periods. Because the
estimated loss pursuant to the systemic
risk determination will be periodically
adjusted, the FDIC would retain the
ability to cease collection early, impose
an extended special assessment
collection period after the eight-quarter
collection period to collect the
difference between losses and the
amounts collected, and impose a final
shortfall special assessment after both
receiverships terminate.
V. Request for Comment
The FDIC is requesting comment on
all aspects of the notice of proposed
rulemaking, in addition to the specific
requests below.
Question 1: Should the special
assessments be calculated as proposed?
Question 2: Are there alternative
methodologies for calculating the
special assessments the FDIC should
consider that would result in financial
reporting in accordance with U.S. GAAP
and could result in different timing for
the impact to earnings and capital?
Please describe.
Question 3: Should the assessment
base for the special assessments be
equal to estimated uninsured deposits
reported as of December 31, 2022, or
reported as of some other date, and
why?
VerDate Sep<11>2014
17:48 May 19, 2023
Jkt 259001
Question 4: Should the assessment
base for the special assessments be
equal to estimated uninsured deposits
or some other measure?
Question 5: Is the deduction of $5
billion of aggregate estimated uninsured
deposits from the assessment base for
the special assessments for each IDI or
banking organization appropriate?
Why?
Question 6: Should the FDIC collect
special assessments over an eightquarter collection period, as proposed?
Should the collection period be longer
to spread out the effects of the payment
of special assessments, or shorter?
Question 7: Should the FDIC consider
an exemption for specific types of
deposits from the base for special
assessments? On what basis?
Question 8: Should any shortfall
special assessments be calculated as
proposed?
VI. Administrative Law Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA)
generally requires an agency, in
connection with a proposed rule, to
prepare and make available for public
comment an initial regulatory flexibility
analysis that describes the impact of the
proposed rule on small entities.47
However, an initial regulatory flexibility
analysis is not required if the agency
certifies that the proposed rule will not,
if promulgated, have a significant
economic impact on a substantial
number of small entities. The Small
Business Administration (SBA) has
defined ‘‘small entities’’ to include
banking organizations with total assets
of less than or equal to $850 million.48
Certain types of rules, such as rules of
particular applicability relating to rates,
corporate or financial structures, or
practices relating to such rates or
structures, are expressly excluded from
the definition of ‘‘rule’’ for purposes of
the RFA.49 Because the proposed rule
relates directly to the rates imposed on
FDIC-insured institutions, the proposed
rule is not subject to the RFA.
47 5
U.S.C. 601 et seq.
SBA defines a small banking organization
as having $850 million or less in assets, where an
organization’s ’’assets are determined by averaging
the assets reported on its four quarterly financial
statements for the preceding year.’’ See 13 CFR
121.201 (as amended by 87 FR 69118, effective
December 19, 2022). In its determination, the ’’SBA
counts the receipts, employees, or other measure of
size of the concern whose size is at issue and all
of its domestic and foreign affiliates.’’ See 13 CFR
121.103. Following these regulations, the FDIC uses
an insured depository institution’s affiliated and
acquired assets, averaged over the preceding four
quarters, to determine whether the insured
depository institution is ’’small’’ for the purposes of
RFA.
49 5 U.S.C. 601(2).
48 The
PO 00000
Frm 00014
Fmt 4702
Sfmt 4702
Nonetheless, the FDIC is voluntarily
presenting information in this RFA
section.
The FDIC insures 4,715 institutions as
of December 31, 2022, of which 3,433
are small entities.50 As discussed
previously, the proposed rule would
impose a special assessment on IDIs that
are part of banking organizations that
reported $5 billion or more in uninsured
deposits, as of December 31, 2022.
Given that no small entity has reported
$5 billion or more in uninsured
deposits, the FDIC does not believe the
proposed rule will have a direct effect
on any small entity.
The FDIC invites comments on all
aspects of the supporting information
provided in this RFA section. In
particular, would this proposed rule
have any significant effects on small
entities that the FDIC has not identified?
B. Paperwork Reduction Act
The Paperwork Reduction Act of
1995 51 (PRA) states that no agency may
conduct or sponsor, nor is the
respondent required to respond to, an
information collection unless it displays
a currently valid Office of Management
and Budget (OMB) control number. The
FDIC’s OMB control numbers for its
assessment regulations are 3064–0057,
3064–0151, and 3064–0179. The
proposed rule does not revise any of
these existing assessment information
collections pursuant to the PRA;
consequently, no submissions in
connection with these OMB control
numbers will be made to the OMB for
review.
C. Riegle Community Development and
Regulatory Improvement Act
Section 302(a) of the Riegle
Community Development and
Regulatory Improvement Act of 1994
(RCDRIA) 52 requires that the Federal
banking agencies, including the FDIC, in
determining the effective date and
administrative compliance requirements
of new regulations that impose
additional reporting, disclosure, or other
requirements on IDIs, consider,
consistent with principles of safety and
soundness and the public interest, any
administrative burdens that such
regulations would place on depository
institutions, including small depository
institutions, and customers of
depository institutions, as well as the
benefits of such regulations. Subject to
certain exceptions, new regulations and
amendments to regulations prescribed
by a Federal banking agency which
50 December
31, 2022 Call Report data.
U.S.C. 3501–3521.
52 12 U.S.C. 4802(a).
51 44
E:\FR\FM\22MYP1.SGM
22MYP1
Federal Register / Vol. 88, No. 98 / Monday, May 22, 2023 / Proposed Rules
impose additional reporting,
disclosures, or other new requirements
on insured depository institutions shall
take effect on the first day of a calendar
quarter which begins on or after the date
on which the regulations are published
in final form.53
The proposed rule would not impose
additional reporting, disclosure, or other
new requirements on insured depository
institutions, including small depository
institutions, or on the customers of
depository institutions. Accordingly,
section 302 of RCDRIA does not apply.
Nevertheless, the requirements of
RCDRIA will be considered as part of
the overall rulemaking process, and the
FDIC invites comments that will further
inform its consideration of RCDRIA.
D. Plain Language
Section 722 of the Gramm-LeachBliley Act 54 requires the Federal
banking agencies to use plain language
in all proposed and final rulemakings
published in the Federal Register after
January 1, 2000. The FDIC invites your
comments on how to make this
proposed rule easier to understand. For
example:
• Has the FDIC organized the material
to suit your needs? If not, how could the
material be better organized?
• Are the requirements in the
proposed regulation clearly stated? If
not, how could the regulation be stated
more clearly?
• Does the proposed regulation
contain language or jargon that is
unclear? If so, which language requires
clarification?
• Would a different format (grouping
and order of sections, use of headings,
paragraphing) make the regulation
easier to understand?
List of Subjects in 12 CFR Part 327
Bank deposit insurance, Banks,
banking, Savings associations.
Authority and Issuance
For the reasons stated in the
preamble, the Federal Deposit Insurance
Corporation proposes to amend 12 CFR
part 327 as follows:
ddrumheller on DSK120RN23PROD with PROPOSALS1
PART 327—ASSESSMENTS
1. The authority citation for part 327
is revised to read as follows:
■
Authority: 12 U.S.C. 1813, 1815, 1817–19,
1821, 1823.
■
2. Add § 327.13 to read as follows:
53 12
U.S.C. 4802(b).
Law 106–102, section 722, 113 Stat.
1338, 1471 (1999), 12 U.S.C. 4809.
54 Public
VerDate Sep<11>2014
17:48 May 19, 2023
Jkt 259001
§ 327.13 Special Assessment Pursuant to
March 12, 2023, Systemic Risk
Determination.
(a) Special assessment. A special
assessment shall be imposed on each
insured depository institution to recover
losses to the Deposit Insurance Fund, as
described in paragraph (b) of this
section, resulting from the March 12,
2023, systemic risk determination
pursuant to 12 U.S.C. 1823(c)(4)(G). The
special assessment shall be collected
from each insured depository institution
on a quarterly basis as described in this
section during the initial special
assessment period as defined in
paragraph (f) of this section and, if
necessary, the extended special
assessment period as defined in
paragraph (g) of this section, and if
further necessary, on a one-time basis as
described in paragraph (l) of this
section.
(b) Losses to the Deposit Insurance
Fund. As used in this section, ‘‘losses to
the Deposit Insurance Fund’’ refers to
losses incurred by the Deposit Insurance
Fund resulting from actions taken by the
FDIC under the March 12, 2023,
systemic risk determination, as may be
revised from time to time.
(c) Calculation of special assessment.
An insured depository institution’s
special assessment for each quarter
during the initial special assessment
period and extended special assessment
period shall be calculated by
multiplying the special assessment rate
defined in paragraph (f)(2) or (g)(3) of
this section, as appropriate, by the
institution’s special assessment base as
defined in paragraph (f)(3) or (g)(4) of
this section, as appropriate.
(d) Invoicing of special assessment.
For each assessment period in which
the special assessment is imposed, the
FDIC shall advise each insured
depository institution of the amount and
calculation of any special assessment
payment due in a form that notifies the
institution of the special assessment
base and special assessment rate
exclusive of any other assessments
imposed under this part. This
information shall be provided at the
same time as the institution’s quarterly
certified statement invoice under
§ 327.2 for the assessment period in
which the special assessment was
imposed.
(e) Payment of special assessment.
Each insured depository institution
shall pay to the Corporation any special
assessment imposed under this section
in compliance with and subject to the
provisions of §§ 327.3, 327.6, and 327.7.
The date for any special assessment
payment shall be the date provided in
§ 327.3(b)(2) for the institution’s
PO 00000
Frm 00015
Fmt 4702
Sfmt 4702
32707
quarterly certified statement invoice for
the calendar quarter in which the
special assessment was imposed.
(f) Special assessment during initial
special assessment period—(1) Initial
special assessment period. The initial
special assessment period shall begin
with the first quarterly assessment
period of 2024 and end the last
quarterly assessment period of 2025,
except the initial special assessment
period will cease the first quarterly
assessment period after the aggregate
amount of special assessments collected
under this section meets or exceeds the
losses to the Deposit Insurance Fund,
where amounts collected and losses are
compared on a quarterly basis.
(2) Special assessment rate during
initial special assessment period. The
special assessment rate during the
initial special assessment period is 3.13
basis points on a quarterly basis.
(3) Special assessment base during
initial special assessment period. (i) The
special assessment base for an insured
depository institution during the initial
special assessment period that has no
affiliated insured depository institution
shall equal:
(A) The institution’s uninsured
deposits, as described in paragraph (h)
of this section; minus
(B) The $5 billion deduction;
provided, however, that an institution’s
assessment base cannot be negative.
(ii) The special assessment base for an
insured depository institution during
the initial special assessment period
that has one or more affiliated insured
depository institutions shall equal:
(A) The institution’s uninsured
deposits, as described in paragraph (h)
of this section; minus
(B) The institution’s portion of the $5
billion deduction, determined according
to paragraph (i) of this section;
provided, however, that an institution’s
special assessment base cannot be
negative.
(g) Special assessment during
extended special assessment period—(1)
Shortfall amount. The shortfall amount
is the amount of losses to the Deposit
Insurance Fund, as reviewed and
revised as of the last quarterly
assessment period of 2025, that exceed
the aggregate amount of special
assessments collected during the initial
special assessment period.
(2) Extended special assessment
period. If there is a shortfall amount
after the last quarterly assessment
period of 2025, the special assessment
period will be extended, with at least 30
day notice to insured depository
institutions, to collect the shortfall
amount. The length of the extended
special assessment period shall be the
E:\FR\FM\22MYP1.SGM
22MYP1
ddrumheller on DSK120RN23PROD with PROPOSALS1
32708
Federal Register / Vol. 88, No. 98 / Monday, May 22, 2023 / Proposed Rules
minimum number of quarters required
to recover the shortfall amount at a rate
under paragraph (g)(3) of this section
that is at or below 3.13 basis points per
quarter.
(3) Assessment rate during extended
special assessment period. The
assessment rate during the extended
special assessment period will be the
shortfall amount, divided by the total
amount of uninsured deposits for the
quarter ended December 31, 2022,
adjusted for mergers, consolidation, and
termination of insurance as of the last
quarterly assessment period of 2025,
minus the $5 billion deduction for each
insured depository institution or each
institution’s portion of the $5 billion
deduction, determined according to
paragraph (i) of this section, divided by
the minimum number of quarters that
results in the quarterly rate being no
greater than 3.13 basis points.
(4) Assessment base during the
extended special assessment period. (i)
The special assessment base for an
insured depository institution during
the extended special assessment period
that has no affiliated insured depository
institution shall equal:
(A) The institution’s uninsured
deposits, as described in paragraph (h)
of this section, adjusted for mergers,
consolidation, and termination of
insurance as of the last assessment
period of 2025; minus
(B) The $5 billion deduction;
provided, however, that an institution’s
special assessment base cannot be
negative.
(ii) The special assessment base for an
insured depository institution during
the extended special assessment period
that has one or more affiliated insured
depository institutions shall equal:
(A) The institution’s uninsured
deposits, as described in paragraph (h)
of this section, adjusted for mergers,
consolidation, and termination of
insurance as of the last assessment
period of 2025; minus
(B) The institution’s portion of the $5
billion deduction, determined according
to paragraph (i) of this section;
provided, however, that an institution’s
special assessment base cannot be
negative.
(h) Uninsured deposits. For purposes
of this section, the term ‘‘uninsured
deposits’’ means an institution’s
estimated uninsured deposits as
reported in Memoranda Item 2 on
Schedule RC–O, Other Data For Deposit
Insurance Assessments in the
Consolidated Reports of Condition and
Income (Call Report) or Report of Assets
and Liabilities of U.S. Branches and
Agencies of Foreign Banks (FFIEC 002)
for the quarter ended December 31,
VerDate Sep<11>2014
17:48 May 19, 2023
Jkt 259001
2022, reported as of the date this rule is
adopted. Institutions with less than $1
billion in total assets as of June 30,
2021, were not required to report such
items; therefore, for purposes of
calculating special assessments or a
shortfall special assessment under this
section, the amount of uninsured
deposits for such institutions as of
December 31, 2022, is zero.
Amendments to an institution’s Call
Report or FFIEC 002 subsequent to the
date this rule is adopted by the Board
do not affect the amount of the
institution’s uninsured deposits for
purposes of calculating special
assessments or shortfall special
assessments under this section.
(i) Special assessment base—
institution’s portion of the $5 billion
deduction. For purposes of paragraphs
(f)(3)(ii)(B) and (g)(4)(ii)(B) of this
section, an institution’s portion shall
equal the ratio of the institution’s
uninsured deposits to the sum of the
institution’s uninsured deposits and the
uninsured deposits of all of the
institution’s affiliated insured
depository institutions, multiplied by $5
billion.
(j) Affiliates. For the purposes of this
section, an affiliated insured depository
institution is an insured depository
institution that meets the definition of
‘‘affiliate’’ in section 3 of the FDI Act,
12 U.S.C. 1813(w)(6).
(k) Effect of mergers, consolidations,
and other terminations of insurance on
special assessments—(1) Final quarterly
certified invoice for acquired institution.
The surviving or resulting insured
depository institution in a merger or
consolidation shall be liable for any
unpaid special assessments or final
shortfall special assessments
outstanding at the time of the merger or
consolidation on the part of the
institution that is not the resulting or
surviving institution consistent with
§ 327.6.
(2) Special assessment for quarter in
which the merger or consolidation
occurs. If an insured depository
institution is the surviving or resulting
institution in a merger or consolidation
or acquires all or substantially all of the
assets, or assumes all or substantially all
of the deposit liabilities, of an insured
depository institution, then the
surviving or resulting insured
depository institution or the insured
depository institution that acquires such
assets or assumes such deposit
liabilities, shall be liable for the
acquired institutions’ special
assessment, if any, from the quarter of
the acquisition through the remainder of
the initial or extended special
PO 00000
Frm 00016
Fmt 4702
Sfmt 4702
assessment period, including any final
shortfall special assessments.
(3) Other termination. When the
insured status of an institution is
terminated, and the deposit liabilities of
such institution are not assumed by
another insured depository institution,
special assessments and any shortfall
special assessments shall be paid
consistent with § 327.6(c).
(l) One-time final shortfall special
assessment. If the aggregate amount of
special assessments collected during the
initial or extended special assessment
period(s) do not meet or exceed the
losses to the Deposit Insurance Fund, as
calculated after the receiverships
resulting from the March 12, 2023
systemic risk determination are
terminated, insured depository
institutions shall pay a one-time final
shortfall special assessment in
accordance with this paragraph.
(1) Notification of final shortfall
special assessment. The FDIC shall
notify each insured depository
institution of the amount of such
institution’s final shortfall special
assessment no later than 45 days before
such shortfall assessment is due.
(2) Aggregate final shortfall special
assessment amount. The aggregate
amount of the final shortfall special
assessment imposed across all insured
depository institutions shall equal the
losses to the Deposit Insurance Fund, as
of termination of the receiverships to
which the March 12, 2023, systemic risk
determination applied, minus the
aggregate amount of special assessments
collected under this section through
initial and extended special assessment
periods.
(3) Final shortfall special assessment
rate. The final shortfall special
assessment rate shall be the aggregate
final shortfall special assessment
amount divided by the total amount of
uninsured deposits for the quarter
ended December 31, 2022, adjusted for
mergers, consolidation, and termination
of insurance as of the assessment period
preceding the final shortfall special
assessment period, minus the $5 billion
deduction for each insured depository
institution or each institution’s portion
of the $5 billion deduction, determined
according to paragraph (i) of this
section.
(4) Final shortfall special assessment
base. (i) The final shortfall special
assessment base for an insured
depository institution that has no
affiliated insured depository institution
shall equal:
(A) The institution’s uninsured
deposits, as described in paragraph (h)
of this section, adjusted for mergers,
consolidation, and termination of
E:\FR\FM\22MYP1.SGM
22MYP1
ddrumheller on DSK120RN23PROD with PROPOSALS1
Federal Register / Vol. 88, No. 98 / Monday, May 22, 2023 / Proposed Rules
insurance as of the assessment period
preceding the final short fall assessment
period; minus
(B) The $5 billion deduction;
provided, however, that an institution’s
final shortfall special assessment base
cannot be negative.
(ii) The final shortfall special
assessment base for an insured
depository institution that has one or
more affiliated insured depository
institutions shall equal:
(A) The institution’s uninsured
deposits, as described in paragraph (h)
of this section, adjusted for mergers,
consolidation, and termination of
insurance as of the assessment period
preceding the final shortfall assessment
period; minus
(B) The institution’s portion of the $5
billion deduction, determined according
to paragraph (i) of this section;
provided, however, that an institution’s
final shortfall special assessment base
cannot be negative.
(5) Calculation of final shortfall
special assessment. An insured
depository institution’s final shortfall
special assessment shall be calculated
by multiplying the final shortfall special
assessment rate by the institution’s final
shortfall special assessment base as
defined in paragraph (l)(4) of this
section.
(6) One-time final special assessment.
The one-time final shortfall special
assessment shall be collected on a onetime quarterly basis after final losses to
the Deposit Insurance Fund are
determined after termination of the
receiverships to which the March 12,
2023, systemic risk determination
applied.
(7) Payment, invoicing, and mergers.
Paragraphs (d), (e), and (k) of this
section are applicable to the one-time
shortfall special assessment.
(m) Request for revisions. An insured
depository institution may submit a
written request for revision of the
computation of any special assessment
or shortfall special assessment pursuant
to this part consistent with § 327.3(f).
(n) Special assessment collection in
excess of losses. Any special
assessments collected under this section
that exceed the losses to the Deposit
Insurance Fund, as of termination of the
receiverships to which the March 12,
2023, systemic risk determination
applied, shall be placed in the Deposit
Insurance Fund.
(o) Rule of construction. Nothing in
this section shall prevent the FDIC from
imposing additional special assessments
as required to recover current or future
losses to the Deposit Insurance Fund
resulting from any systemic risk
VerDate Sep<11>2014
17:48 May 19, 2023
Jkt 259001
determination under 12 U.S.C.
1823(c)(4)(G).
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on May 11, 2023.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2023–10447 Filed 5–19–23; 8:45 am]
BILLING CODE 6714–01–P
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
33 CFR Part 117
[Docket No. USCG–2023–0188]
RIN 1625–AA09
Drawbridge Operation Regulation;
Cuyahoga River, Cleveland, OH
Coast Guard, DHS.
Notice of proposed rulemaking.
AGENCY:
ACTION:
The Coast Guard proposes to
create a new operating schedule to
govern all movable bridges over the
Cuyahoga River. The Coast Guard is also
proposing new rules that will assist
mariners signal for and anticipate bridge
openings. Mariners have raised
concerns to the Ninth Coast Guard
District Commander regarding the safety
and consistency of moveable bridge
operations on the Cuyahoga River.
These additions are proposed in
response to those concerns. We invite
your comments on this proposed
rulemaking.
SUMMARY:
Comments and relate material
must reach the Coast Guard on or before
July 21, 2023.
ADDRESSES: You may submit comments
identified by docket number USCG–
2023–0188 using Federal DecisionMaking Portal at https://
www.regulations.gov.
See the ‘‘Public Participation and
Request for Comments’’ portion of the
SUPPLEMENTARY INFORMATION section
below for instructions on submitting
comments.
DATES:
If
you have questions on this proposed
rule, call or email If you have questions
on this temporary final rule, call or
email Mr. Lee D. Soule, Bridge
Management Specialist, Ninth Coast
Guard District; telephone 216–902–
6085, email Lee.D.Soule@uscg.mil.
SUPPLEMENTARY INFORMATION:
FOR FURTHER INFORMATION CONTACT:
I. Table of Abbreviations
CFR
PO 00000
Code of Federal Regulations
Frm 00017
Fmt 4702
Sfmt 4702
32709
CRSTF Cuyahoga River Safety Task Force
DHS Department of Homeland Security
FR Federal Register
IGLD85 International Great Lakes Datum of
1985
LWD Low Water Datum Based on IGLD85
OMB Office of Management and Budget
PAWSA Ports And Waterway Safety
Assessment
NPRM Notice of Proposed Rulemaking
§ Section
U.S.C. United States Code
II. Background, Purpose, and Legal
Basis
The Cuyahoga River is over 100-miles
in length and empties into Lake Erie at
Cleveland, Ohio, but only the last 7miles of the river are considered
navigable for interstate commerce
purposes. The Cuyahoga River system
consists of the Cuyahoga River and the
Old River Channel, the original outflow
channel of the Cuyahoga River. The
Cuyahoga River has multiple sharp
bends that make visibility down river
impossible and is designated as an
American Heritage River by Executive
Order 13061.
Twenty-four bridges cross the
Cuyahoga River. These bridges
accommodate small powered and nonpowered recreational vessels, along with
large commercial vessels of up to 700
feet in length.
The Cuyahoga River is considered one
of the major industrial centers in the
Great Lakes and handles several
commodities for domestic and
international commerce, including steel,
heavy machinery, dry and liquid bulk
products, and salt.
The United States and Canadian Coast
Guard conduct fall and spring icebreaking operations in the Cuyahoga
River, depending on shipping schedules
and weather conditions.
Heavy recreational traffic is
concentrated in the Old River and on
the Cuyahoga River up to mile 2.42
during the summer.
All vertical clearances over the
Cuyahoga River and Old River Channel
are based on IGLD85. Two bridges cross
the Old River Channel:
1. The CSX Railroad Bridge, mile
0.89, is a single leaf bascule bridge that
provides a horizontal clearance of 170feet and a vertical clearance of 6-feet in
the closed position and an unlimited
clearance in the open position. This
bridge is maintained in the open
position.
2. The Willow Avenue Bridge, mile
1.02, is a vertical lift bridge that
provides a horizontal clearance of 150feet and a vertical clearance of 12-feet in
the closed position and 98 feet in the
open position.
E:\FR\FM\22MYP1.SGM
22MYP1
]]>Agencies
[Federal Register Volume 88, Number 98 (Monday, May 22, 2023)]
[Proposed Rules]
[Pages 32694-32709]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-10447]
=======================================================================
-----------------------------------------------------------------------
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 327
RIN 3064-AF93
Special Assessments Pursuant to Systemic Risk Determination
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: The FDIC is seeking comment on a proposed rule that would
impose special assessments to recover the loss to the Deposit Insurance
Fund (DIF or Fund) arising from the protection of uninsured depositors
in connection with the systemic risk determination announced on March
12, 2023, following the closures of Silicon Valley Bank, Santa Clara,
CA, and Signature Bank, New York, NY, as required by the Federal
Deposit Insurance Act (FDI Act). The assessment base for the special
assessments would be equal to an insured depository institution's (IDI)
estimated uninsured deposits, reported as of December 31, 2022,
adjusted to exclude the first $5 billion in estimated uninsured
deposits from the IDI, or for IDIs that are part of a holding company
with one or more subsidiary IDIs, at the banking organization level.
The FDIC is proposing to collect special assessments at an annual rate
of approximately 12.5 basis points, over eight quarterly assessment
periods, which it estimates will result in total revenue of $15.8
billion. Because the estimated loss pursuant to the systemic risk
determination will be periodically adjusted, the FDIC would retain the
ability to cease collection early, extend the special assessment
collection period one or more quarters beyond the initial eight-quarter
collection period to collect the difference between actual or estimated
losses and the amounts collected, and impose a final shortfall special
assessment on a one-time basis after the receiverships for Silicon
Valley Bank and Signature Bank terminate. The FDIC is proposing an
effective date of January 1, 2024, with special assessments collected
beginning with the first quarterly assessment period of 2024 (i.e.,
January 1 through March 31, 2024, with an invoice payment date of June
28, 2024).
DATES: Comments must be received on or before July 21, 2023.
ADDRESSES: Interested parties are invited to submit written comments,
identified by RIN 3064-AF93, by any of the following methods:
Agency Website: https://www.fdic.gov/resources/regulations/federal-register-publications/. Follow the instructions for
submitting comments on the agency website.
Email: [email protected]. Include RIN 3064-AF93 in the
subject line of the message.
Mail: James P. Sheesley, Assistant Executive Secretary,
Attention: Comments-RIN 3064-AF93, Federal Deposit Insurance
Corporation, 550 17th Street NW, Washington, DC 20429.
Hand Delivery: Comments may be hand delivered to the guard
station at the rear of the 550 17th Street NW building (located on F
Street NW) on business days between 7 a.m. and 5 p.m.
Public Inspection: Comments received, including any
personal information provided, may be posted without change to https://www.fdic.gov/resources/regulations/federal-register-publications/.
Commenters should submit only information that the commenter wishes to
make available publicly. The FDIC may review, redact, or refrain from
posting all or any portion of any comment that it may deem to be
inappropriate for publication, such as irrelevant or obscene material.
The FDIC may post only a single representative example of identical or
substantially identical comments, and in such cases will generally
identify the number of identical or substantially identical comments
represented by the posted example. All comments that have been
redacted, as well as those that have not been posted, that contain
comments on the merits of this document will be retained in the public
comment file and will be considered as required under all applicable
laws. All comments may be accessible under the Freedom of Information
Act.
FOR FURTHER INFORMATION CONTACT: Division of Insurance and Research:
Michael Spencer, Associate Director, Financial Risk Management Branch,
202-898-7041, [email protected]; Kayla Shoemaker, Acting Chief,
Banking and Regulatory Policy, 202-898-6962, [email protected];
Legal Division: Sheikha Kapoor, Senior Counsel, 202-898-3960,
[email protected]; Ryan McCarthy, Counsel, 202-898-7301,
[email protected].
SUPPLEMENTARY INFORMATION:
I. Background
On March 10, 2023, Silicon Valley Bank was closed by the California
Department of Financial Protection and Innovation, followed by the
closure of Signature Bank by the New York State Department of Financial
Services. The
[[Page 32695]]
FDIC was appointed as the receiver for both institutions.1 2
---------------------------------------------------------------------------
\1\ FDIC PR-16-2023. ``FDIC Creates a Deposit Insurance National
Bank of Santa Clara to Protect Insured Depositors of Silicon Valley
Bank, Santa Clara, California.'' March 10, 2023. https://www.fdic.gov/news/press-releases/2023/pr23016.html.
\2\ FDIC PR-18-2023. ``FDIC Establishes Signature Bridge Bank,
N.A., as Successor to Signature Bank, New York, NY.'' March 12,
2023. https://www.fdic.gov/news/press-releases/2023/pr23018.html.
---------------------------------------------------------------------------
Section 13(c)(4)(G) of the FDI Act permits the FDIC to take action
or provide assistance to an IDI for which the FDIC has been appointed
receiver as necessary to avoid or mitigate adverse effects on economic
conditions or financial stability, following a recommendation by the
FDIC Board of Directors (Board), with the written concurrence of the
Board of Governors of the Federal Reserve System (Board of Governors),
and a determination of systemic risk by the Secretary of the U.S.
Department of Treasury (Treasury) (in consultation with the
President).\3\
---------------------------------------------------------------------------
\3\ 12 U.S.C. 1823(c)(4)(G). As used in this proposed rule, the
term ``bank'' is synonymous with the term ``insured depository
institution'' as it is used in section 3(c)(2) of the FDI Act, 12
U.S.C. 1813(c)(2).
---------------------------------------------------------------------------
On March 12, 2023, the Secretary of the Treasury, acting on the
recommendation of the FDIC Board and Board of Governors and after
consultation with the President, invoked the statutory systemic risk
exception to allow the FDIC to complete its resolution of both Silicon
Valley Bank and Signature Bank in a manner that fully protects all
depositors.\4\ The full protection of all depositors, rather than
imposing losses on uninsured depositors, was intended to strengthen
public confidence in the nation's banking system.
---------------------------------------------------------------------------
\4\ 12 U.S.C. 1823(c)(4)(G). See also: FDIC PR-17-2023. ``Joint
Statement by the Department of the Treasury, Federal Reserve, and
FDIC.'' March 12, 2023. https://www.fdic.gov/news/press-releases/2023/pr23017.html. See also: ``Remarks by Chairman Martin J.
Gruenberg on Recent Bank Failures and the Federal Regulatory
Response before the Committee on Banking, Housing, and Urban
Affairs, United States Senate.'' March 27, 2023. https://www.fdic.gov/news/speeches/2023/spmar2723.html.
---------------------------------------------------------------------------
On March 12 and 13, 2023, the FDIC transferred all deposits--both
insured and uninsured--and substantially all assets of these banks to
newly created, full-service FDIC-operated bridge banks, Silicon Valley
Bridge Bank, N.A. (Silicon Valley Bridge Bank) and Signature Bridge
Bank, N.A. (Signature Bridge Bank), in an action designed to protect
all depositors of these banks.\5\ The transfer of all deposits was
completed under the systemic risk exception declared on March 12, 2023.
---------------------------------------------------------------------------
\5\ A bridge bank is a chartered national bank that operates
under a board appointed by the FDIC. It assumes the deposits and
certain other liabilities and purchases certain assets of a failed
bank. The bridge bank structure is designed to ``bridge'' the gap
between the failure of a bank and the time when the FDIC can
stabilize the institution and implement an orderly resolution.
---------------------------------------------------------------------------
On March 19, 2023, the FDIC announced it entered into a purchase
and assumption agreement for substantially all deposits and certain
loan portfolios of Signature Bridge Bank.\6\ On March 27, 2023, the
FDIC entered into a purchase and assumption agreement for all deposits
and loans of Silicon Valley Bridge Bank. This announcement also
disclosed that the FDIC and First-Citizens Bank & Trust Company (First
Citizens) entered into a loss-share transaction on the commercial loans
it purchased from Silicon Valley Bridge Bank.\7\
---------------------------------------------------------------------------
\6\ FDIC PR-21-2023. ``Subsidiary of New York Community Bancorp,
Inc. to Assume Deposits of Signature Bridge Bank, N.A., From the
FDIC.'' March 19, 2023. https://www.fdic.gov/news/press-releases/2023/pr23021.html. The purchase and assumption agreement did not
include approximately $4 billion of deposits related to the former
Signature Bank's digital-asset banking business. The FDIC announced
that it would provide these deposits directly to customers whose
accounts are associated with the digital-asset banking business.
\7\ FDIC PR-23-2023. ``First-Citizens Bank & Trust Company,
Raleigh, NC, to Assume All Deposits and Loans of Silicon Valley
Bridge Bank, N.A., From the FDIC.'' March 26, 2023. https://www.fdic.gov/news/press-releases/2023/pr23023.html.
---------------------------------------------------------------------------
II. Legal Authority and Policy Objectives
Under section 13(c)(4)(G) of the FDI Act, the loss to the DIF
arising from the use of a systemic risk exception must be recovered
from one or more special assessments on IDIs, depository institution
holding companies (with the concurrence of the Secretary of the
Treasury with respect to holding companies), or both, as the FDIC
determines to be appropriate.\8\ As required by the FDI Act, the
proposed special assessment, detailed below, is intended and designed
to recover the losses to the DIF incurred as the result of the actions
taken by the FDIC to protect the uninsured depositors of Silicon Valley
Bank and Signature Bank following a determination of systemic risk.\9\
---------------------------------------------------------------------------
\8\ 12 U.S.C. 1823(c)(4)(G)(ii)(I).
\9\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
---------------------------------------------------------------------------
Section 13(c)(4)(G) of the FDI Act provides the FDIC with
discretion in the design and timeframe for any special assessments to
recover the losses to the DIF as a result of the systemic risk
determination. As detailed in the sections that follow, in implementing
special assessments under section 13(c)(4)(G) of the FDI Act, the FDIC
considered the types of entities that benefit from any action taken or
assistance provided under the determination of systemic risk, economic
conditions, the effects on the industry, and such other factors as the
FDIC deemed appropriate and relevant to the action taken or assistance
provided.\10\
---------------------------------------------------------------------------
\10\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
---------------------------------------------------------------------------
III. Description of the Proposed Rule
A. Summary
The FDIC is seeking comment on a proposed rule that would impose
special assessments to recover the loss to the DIF arising from the
protection of uninsured depositors in connection with the systemic risk
determination announced on March 12, 2023, following the closures of
Silicon Valley Bank and Signature Bank, as required by the FDI Act. The
total amount collected for the special assessments would be
approximately equal to the losses attributable to the protection of
uninsured depositors at these two failed banks, which are currently
estimated to total $15.8 billion.
The FDIC proposes an annual special assessment rate of
approximately 12.5 basis points. The assessment base for the special
assessments would be equal to an IDI's estimated uninsured deposits as
reported in the Consolidated Reports of Condition and Income (Call
Report) or Report of Assets and Liabilities of U.S. Branches and
Agencies of Foreign Banks (FFIEC 002) as of December 31, 2022, with
certain adjustments. The special assessments would be collected over an
eight-quarter collection period, at a quarterly special assessment rate
of 3.13 basis points. Over such collection period, the FDIC estimates
that it would collect an amount sufficient to recover estimated losses
attributable to the protection of uninsured depositors of Silicon
Valley Bank and Signature Bank, which are currently estimated to total
$15.8 billion, totaling approximately $2.0 billion per quarter.
The assessment base for the special assessments would be adjusted
to exclude the first $5 billion from estimated uninsured deposits
reported as of December 31, 2022, applicable either to the IDI, if an
IDI is not a subsidiary of a holding company, or at the banking
organization level, to the extent that an IDI is part of a holding
company with one or more subsidiary IDIs.\11\
---------------------------------------------------------------------------
\11\ As used in this proposal, the term ``banking organization''
includes IDIs that are not subsidiaries of a holding company as well
as holding companies with one or more subsidiary IDIs.
---------------------------------------------------------------------------
[[Page 32696]]
If an IDI is part of a holding company with one or more subsidiary
IDIs, the $5 billion deduction would be apportioned based on its
estimated uninsured deposits as a percentage of total estimated
uninsured deposits held by all IDI affiliates in the banking
organization.12 13
---------------------------------------------------------------------------
\12\ As used in this proposal, the term ``affiliate'' has the
same meaning as defined in section 3 of the FDIC Act, 12 U.S.C.
1813(w)(6), which references the Bank Holding Company Act (``any
company that controls, is controlled by, or is under common control
with another company''). See 12 U.S.C. 1841(k).
\13\ IDIs with less than $1 billion in total assets as of June
30, 2021, were not required to report the estimated amount of
uninsured deposits on the Call Report for December 31, 2022.
Therefore, for IDIs that had less than $1 billion in total assets as
of June 30, 2021, the amount and share of estimated uninsured
deposits as of December 31, 2022, would be zero.
---------------------------------------------------------------------------
The estimated loss attributable to the protection of uninsured
depositors pursuant to the systemic risk determination is currently
estimated to total $15.8 billion. However, as with all failed bank
receiverships, this estimate will be periodically adjusted as assets
are sold, liabilities are satisfied, and receivership expenses are
incurred. The exact amount of losses incurred will be determined when
the FDIC terminates the receiverships.
If, prior to the end of the eight-quarter collection period, the
FDIC expects the loss to be lower than the amount it expects to collect
from the special assessments, the FDIC would cease collection in the
quarter after it has collected enough to recover actual or estimated
losses. Alternatively, if at the end of the eight-quarter collection
period, the estimated or actual loss exceeds the amount collected, the
FDIC would extend the collection period over one or more quarters, as
needed, to recover the difference between the amount collected and the
estimated or actual loss, at a rate that would not exceed the 3.13
basis point quarterly special assessment rate applied during the
initial eight-quarter collection period.
Receiverships are terminated once the FDIC has completed the
disposition of the receivership's assets and has resolved all
obligations, claims, and other impediments. The termination of the
receiverships to which the March 12, 2023, systemic risk determination
applied may occur years after the initial eight-quarter collection
period and any extended collection period. In the likely event that the
final loss amount at the termination of the receiverships is not
determined until after the special assessments have been collected, and
if the actual losses calculated as of the termination of the
receiverships exceed the amount collected through such special
assessments, the FDIC would impose a one-time final shortfall special
assessment to collect the amount of actual losses in excess of the
amount of special assessments collected, if any.
B. Estimated Special Assessment Amount
By statute, the FDIC is required to recover through special
assessments any losses to the DIF incurred as a result of the actions
of the FDIC pursuant to the determination of systemic risk, which, in
the case of the determination pursuant to the closures of Silicon
Valley Bank and Signature Bank, was to protect uninsured
depositors.\14\ To determine the amount of the cost of the failures
attributable to the cost of covering uninsured deposits, the FDIC
determined the percentage of deposits that were uninsured at the time
of failure and applied that percentage to the total cost of the failure
for each bank. At Signature Bank, for which 67 percent of deposits were
uninsured at the point of failure, the portion of the total estimated
loss of $2.4 billion that is attributable to the protection of
uninsured depositors is $1.6 billion.
---------------------------------------------------------------------------
\14\ 12 U.S.C. 1823(c)(4)(G)(ii).
---------------------------------------------------------------------------
At Silicon Valley Bank, for which 88 percent of deposits were
uninsured at the point of failure, the portion of the total estimated
loss of $16.1 billion that is attributable to the protection of
uninsured depositors is $14.2 billion. The cost estimate for the sale
of the Silicon Valley Bridge Bank to First Citizens has been revised
from the original estimate of $20.0 billion to approximately $16.1
billion due to a decrease in the amount of liabilities assumed by First
Citizens relative to the initial estimate, higher anticipated
recoveries from certain other assets in receivership, and an increase
in the market value of receivership securities. This revised cost
estimate forms the basis for the Silicon Valley Bank portion of the
current special assessment calculation, and, as with all failed bank
receiverships, will be periodically adjusted as assets are sold,
liabilities are satisfied, and receivership expenses are incurred. As
noted below, the amount of the special assessment will be adjusted as
the loss estimate changes.
In total, of the $18.5 billion in estimated losses at the two banks
and incurred by the DIF in the first quarter of 2023, the estimated
loss attributable to the protection of uninsured depositors was $15.8
billion.
C. Rate for the Special Assessments
Under the proposal, the FDIC would impose a special assessment
equal to approximately 12.5 basis points annually. The special
assessment rate was derived by dividing the current loss estimate
attributable to the protection of uninsured depositors of $15.8 billion
by the proposed assessment base calculated for all IDIs subject to
special assessments as of December 31, 2022, totaling $6.3 trillion. As
described in detail below, the proposed assessment base is equal to
estimated uninsured deposits reported as of December 31, 2022, after
applying the $5 billion deduction. The resulting rate is then divided
by two to reflect the two year (eight-quarter) collection period, as
described below, resulting in an annual rate of approximately 12.5
basis points, or a quarterly rate of 3.13 basis points. The special
assessment rate is subject to change prior to any final rule depending
on any adjustments to the loss estimate, mergers or failures, or
amendments to reported estimates of uninsured deposits.\15\ Over the
eight-quarter collection period, the FDIC estimates that it would
collect an amount sufficient to recover estimated losses attributable
to the protection of uninsured depositors of Silicon Valley Bank and
Signature Bank, which are currently estimated to total $15.8 billion,
totaling approximately $2.0 billion per quarter.
---------------------------------------------------------------------------
\15\ Estimates of the special assessment rate and expected
effects in this proposed rule generally reflect any amendments to
data reported through February 21, 2023, for the reporting period
ending December 31, 2022. Given the closure of First Republic Bank,
San Francisco, CA announced on May 1, 2023, estimates in this
proposed rule exclude First Republic Bank in addition to Silicon
Valley Bank and Signature Bank. See FDIC: PR-34-2023. ``JPMorgan
Chase Bank, National Association, Columbus, Ohio Assumes All the
Deposits of First Republic Bank, San Francisco, California.'' May 1,
2023. https://www.fdic.gov/news/press-releases/2023/pr23034.html.
---------------------------------------------------------------------------
D. Assessment Base for the Special Assessments
Under the proposal, each IDI's assessment base for the special
assessments would be equal to estimated uninsured deposits as reported
in the Call Report or FFIEC 002 as of December 31, 2022, with certain
adjustments.\16\ The assessment base for the special assessments would
be adjusted to exclude the first $5 billion from estimated uninsured
deposits reported as of December 31, 2022, applicable either to the
IDI, if an IDI is not a subsidiary of a holding company,
[[Page 32697]]
or at the banking organization level, to the extent that an IDI is part
of a holding company with one or more subsidiary IDIs. Estimated
uninsured deposits as of December 31, 2022, are the most recently
available data reflecting the amount of uninsured deposits in each
institution near or at the time the determination of systemic risk was
made and the uninsured depositors of the failed institutions were
protected. Using estimated uninsured deposits as of December 31, 2022,
in calculating special assessments would result in institutions that
had the largest amounts of uninsured deposits at the time of the
determination of systemic risk paying a larger share of the special
assessments.
---------------------------------------------------------------------------
\16\ Estimated uninsured deposits are reported in Memoranda Item
2 on Schedule RC-O, Other Data for Deposit Insurance Assessments of
both the Call Report and FFIEC 002.
---------------------------------------------------------------------------
Defining the assessment base for the special assessment as
estimated uninsured deposits reported as of December 31, 2022, and
deducting $5 billion from an IDI or banking organization's assessment
base, would have the result that any banking organization that reported
less than $5 billion in uninsured deposits would not be subject to the
special assessment.
In general, large banks and regional banks, and particularly those
with large amounts of uninsured deposits, were the banks most exposed
to and likely would have been the most affected by uninsured deposit
runs. Indeed, shortly after Silicon Valley Bank was closed, a number of
institutions with large amounts of uninsured deposits reported that
depositors had begun to withdraw their funds. The failure of Silicon
Valley Bank and the impending failure of Signature Bank raised concerns
that, absent immediate assistance for uninsured depositors, there could
be negative knock-on consequences for similarly situated institutions,
depositors and the financial system more broadly. Generally speaking,
larger banks benefited the most from the stability provided to the
banking industry under the systemic risk determination.
With the rapid collapse of Silicon Valley Bank and Signature Bank
in the space of 48 hours, concerns arose that risk could spread more
widely to other institutions and that the financial system as a whole
could be placed at risk. Shortly after Silicon Valley Bank was closed
on March 10, 2023, a number of institutions with large amounts of
uninsured deposits reported that depositors had begun to withdraw their
funds. The extent to which IDIs rely on uninsured deposits for funding
varies significantly. Uninsured deposits were used to fund nearly
three-quarters of assets at Silicon Valley Bank and Signature Bank.
On average, the largest banking organizations by asset size fund a
larger share of assets with uninsured deposits, as depicted in Table 1
below, based on data as of December 31, 2022. Among banking
organizations that report uninsured deposits, those with total assets
between $1 billion and $5 billion are generally the least reliant on
uninsured deposits for funding, with uninsured deposits averaging 28.1
percent of assets, compared with the largest banking organizations with
total assets greater than $250 billion, which had uninsured deposits
that averaged 35.8 percent of assets.
Table 1--Average Share of Assets Funded by Uninsured Deposits, by
Banking Organization Asset Size
[Percent]
------------------------------------------------------------------------
Average share of
assets funded by
Asset size of banking organization uninsured deposits
(percent)
------------------------------------------------------------------------
$1 to $5 Billion.................................. 28.1
$5 to $10 Billion................................. 28.9
$10 to $50 Billion................................ 32.1
$50 to $250 Billion............................... 34.2
Greater than $250 Billion......................... 35.8
------------------------------------------------------------------------
Deposits are the most common funding source for many institutions;
however, other liability sources such as borrowings can also provide
funding. Deposits and other liability sources are often differentiated
by their stability and customer profile characteristics. While some
uninsured deposit relationships remain stable when a bank is in good
condition, such relationships might become less stable due to their
uninsured status if a bank experiences financial problems or if the
banking industry experiences stress events.
Uninsured deposit concentrations of IDIs, meaning the percentage of
domestic deposits that are uninsured, also vary significantly. At
Silicon Valley Bank, 88 percent of deposits were uninsured at the point
of failure compared to 67 percent at Signature Bank. On average, the
largest banking organizations by asset size reported significantly
greater uninsured deposit concentrations relative to smaller banking
organizations, as illustrated in Table 2 below, based on data as of
December 31, 2022. Banking organizations with total assets between $1
billion and $5 billion generally reported the lowest percentage of
uninsured deposits to total domestic deposits, averaging 33.2 percent,
compared with the largest banking organizations with total assets
greater than $250 billion, which averaged 51.8 percent.
Table 2--Uninsured Deposits as a Percentage of Total Domestic Deposits,
by Banking Organization Asset Size
[Percent]
------------------------------------------------------------------------
Ratio of uninsured
deposits to total
Asset size of banking organization domestic deposits
(percent)
------------------------------------------------------------------------
$1 to $5 Billion.................................. 33.2
$5 to $10 Billion................................. 35.0
$10 to $50 Billion................................ 39.9
[[Page 32698]]
$50 to $250 Billion............................... 44.2
Greater than $250 Billion......................... 51.8
------------------------------------------------------------------------
Based on Federal Reserve data reported by a sample of domestically
chartered banks, domestic deposits declined by over 2 percent during
the first two months of 2023, predominately among the top 25 commercial
banks by asset size. This followed similar declines in domestic
deposits over the prior three quarters, likely driven by the shift of
certain types of deposits into higher-yielding alternatives. Following
the March 2023 bank failures and the determination of systemic risk,
deposits of the top 25 commercial banks grew slightly while deposit
outflows rapidly accelerated, with banks outside of the top 25
experiencing a four percent decline in two weeks. Since late March,
Federal Reserve data indicates that deposit flows have stabilized, with
some reversal of prior outflows.\17\ First quarter earnings releases of
select regional banks confirmed sizeable outflows of deposits, while
other large and regional banks reported more modest declines or
inflows.
---------------------------------------------------------------------------
\17\ Board of Governors of the Federal Reserve System. Assets
and Liabilities of Commercial Banks in the United States--H.8.
Available at: https://www.federalreserve.gov/releases/h8/default.htm.
---------------------------------------------------------------------------
Following the announcement of the systemic risk determination, the
FDIC observed a significant slowdown in uninsured deposits leaving
certain institutions, evidence that the systemic risk determination
helped stem the outflow of these deposits while providing stability to
the banking industry.
Under the proposal, the banks that benefited most from the
assistance provided under the systemic risk determination would be
charged special assessments to recover losses to the DIF resulting from
the protection of uninsured depositors, with banks of larger asset
sizes and that hold greater amounts of uninsured deposits paying higher
special assessments.
For banking organizations that have more than one subsidiary IDI,
the assessment base for the special assessments would be equal to its
total estimated uninsured deposits reported as of December 31, 2022,
less its share of the $5 billion deduction, which would be based on its
share of total estimated uninsured deposits held by all IDI affiliates
in the banking organization. 18 19 Table 3 provides an
example of the calculation of special assessments for a banking
organization with three subsidiary IDIs.
---------------------------------------------------------------------------
\18\ As used in this NPR, the term ``affiliate'' has the same
meaning as defined in section 3 of the FDIC Act, 12 U.S.C.
1813(w)(6), which references the Bank Holding Company Act (``any
company that controls, is controlled by, or is under common control
with another company''). See 12 U.S.C. 1841(k).
\19\ IDIs with less than $1 billion in total assets as of June
30, 2021, were not required to report the estimated amount of
uninsured deposits on the Call Report for December 31, 2022.
Therefore, for IDIs that had less than $1 billion in total assets as
of June 30, 2021, and that are part of a banking organization with
more than one IDI subsidiary, the amount and share of estimated
uninsured deposits as of December 31, 2022, would be zero.
Table 3--Calculation of Special Assessments within a Banking Organization With More Than One Insured Depository Institution Subsidiary
[Dollar amounts in millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
----------------------------------------------------------------------------------------------------------------
IDI share of
banking IDI Share of special
Estimated organization IDI share of $5 billion Assessment base for assessments (Column D
uninsured deposits estimated deduction (Column B * special assessment * 25 basis points)/
as reported as of uninsured $5 billion) (Column A - Column C) current loss estimate
December 31, 2022 deposits (percent)
(percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
IDI A.................................. $50,000 50 $2,500 $47,500 0.75
IDI B.................................. 40,000 40 2,000 38,000 0.60
IDI C.................................. 10,000 10 500 9,500 0.15
--------------------------------------------------------------------------------------------------------------------------------------------------------
The adjustments to the assessment base for the special assessments
would serve several purposes. First, IDIs without affiliates and
banking organizations, that reported $5 billion or less in estimated
uninsured deposits as of December 31, 2022, would not contribute to the
special assessments. IDIs and banking organizations that reported more
than $5 billion in estimated uninsured deposits would pay based on the
marginal amounts of uninsured deposits they reported, helping to
mitigate a ``cliff effect'' that might otherwise apply if a different
method, such as an asset size threshold, were used to determine
applicability, and thereby ensuring more equitable treatment.
Otherwise, a banking organization just over a particular size threshold
would pay special assessments, while a banking organization just below
such size threshold would pay none. In general, large banks and
regional banks, and particularly those with large amounts of uninsured
deposits, were the banks most exposed to and likely would have been the
most affected by uninsured deposit runs. Indeed, shortly after
[[Page 32699]]
Silicon Valley Bank was closed, a number of institutions with large
amounts of uninsured deposits reported that depositors had begun to
withdraw their funds. The failure of Silicon Valley Bank and the
impending failure of Signature Bank raised concerns that, absent
immediate assistance for uninsured depositors, there could be negative
knock-on consequences for similarly situated institutions, depositors
and the financial system more broadly. Generally speaking, larger banks
benefited the most from the stability provided to the banking industry
under the systemic risk determination. With the adjustments to the
assessment base, the banks that benefited the most--banks of larger
asset sizes and that hold greater amounts of uninsured deposits--would
be responsible for paying special assessments.
Second, the proposed methodology also would result in most small
IDIs and IDIs that are part of a small banking organization not paying
anything towards the special assessments. As proposed, the FDIC
estimates that the special assessments would not be applicable to any
banking organizations with total assets under $5 billion.
Based on data reported as of December 31, 2022, and as illustrated
in Table 4 below, the FDIC estimates that 113 banking organizations,
which include IDIs that are not subsidiaries of a holding company and
holding companies with one or more subsidiary IDIs and which comprise
83.0 percent of industry assets, would be subject to special
assessments, including 48 banking organizations with total assets over
$50 billion and 65 banking organizations with total assets between $5
and $50 billion. No banking organizations with total assets under $5
billion would pay special assessments, based on data as of December 31,
2022. The number of banking organizations subject to special
assessments may change prior to any final rule depending on any
adjustments to the loss estimate, mergers or failures, or amendments to
reported estimates of uninsured deposits.
Table 4--Banking Organizations Required To Pay Special Assessments, Based on Data Reported as of December 31,
2022
----------------------------------------------------------------------------------------------------------------
Percentage of
Number of banking
banking organizations Share of Share of
Asset size of banking organization organizations required to pay special industry
required to pay special assessments assets
special assessments (percent) (percent)
assessments (percent)
----------------------------------------------------------------------------------------------------------------
Greater than $50 billion...................... 48 1.1 95.2 76.0
Between $5 and $50 billion.................... 65 1.5 4.8 7.0
Under $5 billion.............................. 0 0.0 0.0 0.0
-----------------------------------------------------------------
Total..................................... 113 2.6 100.0 83.0
----------------------------------------------------------------------------------------------------------------
Finally, deducting $5 billion from the assessment base of estimated
uninsured deposits at the banking organization level for those with
more than one IDI would ensure that banking organizations with similar
amounts of estimated uninsured deposits pay a similar special
assessment. For example, a banking organization with multiple IDIs with
large amounts of estimated uninsured deposits would not have an
advantage over other similarly-positioned IDIs that are not
subsidiaries of a holding company because instead of excluding $5
billion of estimated uninsured deposits for each IDI in one banking
organization, the $5 billion deduction would be distributed across
multiple affiliated IDIs.
The proposed methodology ensures that the banks that benefited most
from the assistance provided under the systemic risk determination
would be charged special assessments to recover losses to the DIF
resulting from the protection of uninsured depositors, with banks of
larger asset sizes and that hold greater amounts of uninsured deposits
paying higher special assessments.
E. Collection Period for Special Assessments
Under the proposal, the special assessments would be collected
beginning with the first quarterly assessment period of 2024 (i.e.,
January 1 through March 31, 2024, with an invoice payment date of June
28, 2024). In order to preserve liquidity at IDIs, and in the interest
of consistent and predictable assessments, the special assessments
would be collected over eight quarters.
The estimated loss attributable to the protection of uninsured
depositors pursuant to the systemic risk determination is currently
estimated to total $15.8 billion. However, loss estimates for failed
banks are periodically adjusted as assets are sold, liabilities are
satisfied, and receivership expenses are incurred.
The FDIC would review and consider any revisions to loss estimates
each quarter of the collection period. If, prior to the end of the
eight-quarter collection period, the FDIC expects the loss to be lower
than the amount it expects to collect from the special assessments, the
FDIC would cease collection of special assessments before the end of
the initial eight-quarter collection period, in the quarter after it
has collected enough to recover actual or estimated losses. The FDIC
would provide notice of the cessation of collections at least 30 days
before the next payment is due.
The FDIC is required by statute to place the excess funds collected
through special assessments in the DIF.\20\ By spreading out the
collection period over eight quarters, a length of time that would
enable the FDIC to develop a more precise estimate of loss, and
allowing for early cessation after the FDIC has collected enough to
recover actual or estimated losses, the FDIC mitigates the risk of over
collecting.
---------------------------------------------------------------------------
\20\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
---------------------------------------------------------------------------
F. Extended Special Assessment Period
If, at the end of the eight-quarter collection period, the
estimated or actual loss exceeds the amount collected, the FDIC would
extend the collection period over one or more quarters as needed in
order to collect the difference between the amount collected and the
estimated or actual loss at the end of the eight-quarter collection
period, (the shortfall amount), after providing notice of at least 30
days
[[Page 32700]]
before the first payment of any extended special assessment is due.
In the event that extended special assessments are needed, the FDIC
would collect the shortfall amount on a quarterly basis. In the
interest of consistency and predictability, the quarterly rate would
not exceed the 3.13 basis point quarterly special assessment rate
applied during the initial eight-quarter collection period, and such
extended special assessments would be collected for the minimum number
of quarters needed to recover the shortfall amount at such quarterly
rates.
The assessment base for such extended special assessment would be
as described above, based on estimated uninsured deposits reported as
of December 31, 2022, with a $5 billion deduction for each banking
organization. However, each banking organization's assessment base for
such extended special assessments may differ from its assessment base
for special assessments over the initial eight-quarter collection
period, due to mergers or failures that occurred during the eight-
quarter collection period.
G. One-Time Final Shortfall Special Assessment
The FDIC is required by statute to recover the loss to the DIF
attributable to protecting uninsured depositors of Silicon Valley Bank
and Signature Bank.\21\ The exact amount of losses will be determined
when the FDIC terminates the receiverships. Receiverships are
terminated once the FDIC has completed the disposition of the
receivership's assets and has resolved all obligations, claims, and
other impediments. The termination of the receiverships to which the
March 12, 2023, systemic risk determination applied may occur years
after the initial eight-quarter collection period and any extended
collection period.
---------------------------------------------------------------------------
\21\ 12 U.S.C. 1823(c)(4)(G)(ii).
---------------------------------------------------------------------------
In the likely event that a final loss amount at the termination of
the receiverships is not determined until after the initial special
assessments and any extended special assessments have been collected,
and if losses at the termination of the receiverships exceed the amount
collected through such special assessments (the final shortfall
amount), the FDIC would impose a one-time final shortfall special
assessment.
The assessment base for such one-time final shortfall special
assessment would be as described above, based on estimated uninsured
deposits reported as of December 31, 2022, with a $5 billion deduction
for each banking organization. However, each banking organization's
assessment base for the one-time final shortfall special assessment may
differ from its assessment base for previous special assessments
collections, due to mergers or failures that occurred up to the
determination of the shortfall amount. The FDIC would determine the
assessment rate for the one-time final shortfall special assessment
based on the amount needed to recover the final shortfall amount and
the total amount of estimated uninsured deposits reported as of
December 31, 2022, after applying the $5 billion deduction to banking
organizations as of the date that the final shortfall is calculated.
The entire final shortfall amount would be collected in one quarter
so that there are no missed amounts due to mergers or other
arrangements, and to streamline the operational impact on banking
organizations. The FDIC would provide banking organizations notice of
at least 45 days before payment of the one-time shortfall special
assessment is due and would consider the statutory factors, including
economic conditions and the effects on the industry, in deciding on the
timing of such payments.
The FDIC would notify each IDI subject to a one-time shortfall
special assessment of the final shortfall special assessment rate and
its share of the final shortfall assessment no later than 15 days
before payment is due. The notice would be included in the IDI's
invoice for its regular quarterly deposit insurance assessment.
H. No Prior Period Amendments
Each IDI's assessment base for the special assessments would be
based on its estimated uninsured deposits reported on its Call Report
for December 31, 2022. Amendments to an IDI's Call Report for the
December 31, 2022, reporting period made after the date of adoption of
any final rule would not affect an institution's rate or base for the
special assessments. While the rule would not change existing reporting
policies and procedures around prior period amendments, the FDIC would
use data on estimated uninsured deposits for the quarter ending
December 31, 2022, reported as of the date of adoption of any final
rule to calculate special assessments for the duration of the
collection period.
I. Collection of Special Assessments and Any Shortfall Special
Assessment
The special assessments and any shortfall special assessment would
be collected at the same time and in the same manner as an IDI's
regular quarterly deposit insurance assessment. Invoices for an IDI's
regular quarterly deposit insurance assessment would disclose the
amount of any special assessments or shortfall special assessments due.
J. Payment Mechanism for the Special Assessments and Shortfall Special
Assessment
Each IDI would be required to take any actions necessary to allow
the FDIC to debit its special assessment and shortfall special
assessment from the bank's designated deposit account used for payment
of its regular assessment. Before the dates that payments are due, each
IDI would have to ensure that sufficient funds to pay its obligations
are available in the designated account for direct debit by the FDIC.
Failure to take any such action or to fund the account would constitute
nonpayment of the special assessment. Penalties for nonpayment would be
as provided for nonpayment of an IDI's regular assessment.\22\
---------------------------------------------------------------------------
\22\ See 12 CFR 327.3(c).
---------------------------------------------------------------------------
K. Mergers, Consolidations and Terminations of Deposit Insurance
First, under existing regulations, an IDI that is not the resulting
or surviving IDI in a merger or consolidation must file a quarterly
Call Report for every assessment period prior to the assessment period
in which the merger or consolidation occurs. The surviving or resulting
IDI is responsible for ensuring that these Call Reports are filed. The
surviving or resulting IDI is also responsible and liable for any
unpaid assessments on the part of the IDI that is not the resulting or
surviving IDI.\23\ The FDIC proposes that unpaid assessments would also
include any unpaid special assessments and any shortfall special
assessments.
---------------------------------------------------------------------------
\23\ 12 CFR 327.6(a).
---------------------------------------------------------------------------
Second, if an IDI acquires--through merger or consolidation--
another IDI during the collection period of the special assessments,
the acquiring IDI would be required to pay the acquired IDI's special
assessments, if any, in addition to its own special assessments from
the quarter of the acquisition through the remainder of the collection
period. The FDIC would not adjust the acquiring institution's special
assessments. The FDIC also would not adjust the calculation of the
acquired institution's special assessments. Any shortfall special
assessments following the eight-quarter collection period would be
calculated as described above, based on estimated uninsured deposits
reported as of December 31, 2022. However, to ensure full recovery of
the
[[Page 32701]]
difference between amounts collected and losses related to the systemic
risk determination, each organization's extended special assessments or
final shortfall special assessments would reflect mergers,
consolidations, failures, or other terminations of deposit insurance
that occurred between December 31, 2022, and the date in which such
extended special assessments or final shortfall special assessments are
determined.
Third, existing regulations provide that, when the insured status
of an IDI is terminated and the deposit liabilities of the IDI are not
assumed by another IDI, the IDI whose insured status is terminating
must, among other things, continue to pay assessments for the
assessment periods that its deposits are insured, but not
thereafter.\24\ The FDIC proposes that these provisions would also
apply to the special assessments and any shortfall special assessments.
---------------------------------------------------------------------------
\24\ 12 CFR 327.6(c).
---------------------------------------------------------------------------
Finally, in the case of one or more transactions in which one IDI
voluntarily terminates its deposit insurance under the FDI Act and
sells certain assets and liabilities to one or more other IDIs, each
IDI must report the increase or decrease in assets and liabilities on
the Call Report due after the transaction date and be assessed
accordingly under existing FDIC assessment regulations. The IDI whose
insured status is terminating must, among other things, continue to pay
assessments for the assessment periods that its deposits are
insured.\25\ The FDIC proposes that the same process would also apply
to the special assessments and any shortfall special assessments.
---------------------------------------------------------------------------
\25\ 12 CFR 327.6(c).
---------------------------------------------------------------------------
L. Accounting Treatment
Each institution should account for the special assessment in
accordance with U.S. generally accepted accounting principles (GAAP).
In accordance with Financial Accounting Standards Board Accounting
Standards Codification Topic 450, Contingencies (FASB ASC Topic 450),
an estimated loss from a loss contingency shall be accrued by a charge
to income if information indicates that it is probable that a liability
has been incurred and the amount of loss is reasonably estimable.\26\
Therefore, an institution would recognize in the Call Report and other
financial statements the accrual of a liability and estimated loss
(i.e., expense) from a loss contingency for the special assessment when
the institution determines that the conditions for accrual under GAAP
have been met.
---------------------------------------------------------------------------
\26\ FASB ASC paragraph 450-20-25-2.
---------------------------------------------------------------------------
Similarly, each institution should account for any shortfall
special assessment in accordance with FASB ASC Topic 450 when the
conditions for accrual under GAAP have been met.
M. Request for Revisions
An IDI may submit a written request for revision of the computation
of any special assessment or shortfall special assessment pursuant to
existing regulation 12 U.S.C. 327.3(f).\27\
---------------------------------------------------------------------------
\27\ Consistent with Section M above, amendments filed by an IDI
to its Call Report or FFIEC 002 after the date of adoption of the
final rule by the Board, would not be eligible as a basis for a
request for revision under 12 U.S.C 327.3(f). Existing regulation 12
U.S.C. 327.4(c) allows an IDI to submit a request for review of the
IDI's risk assignment. Because the amount of an IDI's special
assessment or shortfall special assessment is not determined based
on the IDI's risk assignment as proposed, the request for review
provision under 12 U.S.C. 327.4(c) would not be applicable to an
IDI's special assessment or shortfall special assessment.
---------------------------------------------------------------------------
IV. Analysis and Expected Effects
A. Analysis of the Statutory Factors
Section 13(c)(4)(G) of the FDI Act provides the FDIC with
discretion in the design and timeframe for any special assessments to
recover the losses from the systemic risk determination. As detailed in
the sections that follow, and as required by the FDI Act, the FDIC has
considered the types of entities that benefit from any action taken or
assistance provided under the determination of systemic risk, effects
on the industry, economic conditions, and any such other factors as the
Corporation deems appropriate and relevant to the action taken or the
assistance provided.\28\
---------------------------------------------------------------------------
\28\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
---------------------------------------------------------------------------
The Types of Entities That Benefit
In implementing special assessments under section 13(c)(4)(G) of
the FDI Act, the FDIC is required to consider the types of entities
that benefit from any action taken or assistance provided pursuant to
determination of systemic risk.\29\
---------------------------------------------------------------------------
\29\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
---------------------------------------------------------------------------
With the rapid collapse of Silicon Valley Bank and Signature Bank
in the space of 48 hours, concerns arose that risk could spread more
widely to other institutions and that the financial system as a whole
could be placed at risk. Shortly after Silicon Valley Bank was closed
on March 10, 2023, a number of institutions with large amounts of
uninsured deposits reported that depositors had begun to withdraw their
funds. The extent to which IDIs rely on uninsured deposits for funding
varies significantly. Uninsured deposits were used to fund nearly
three-quarters of the assets at Silicon Valley Bank and Signature Bank.
On March 12, 2023, the FDIC Board and the Board of Governors voted
unanimously to recommend, and the Treasury Secretary, in consultation
with the President, determined that the FDIC could use emergency
systemic risk authorities under the FDI Act to complete its resolution
of both Silicon Valley Bank and Signature Bank in a manner that fully
protects all depositors.\30\ The full protection of all depositors,
rather than imposing losses on uninsured depositors, was intended to
strengthen public confidence in the nation's banking system.
---------------------------------------------------------------------------
\30\ 12 U.S.C. 1823(c)(4)(G). See also: FDIC PR-17-2023. ``Joint
Statement by the Department of the Treasury, Federal Reserve, and
FDIC.'' March 12, 2023. https://www.fdic.gov/news/press-releases/2023/pr23017.html.
---------------------------------------------------------------------------
In the weeks that followed the determination of systemic risk,
efforts to stabilize the banking system and stem potential contagion
from the failures of Silicon Valley Bank and Signature Bank ensured
that depositors would continue to have access to their savings, that
small businesses and other employers could continue to make payrolls,
and that other banks could continue to extend credit to borrowers and
serve as a source of support.
In general, large banks and regional banks, and particularly those
with large amounts of uninsured deposits, were the banks most exposed
to and likely would have been the most affected by uninsured deposit
runs. Indeed, shortly after Silicon Valley Bank was closed, a number of
institutions with large amounts of uninsured deposits reported that
depositors had begun to withdraw their funds. The failure of Silicon
Valley Bank and the impending failure of Signature Bank raised concerns
that, absent immediate assistance for uninsured depositors, there could
be negative knock-on consequences for similarly situated institutions,
depositors and the financial system more broadly. Generally speaking,
larger banks benefited the most from the stability provided to the
banking industry under the systemic risk determination. Under the
proposal, the banks that benefited most from the assistance provided
under the systemic risk determination would be charged special
assessments to recover losses to the DIF resulting from the protection
of uninsured depositors, with banks of larger asset sizes and that hold
greater amounts of uninsured deposits paying higher special
assessments.
[[Page 32702]]
Effects on the Industry
In calculating the assessment base for the special assessments, the
FDIC would deduct $5 billion from each IDI or banking organization's
aggregate estimated uninsured deposits reported as of December 31,
2022. As a result, any institution that did not report any uninsured
deposits as of December 31, 2022, would not be subject to the special
assessment. Additionally, most small IDIs and IDIs that are part of a
small banking organization would not pay anything towards the special
assessment. Some small and mid-size IDIs would be subject to the
special assessment if they were subsidiaries of a banking organization
with more than $5 billion in uninsured deposits and such IDIs reported
positive amounts of uninsured deposits after application of the
deduction, or if they directly held more than $5 billion in estimated
uninsured deposits as of December 31, 2022, which for smaller
institutions would constitute heavy reliance on uninsured deposits.
Based on data reported as of December 31, 2022, and as captured in
Table 4 above, the FDIC estimates that 113 banking organizations would
be subject to special assessments, including 48 banking organizations
with total assets over $50 billion and 65 banking organizations with
total assets between $5 and $50 billion. No banking organizations with
total assets under $5 billion would pay special assessments, based on
data reported as of December 31, 2022.\31\ It is anticipated that the
same banking organizations subject to special assessments would also be
subject to any extended special assessments or final shortfall special
assessment, absent the effects of any mergers, consolidations,
failures, or other terminations of deposit insurance that occur through
the determination of such extended special assessments or final
shortfall special assessment.
---------------------------------------------------------------------------
\31\ The number of banking organizations subject to special
assessments may change prior to any final rule depending on any
adjustments to the loss estimate, mergers or failures, or similar
activities, or amendments to reported estimates of uninsured
deposits.
---------------------------------------------------------------------------
Capital and Earnings Analysis
The FDIC has analyzed the effect of the special assessments on the
capital and earnings of banking organizations, including IDIs that are
not subsidiaries of a holding company. This analysis incorporates data
on estimated uninsured deposits reported by banking organizations as of
December 31, 2022, and assumes that pre-tax income for the quarter in
which a banking organization would recognize the accrual of a liability
and an estimated loss (i.e., expense) from a loss contingency for the
special assessments, will equal the average of their pre-tax income
from January 1, 2022, through December 31, 2022.\32\
---------------------------------------------------------------------------
\32\ All income statement items used in this analysis were
adjusted for the effect of mergers. Institutions for which four
quarters of non-zero earnings data were unavailable, including
insured branches of foreign banks, were excluded from this analysis.
---------------------------------------------------------------------------
To avoid the possibility of underestimating effects on bank
earnings or capital, the analysis also assumes that the effects of the
special assessments are not transferred to customers in the form of
changes in borrowing rates, deposit rates, or service fees. Because
special assessments are a tax-deductible operating expense for all
institutions, increases in the assessment expense can lower taxable
income.\33\ The analysis considers the effective pre-tax cost of
special assessments in calculating the effect on capital.\34\
---------------------------------------------------------------------------
\33\ The Tax Cuts and Jobs Act of 2017 placed a limitation on
tax deductions for FDIC premiums for banks with total consolidated
assets between $10 and $50 billion and disallowed the deduction
entirely for banks with total assets of $50 billion or more.
However, the definition of FDIC premiums under the Act is limited to
any assessment imposed under section 7(b) of the FDI Act (12 U.S.C.
1817(b)), and therefore does not include special assessments
required under section 13(c)(4)(G) of the FDI Act. See the Tax Cuts
and Jobs Act, Public Law 115-97 (Dec. 22, 2017).
\34\ The analysis does not incorporate any tax effects from an
operating loss carry forward or carry back.
---------------------------------------------------------------------------
A banking organization's earnings retention and dividend policies
influence the extent to which special assessments affect equity levels.
If a banking organization maintains the same dollar amount of dividends
when it recognizes the accrual of a liability and an estimated loss
(i.e., expense) from a loss contingency for the special assessments or
shortfall special assessment as proposed, equity (retained earnings)
will be reduced by the full amount of the pre-tax cost of the special
assessments or shortfall special assessment. This analysis instead
assumes that a banking organization will maintain its dividend rate
(that is, dividends as a percentage of net income) unchanged from the
weighted average rate reported over the four quarters ending December
31, 2022. In the event that the ratio of Tier 1 capital to assets falls
below four percent, however, this assumption is modified such that a
banking organization retains the amount necessary to reach a four
percent minimum and distributes any remaining funds according to the
dividend payout rate.\35\
---------------------------------------------------------------------------
\35\ The analysis uses four percent as the threshold because
IDIs generally need to maintain a Tier 1 leverage ratio of 4.0
percent or greater to be considered ``adequately capitalized'' under
Prompt Corrective Action Standards, in addition to the following
requirements: (i) total risk-based capital ratio of 8.0 percent or
greater; (ii) Tier 1 risk-based capital ratio of 6.0 percent or
greater; (iii) common equity tier 1 capital ratio of 4.5 percent or
greater; and (iv) does not meet the definition of ``well
capitalized.'' Beginning January 1, 2018, an advanced approaches or
Category III FDIC-supervised institution will be deemed to be
``adequately capitalized'' if it satisfies the above criteria and
has a supplementary leverage ratio of 3.0 percent or greater, as
calculated in accordance with 12 CFR 324.10. See 12 CFR
324.403(b)(2). Additionally, Federal Reserve Board-regulated
institutions must generally must maintain a Tier 1 leverage ratio of
4.0 percent or greater to meet the minimum capital requirements, in
addition to the following requirements: (i) total capital ratio of
8.0 percent; (ii) Tier 1 capital ratio of 6.0; (iii) common equity
tier 1 capital ratio of 4.5; and (iv) for advanced approaches
Federal Reserve Board-regulated institutions, or for Category III
Federal Reserve Board-regulated institutions, a supplementary
leverage ratio of 3 percent. See 12 CFR 217.10(a)(1). For purposes
of this analysis, Tier 1 capital to assets is used as the measure of
capital adequacy.
---------------------------------------------------------------------------
As proposed, the FDIC estimates that it would collect the estimated
loss from protecting uninsured depositors at Silicon Valley Bank and
Signature Bank of approximately $15.8 billion, over the eight-quarter
collection period. Banking organizations would recognize the accrual of
a liability and an estimated loss (i.e., expense) from a loss
contingency for the special assessment when the institution determines
that the conditions for accrual under GAAP have been met. This analysis
assumes that the effects on capital and income of the entire amount of
the special assessments to be collected over eight quarters would occur
in one quarter only.
Given this estimate and the assumptions in the analysis, the FDIC
estimates that, on average, the proposed special assessments would
decrease the dollar amount of Tier 1 capital of banking organizations
that would be required to pay special assessments by an estimated 61
basis points.\36\ No banking organizations are estimated to fall below
the minimum capital requirement (a four percent Tier 1 capital-to-
assets ratio) as a result of the proposed special assessments.
---------------------------------------------------------------------------
\36\ Estimated effects on capital are calculated based on data
reported as of December 31, 2022, on the Call Report and the
Consolidated Financial Statements for Holding Companies (FR Y-9C),
respectively, for IDIs that are not subsidiaries of a holding
company or that are part of a banking organization with only one
subsidiary IDI required to pay special assessments, and for banking
organizations, to the extent that an IDI is part of a holding
company with more than one subsidiary IDI required to pay special
assessments.
---------------------------------------------------------------------------
The banking industry reported full-year 2022 net income lower than
full-
[[Page 32703]]
year 2021 net income, but still above the pre-pandemic average. The
effect of the proposed special assessments on a banking organization's
income is measured by calculating the amount of the special assessments
as a percent of pre-tax income (hereafter referred to as ``income'').
This income measure is used in order to eliminate the potentially
transitory effects of taxes on profitability.
While special assessments are allocated based on estimated
uninsured deposits reported at the banking organization level, IDIs
will be responsible for payment of the special assessments. The FDIC
analyzed the effect of the special assessments on income reported at
the IDI-level for IDIs subject to special assessments that are not
subsidiaries of a holding company or that are subsidiaries of a holding
company with only one IDI subsidiary. For IDIs that are subsidiaries of
a holding company with more than one IDI subsidiary, the FDIC analyzed
the effect of the special assessments by aggregating the income
reported by all IDIs subject to special assessments within each banking
organization since the IDIs will be responsible for payment. The FDIC
analyzed the impact of the special assessments on banking organizations
that were profitable based on their average quarterly income from
January 1, 2022, to December 31, 2022.\37\
---------------------------------------------------------------------------
\37\ There were no banking organizations that would be required
to pay special assessments that were unprofitable based on average
quarterly income from January 1, 2022, to December 31, 2022.
---------------------------------------------------------------------------
The effects on income of the entire amount of special assessments
to be collected over eight quarters are assumed to occur in one quarter
only. Given the assumptions and the estimated loss amount, the FDIC
estimates that the proposed special assessments would result in an
average one-quarter reduction in income of 17.5 percent for banking
organizations subject to special assessments.\38\
---------------------------------------------------------------------------
\38\ Earnings or income are quarterly income before assessments
and taxes. Quarterly income is assumed to equal average income from
January 1, 2022, through December 31, 2022.
---------------------------------------------------------------------------
Table 5 shows that approximately 66 percent of profitable banking
organizations subject to the proposal are projected to have special
assessments of less than 20 percent of income, including 23 percent
with special assessments of less than 5 percent of income. Another 34
percent of profitable banking organizations subject to the proposal are
projected to have special assessments equal to or exceeding 20 percent
of income.
Table 5--Estimated One-Quarter Effect of Entire Amount of Special Assessments on Income for Profitable Banking
Organizations Subject to Special Assessments \1\
----------------------------------------------------------------------------------------------------------------
Assets of
Number of Percent of banking Percent of
Special assessments as percent of income banking banking organizations assets
organizations organizations ($ billions)
----------------------------------------------------------------------------------------------------------------
Over 30%...................................... 13 12 4,455 23
20% to 30%.................................... 25 22 10,713 56
10% to 20%.................................... 34 30 2,577 13
5% to 10%..................................... 14 13 307 2
Less than 5%.................................. 26 23 1,117 6
-----------------------------------------------------------------
Total..................................... 112 100 19,170 100
----------------------------------------------------------------------------------------------------------------
\1\ Income is defined as quarterly pre-tax income. Quarterly income is assumed to equal the average of income
from January 1, 2022, through December 31, 2022. For purposes of this analysis, the effects on income of the
entire amount of special assessments to be collected over eight quarters are assumed to occur in one quarter
only. Special assessments as a percent of income is an estimate of the one-time accrual of a full eight
quarters of special assessments as a percent of a single quarter's income. Profitable banking organizations
are defined as those having positive average income for the 12 months ending December 31, 2022. Excludes two
insured U.S. branches of one foreign banking organization subject to special assessments. Some columns do not
add to total due to rounding.
In order to preserve liquidity at IDIs, and in the interest of
consistent and predictable assessments, the special assessments would
be collected over eight quarters. The proposed special assessments
would be applicable no earlier than the first quarterly assessment
period of 2024, providing time for institutions to prepare and plan for
the special assessments.
Economic Conditions
On February 28, 2023, the FDIC released the results of the
Quarterly Banking Profile, which provided a comprehensive summary of
financial results for all FDIC-insured institutions for the fourth
quarter of 2022. Overall, key banking industry metrics remained
favorable in the quarter.\39\
---------------------------------------------------------------------------
\39\ FDIC Quarterly Banking Profile, Fourth Quarter 2022.
https://www.fdic.gov/analysis/quarterly-banking-profile/qbp/2022dec/.
---------------------------------------------------------------------------
Loan growth continued, net interest income grew, and asset quality
measures remained favorable. Further, the industry remained well
capitalized and highly liquid, but the report also highlighted a key
weakness in elevated levels of unrealized losses on investment
securities due to rapid increases in market interest rates. Unrealized
losses on available-for-sale and held-to-maturity securities totaled
$620 billion as of December 31, 2022, and unrealized losses on
available-for-sale securities have meaningfully reduced the reported
equity capital of the banking industry. The combination of a high level
of longer-term asset maturities and a moderate decline in total
deposits underscored the risk that unrealized losses could become
actual losses should banks need to sell securities to meet liquidity
needs.
The financial system continues to face significant downside risks
from the effects of inflation, rising market interest rates, and a weak
economic outlook. Credit quality and profitability may weaken due to
these risks, potentially resulting in tighter loan underwriting, slower
loan growth, higher provision expenses, and liquidity constraints.
Additional short-term interest rate increases, combined with longer
asset maturities may continue to increase unrealized losses on
securities and affect bank balance sheets in coming quarters.
Despite these downside risks, in the weeks that followed the
failure of Silicon Valley Bank and Signature Bank, the state of the
U.S. financial system remained sound and institutions are
[[Page 32704]]
well positioned to absorb a special assessment.\40\
---------------------------------------------------------------------------
\40\ Statement of Martin J. Gruenberg, Chairman of the FDIC on
``Recent Bank Failures and the Federal Regulatory Response,'' before
the United States Senate Committee on Banking, Housing, and Urban
Affairs. March 28, 2023. https://www.banking.senate.gov/imo/media/doc/Gruenberg%20Testimony%203-28-23.pdf.
---------------------------------------------------------------------------
B. Alternatives Considered
While the FDIC is required by statute to recover the loss to the
DIF arising from the use of a systemic risk determination through one
or more special assessments, the FDI Act in Section 13(c)(4)(G)
provides the FDIC with discretion in the design and timeframe for any
special assessments to recover the losses from the systemic risk
determination.\41\ The FDIC has considered alternatives to this
proposal to collect special assessments to recover the loss to the DIF
arising from the protection of all uninsured depositors in connection
with the systemic risk determination announced on March 12, 2023, as
required by the FDI Act. The FDIC identified six potentially effective
and reasonably feasible alternatives to the proposed rule. These
alternatives are discussed in detail below.
---------------------------------------------------------------------------
\41\ 12 U.S.C. 1823(c)(4)(G)(ii)(I). In implementing special
assessments, the FDIC is required to consider the types of entities
that benefit from any action taken or assistance provided under the
determination of systemic risk, effects on the industry, economic
conditions, and any such other factors as the FDIC deems appropriate
and relevant to the action taken or the assistance provided. See 12
U.S.C. 1823(c)(4)(G)(ii)(III).
---------------------------------------------------------------------------
Alternative 1: One-Time Special Assessment
As an alternative to the proposal, the FDIC considered imposing a
one-time special assessment at the end of the quarter following the
effective date. The FDIC would impose the one-time special assessment
in the quarter ending March 31, 2024, and collect payment for such
special assessment on June 28, 2024, at the same time and in the same
manner as an IDI's regular quarterly deposit insurance assessment. The
aggregate amount of a one-time special assessment would equal the
entire initial loss estimate. Calculation of the special assessments,
including the special assessment rate, would be the same as proposed,
but instead of collecting the amount over eight quarters, the FDIC
would collect the entire amount in one quarter.
Once actual losses are determined as of the termination of the
receiverships, and if the actual losses exceeded the amount collected
under the one-time special assessment, the FDIC would impose a
shortfall special assessment to collect the amount of losses in excess
of the amount collected. Collection of the entire shortfall special
assessment would also occur in one quarter.
Conversely, if the amount collected under the one-time special
assessment exceeded actual losses, the FDIC is required by statute to
place the excess funds collected in the DIF.\42\
---------------------------------------------------------------------------
\42\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
---------------------------------------------------------------------------
While under both the proposal and this alternative, the estimated
amount of the special assessment would be recognized with the accrual
of a liability and an estimated loss (i.e., expense) from a loss
contingency when the institution determines that the conditions for
accrual under GAAP have been met, which impacts capital and earnings,
this alternative would additionally require payment of the entire
amount in the second quarter of 2024, and would impact liquidity
significantly in one quarter. The FDIC rejected this alternative in the
interest of liquidity preservation in a period of uncertainty and to
mitigate the risk of over collecting.
Alternative 2: Asset Size Applicability Threshold
As an alternative to deducting the first $5 billion in estimated
uninsured deposits in calculating an IDI or banking organization's
assessment base for the special assessment, the FDIC considered basing
applicability on an asset size threshold.
As described previously, in implementing special assessments, the
FDI Act requires the FDIC to consider the types of entities that
benefit from any action taken or assistance provided pursuant to
determination of systemic risk.\43\ Large banks and regional banks, and
particularly those with large amounts of uninsured deposits, were the
banks most exposed to and likely would have been the most affected by
uninsured deposit runs had those occurred as a result of the bank
failures. Larger banks also benefited the most from the stability
provided to the banking industry under the systemic risk determination.
---------------------------------------------------------------------------
\43\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
---------------------------------------------------------------------------
While both the proposal, including the $5 billion deduction from
estimated uninsured deposits, and an asset-size-based applicability
threshold would effectively remove the smallest institutions from
eligibility, the proposed deduction of $5 billion from each banking
organization's estimated uninsured deposits in calculating the special
assessment would help to mitigate a ``cliff effect'' relative to
applying a different threshold for applicability, such as applying an
asset size threshold, thereby ensuring more equitable treatment. With
an asset size threshold, an IDI just above such threshold would pay a
significant amount in special assessments, while an IDI just below such
threshold would pay none. The FDIC rejected this alternative for these
reasons.
Alternative 3: Assessment Base Equal to All Uninsured Deposits, Without
$5 Billion Deduction
A third alternative would be to eliminate the proposed $5 billion
deduction from the assessment base for the special assessment, and
therefore allocate the special assessments among IDIs based on each IDI
or banking organization's estimated uninsured deposits as of December
31, 2022. This alternative would result in special assessments imposed
on every IDI that reported a non-zero amount of estimated uninsured
deposits as of December 31, 2022, or nearly 100 percent of all IDIs
with total assets of $1 billion or more.\44\ Relative to the proposal,
more IDIs would pay special assessments under this alternative, and
IDIs with greater amounts of uninsured deposits would generally pay
lower special assessments relative to the proposal since the special
assessments would be allocated across a significantly larger number of
institutions.
---------------------------------------------------------------------------
\44\ IDIs with less than $1 billion in total assets as of June
30, 2021, were not required to report the estimated amount of
uninsured deposits on the Call Report for December 31, 2022.
Therefore, for IDIs that had less than $1 billion in total assets as
of June 30, 2021, the amount and share of estimated uninsured
deposits as of December 31, 2022, would be zero.
---------------------------------------------------------------------------
However, given the FDIC's statutory requirement to consider the
types of entities that benefit from any action taken or assistance
provided under the determination of systemic risk in implementing
special assessments, the FDIC rejected this alternative in favor of
allocating the special assessments to larger institutions with the
largest amounts of uninsured deposits, with the result that smaller
institutions would not have to contribute to the special assessments.
In general, large banks and regional banks, and particularly those with
large amounts of uninsured deposits, were the banks most exposed to and
likely would have been the most affected by uninsured deposit runs.
Generally speaking, larger banks benefited the most from the stability
provided to the banking industry under the systemic risk determination.
[[Page 32705]]
Alternative 4: Special Assessments Based on Each Institution's
Percentage of Uninsured Deposits to Total Deposits
A fourth alternative would be to allocate the special assessments
among IDIs based on each IDI's estimated uninsured deposits as a
percentage of their total domestic deposits reported as of December 31,
2022, as a proxy for reliance on uninsured deposits at the time the
determination of systemic risk was made and uninsured depositors of the
failed institutions were protected. Similar to the third alternative,
this would result in a special assessment imposed on every IDI that
reported a non-zero amount of estimated uninsured deposits as of
December 31, 2022, or nearly 100 percent of IDIs with total assets of
$1 billion or more.\45\
---------------------------------------------------------------------------
\45\ IDIs with less than $1 billion in total assets as of June
30, 2021, were not required to report the estimated amount of
uninsured deposits on the Call Report for December 31, 2022.
Therefore, for IDIs that had less than $1 billion in total assets as
of June 30, 2021, the amount and share of estimated uninsured
deposits as of December 31, 2022, would be zero.
---------------------------------------------------------------------------
Under this alternative, IDIs with a greater reliance on uninsured
deposits would generally pay the greatest amount of special
assessments; however, the special assessments would be allocated across
a large number of institutions. This alternative would result in
institutions of vastly different asset sizes paying a similar dollar
amount of special assessments. It also would result in some smaller
IDIs and banking organizations, paying potentially significant amounts
of special assessments, and the larger banks that have high amounts of
uninsured deposits and benefited the most from the stability provided
to the banking industry under the systemic risk determination, but that
do not have high uninsured deposit concentrations, paying a smaller
share of special assessments.
In general, large banks and regional banks, and particularly those
with large amounts of uninsured deposits, were the banks most exposed
to and likely would have been the most affected by uninsured deposit
runs. Generally speaking, larger banks benefited the most from the
stability provided to the banking industry under the systemic risk
determination. The FDIC rejected this alternative for these reasons and
because the proposed methodology results in larger special assessments
for similarly sized banking organizations reporting greater
concentrations of uninsured deposits.
Alternative 5: Charge IDIs for 50 Percent of Special Assessment in Year
One Based on Uninsured Deposits as of December 31, 2022; Charge for the
Remainder in Year Two Based on Uninsured Deposits Reported as of
December 31, 2023
Under the proposal and all alternatives described, the special
assessments would initially be calculated based on an estimated amount
of losses, as the exact amount of losses will not be known until the
FDIC terminates the two receiverships. A final alternative would be to
collect 50 percent of the special assessments during the initial four-
quarter collection period based on estimated uninsured deposits
reported by all IDIs as of December 31, 2022, and collect the remaining
special assessments for an additional four quarter collection period
based on an updated estimate of losses pursuant to the systemic risk
determination and estimated uninsured deposits reported by all IDIs as
of December 31, 2023.
Under this alternative, for the initial four-quarter collection
period the special assessment would be allocated to all IDIs based on
each IDI or banking organization's estimated uninsured deposits as a
share of estimated uninsured deposits reported by all IDIs as of
December 31, 2022, as a proxy for the amount of uninsured deposits in
each institution at the time the determination of systemic risk was
made and uninsured depositors of the failed institutions were
protected. Such methodology would allocate the special assessments to
the institutions that had the largest amounts of uninsured deposits at
the time of the determination of systemic risk.
The remaining special assessments would be based on an updated
estimate of losses as of December 31, 2023, and would be allocated to
IDIs with total assets of $1 billion or more, based on each IDI or
banking organization's estimated uninsured deposits as a share of
estimated uninsured deposits reported by all IDIs as of December 31,
2023, in order to reflect amounts of uninsured deposits that did not
run off following the determination of systemic risk.
The FDIC rejected this alternative given the potential incentives
for IDIs to reduce their amount of uninsured deposits ahead of the
December 31, 2023, reporting date, which may result in unintended
market dislocations and reduced liquidity in the banking sector. This
alternative may also change the timing of accrual of the contingent
liability by banks. The proposal's allocation methodology based on
amounts of uninsured deposits as of December 31, 2022, would result in
transparent and consistent payments, and a more simplified framework
for calculating special assessments.
Alternative 6: Apply Special Assessment Rate to Regular Assessment
Base, With or Without Application of a $5 Billion Deduction
A sixth alternative would be to apply a special assessment rate to
an institution's regular quarterly deposit insurance assessment base
(regular assessment base) for that quarter, with or without applying a
$5 billion deduction. Generally, an IDI's assessment base equals its
average consolidated total assets minus its average tangible
equity.\46\ Under this alternative, the FDIC estimates that it would
need to charge an annual assessment rate of 3.76 basis points over two
years to recover estimated losses without the $5 billion deduction, or
4.57 basis points with the $5 billion deduction; however, a
significantly larger number of banking organizations would be subject
to the special assessments relative to the proposal.
---------------------------------------------------------------------------
\46\ See 12 CFR 327.5.
---------------------------------------------------------------------------
Under this alternative, the IDIs with the largest assessment base
would pay the greatest amount of special assessments. IDIs for which
certain assets are excluded in the calculation of the regular
assessment base would pay lower special assessments due to their
smaller assessment base.
This alternative would result in smaller IDIs and banking
organizations, regardless of reliance on uninsured deposits for
funding, paying potentially significant amounts of special assessments.
Further, IDIs engaged in trust activities, or with fiduciary and
custody and safekeeping assets, and for which certain assets are
excluded from their regular assessment base, would pay lower amounts of
special assessments due to these exclusions, despite holding
significant amounts of uninsured deposits. The FDIC rejected this
alternative for these reasons.
The FDIC requests comments on the proposal and the alternative
approaches considered. The FDIC has carefully weighed the available
options in fulfilling the statutory requirement to recover the loss to
the DIF arising from the use of a systemic risk determination through
one or more special assessments.
In the FDIC's view, the proposal reflects an appropriate balancing
of the goal of applying special assessments to the types of entities
that benefited the
[[Page 32706]]
most from the protection of uninsured depositors provided under the
determination of systemic risk while ensuring equitable, transparent,
and consistent treatment based on amounts of uninsured deposits at the
time of the determination of systemic risk. The proposal also allows
for payments to be collected over an extended period of time in order
to mitigate the liquidity effects of the special assessments by
requiring smaller, consistent quarterly payments. On balance, in the
FDIC's view, the proposal best promotes maintenance of liquidity, which
will allow institutions to absorb any potential unexpected setbacks
while continuing to meet the credit needs of the U.S. economy.
C. Comment Period, Effective Date, and Application Date
The FDIC is issuing this proposal with an opportunity for public
comment through July 21, 2023. Following the comment period, the FDIC
expects to issue a final rule with an effective date of January 1,
2024. The special assessment would be collected beginning with the
first quarterly assessment period of 2024 (i.e., January 1 through
March 31, 2024, with an invoice payment date of June 28, 2024), and
would continue to be collected for an anticipated total of eight
quarterly assessment periods. Because the estimated loss pursuant to
the systemic risk determination will be periodically adjusted, the FDIC
would retain the ability to cease collection early, impose an extended
special assessment collection period after the eight-quarter collection
period to collect the difference between losses and the amounts
collected, and impose a final shortfall special assessment after both
receiverships terminate.
V. Request for Comment
The FDIC is requesting comment on all aspects of the notice of
proposed rulemaking, in addition to the specific requests below.
Question 1: Should the special assessments be calculated as
proposed?
Question 2: Are there alternative methodologies for calculating the
special assessments the FDIC should consider that would result in
financial reporting in accordance with U.S. GAAP and could result in
different timing for the impact to earnings and capital? Please
describe.
Question 3: Should the assessment base for the special assessments
be equal to estimated uninsured deposits reported as of December 31,
2022, or reported as of some other date, and why?
Question 4: Should the assessment base for the special assessments
be equal to estimated uninsured deposits or some other measure?
Question 5: Is the deduction of $5 billion of aggregate estimated
uninsured deposits from the assessment base for the special assessments
for each IDI or banking organization appropriate? Why?
Question 6: Should the FDIC collect special assessments over an
eight-quarter collection period, as proposed? Should the collection
period be longer to spread out the effects of the payment of special
assessments, or shorter?
Question 7: Should the FDIC consider an exemption for specific
types of deposits from the base for special assessments? On what basis?
Question 8: Should any shortfall special assessments be calculated
as proposed?
VI. Administrative Law Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires an agency,
in connection with a proposed rule, to prepare and make available for
public comment an initial regulatory flexibility analysis that
describes the impact of the proposed rule on small entities.\47\
However, an initial regulatory flexibility analysis is not required if
the agency certifies that the proposed rule will not, if promulgated,
have a significant economic impact on a substantial number of small
entities. The Small Business Administration (SBA) has defined ``small
entities'' to include banking organizations with total assets of less
than or equal to $850 million.\48\ Certain types of rules, such as
rules of particular applicability relating to rates, corporate or
financial structures, or practices relating to such rates or
structures, are expressly excluded from the definition of ``rule'' for
purposes of the RFA.\49\ Because the proposed rule relates directly to
the rates imposed on FDIC-insured institutions, the proposed rule is
not subject to the RFA. Nonetheless, the FDIC is voluntarily presenting
information in this RFA section.
---------------------------------------------------------------------------
\47\ 5 U.S.C. 601 et seq.
\48\ The SBA defines a small banking organization as having $850
million or less in assets, where an organization's ''assets are
determined by averaging the assets reported on its four quarterly
financial statements for the preceding year.'' See 13 CFR 121.201
(as amended by 87 FR 69118, effective December 19, 2022). In its
determination, the ''SBA counts the receipts, employees, or other
measure of size of the concern whose size is at issue and all of its
domestic and foreign affiliates.'' See 13 CFR 121.103. Following
these regulations, the FDIC uses an insured depository institution's
affiliated and acquired assets, averaged over the preceding four
quarters, to determine whether the insured depository institution is
''small'' for the purposes of RFA.
\49\ 5 U.S.C. 601(2).
---------------------------------------------------------------------------
The FDIC insures 4,715 institutions as of December 31, 2022, of
which 3,433 are small entities.\50\ As discussed previously, the
proposed rule would impose a special assessment on IDIs that are part
of banking organizations that reported $5 billion or more in uninsured
deposits, as of December 31, 2022. Given that no small entity has
reported $5 billion or more in uninsured deposits, the FDIC does not
believe the proposed rule will have a direct effect on any small
entity.
---------------------------------------------------------------------------
\50\ December 31, 2022 Call Report data.
---------------------------------------------------------------------------
The FDIC invites comments on all aspects of the supporting
information provided in this RFA section. In particular, would this
proposed rule have any significant effects on small entities that the
FDIC has not identified?
B. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 \51\ (PRA) states that no
agency may conduct or sponsor, nor is the respondent required to
respond to, an information collection unless it displays a currently
valid Office of Management and Budget (OMB) control number. The FDIC's
OMB control numbers for its assessment regulations are 3064-0057, 3064-
0151, and 3064-0179. The proposed rule does not revise any of these
existing assessment information collections pursuant to the PRA;
consequently, no submissions in connection with these OMB control
numbers will be made to the OMB for review.
---------------------------------------------------------------------------
\51\ 44 U.S.C. 3501-3521.
---------------------------------------------------------------------------
C. Riegle Community Development and Regulatory Improvement Act
Section 302(a) of the Riegle Community Development and Regulatory
Improvement Act of 1994 (RCDRIA) \52\ requires that the Federal banking
agencies, including the FDIC, in determining the effective date and
administrative compliance requirements of new regulations that impose
additional reporting, disclosure, or other requirements on IDIs,
consider, consistent with principles of safety and soundness and the
public interest, any administrative burdens that such regulations would
place on depository institutions, including small depository
institutions, and customers of depository institutions, as well as the
benefits of such regulations. Subject to certain exceptions, new
regulations and amendments to regulations prescribed by a Federal
banking agency which
[[Page 32707]]
impose additional reporting, disclosures, or other new requirements on
insured depository institutions shall take effect on the first day of a
calendar quarter which begins on or after the date on which the
regulations are published in final form.\53\
---------------------------------------------------------------------------
\52\ 12 U.S.C. 4802(a).
\53\ 12 U.S.C. 4802(b).
---------------------------------------------------------------------------
The proposed rule would not impose additional reporting,
disclosure, or other new requirements on insured depository
institutions, including small depository institutions, or on the
customers of depository institutions. Accordingly, section 302 of
RCDRIA does not apply. Nevertheless, the requirements of RCDRIA will be
considered as part of the overall rulemaking process, and the FDIC
invites comments that will further inform its consideration of RCDRIA.
D. Plain Language
Section 722 of the Gramm-Leach-Bliley Act \54\ requires the Federal
banking agencies to use plain language in all proposed and final
rulemakings published in the Federal Register after January 1, 2000.
The FDIC invites your comments on how to make this proposed rule easier
to understand. For example:
---------------------------------------------------------------------------
\54\ Public Law 106-102, section 722, 113 Stat. 1338, 1471
(1999), 12 U.S.C. 4809.
---------------------------------------------------------------------------
Has the FDIC organized the material to suit your needs? If
not, how could the material be better organized?
Are the requirements in the proposed regulation clearly
stated? If not, how could the regulation be stated more clearly?
Does the proposed regulation contain language or jargon
that is unclear? If so, which language requires clarification?
Would a different format (grouping and order of sections,
use of headings, paragraphing) make the regulation easier to
understand?
List of Subjects in 12 CFR Part 327
Bank deposit insurance, Banks, banking, Savings associations.
Authority and Issuance
For the reasons stated in the preamble, the Federal Deposit
Insurance Corporation proposes to amend 12 CFR part 327 as follows:
PART 327--ASSESSMENTS
0
1. The authority citation for part 327 is revised to read as follows:
Authority: 12 U.S.C. 1813, 1815, 1817-19, 1821, 1823.
0
2. Add Sec. 327.13 to read as follows:
Sec. 327.13 Special Assessment Pursuant to March 12, 2023, Systemic
Risk Determination.
(a) Special assessment. A special assessment shall be imposed on
each insured depository institution to recover losses to the Deposit
Insurance Fund, as described in paragraph (b) of this section,
resulting from the March 12, 2023, systemic risk determination pursuant
to 12 U.S.C. 1823(c)(4)(G). The special assessment shall be collected
from each insured depository institution on a quarterly basis as
described in this section during the initial special assessment period
as defined in paragraph (f) of this section and, if necessary, the
extended special assessment period as defined in paragraph (g) of this
section, and if further necessary, on a one-time basis as described in
paragraph (l) of this section.
(b) Losses to the Deposit Insurance Fund. As used in this section,
``losses to the Deposit Insurance Fund'' refers to losses incurred by
the Deposit Insurance Fund resulting from actions taken by the FDIC
under the March 12, 2023, systemic risk determination, as may be
revised from time to time.
(c) Calculation of special assessment. An insured depository
institution's special assessment for each quarter during the initial
special assessment period and extended special assessment period shall
be calculated by multiplying the special assessment rate defined in
paragraph (f)(2) or (g)(3) of this section, as appropriate, by the
institution's special assessment base as defined in paragraph (f)(3) or
(g)(4) of this section, as appropriate.
(d) Invoicing of special assessment. For each assessment period in
which the special assessment is imposed, the FDIC shall advise each
insured depository institution of the amount and calculation of any
special assessment payment due in a form that notifies the institution
of the special assessment base and special assessment rate exclusive of
any other assessments imposed under this part. This information shall
be provided at the same time as the institution's quarterly certified
statement invoice under Sec. 327.2 for the assessment period in which
the special assessment was imposed.
(e) Payment of special assessment. Each insured depository
institution shall pay to the Corporation any special assessment imposed
under this section in compliance with and subject to the provisions of
Sec. Sec. 327.3, 327.6, and 327.7. The date for any special assessment
payment shall be the date provided in Sec. 327.3(b)(2) for the
institution's quarterly certified statement invoice for the calendar
quarter in which the special assessment was imposed.
(f) Special assessment during initial special assessment period--
(1) Initial special assessment period. The initial special assessment
period shall begin with the first quarterly assessment period of 2024
and end the last quarterly assessment period of 2025, except the
initial special assessment period will cease the first quarterly
assessment period after the aggregate amount of special assessments
collected under this section meets or exceeds the losses to the Deposit
Insurance Fund, where amounts collected and losses are compared on a
quarterly basis.
(2) Special assessment rate during initial special assessment
period. The special assessment rate during the initial special
assessment period is 3.13 basis points on a quarterly basis.
(3) Special assessment base during initial special assessment
period. (i) The special assessment base for an insured depository
institution during the initial special assessment period that has no
affiliated insured depository institution shall equal:
(A) The institution's uninsured deposits, as described in paragraph
(h) of this section; minus
(B) The $5 billion deduction; provided, however, that an
institution's assessment base cannot be negative.
(ii) The special assessment base for an insured depository
institution during the initial special assessment period that has one
or more affiliated insured depository institutions shall equal:
(A) The institution's uninsured deposits, as described in paragraph
(h) of this section; minus
(B) The institution's portion of the $5 billion deduction,
determined according to paragraph (i) of this section; provided,
however, that an institution's special assessment base cannot be
negative.
(g) Special assessment during extended special assessment period--
(1) Shortfall amount. The shortfall amount is the amount of losses to
the Deposit Insurance Fund, as reviewed and revised as of the last
quarterly assessment period of 2025, that exceed the aggregate amount
of special assessments collected during the initial special assessment
period.
(2) Extended special assessment period. If there is a shortfall
amount after the last quarterly assessment period of 2025, the special
assessment period will be extended, with at least 30 day notice to
insured depository institutions, to collect the shortfall amount. The
length of the extended special assessment period shall be the
[[Page 32708]]
minimum number of quarters required to recover the shortfall amount at
a rate under paragraph (g)(3) of this section that is at or below 3.13
basis points per quarter.
(3) Assessment rate during extended special assessment period. The
assessment rate during the extended special assessment period will be
the shortfall amount, divided by the total amount of uninsured deposits
for the quarter ended December 31, 2022, adjusted for mergers,
consolidation, and termination of insurance as of the last quarterly
assessment period of 2025, minus the $5 billion deduction for each
insured depository institution or each institution's portion of the $5
billion deduction, determined according to paragraph (i) of this
section, divided by the minimum number of quarters that results in the
quarterly rate being no greater than 3.13 basis points.
(4) Assessment base during the extended special assessment period.
(i) The special assessment base for an insured depository institution
during the extended special assessment period that has no affiliated
insured depository institution shall equal:
(A) The institution's uninsured deposits, as described in paragraph
(h) of this section, adjusted for mergers, consolidation, and
termination of insurance as of the last assessment period of 2025;
minus
(B) The $5 billion deduction; provided, however, that an
institution's special assessment base cannot be negative.
(ii) The special assessment base for an insured depository
institution during the extended special assessment period that has one
or more affiliated insured depository institutions shall equal:
(A) The institution's uninsured deposits, as described in paragraph
(h) of this section, adjusted for mergers, consolidation, and
termination of insurance as of the last assessment period of 2025;
minus
(B) The institution's portion of the $5 billion deduction,
determined according to paragraph (i) of this section; provided,
however, that an institution's special assessment base cannot be
negative.
(h) Uninsured deposits. For purposes of this section, the term
``uninsured deposits'' means an institution's estimated uninsured
deposits as reported in Memoranda Item 2 on Schedule RC-O, Other Data
For Deposit Insurance Assessments in the Consolidated Reports of
Condition and Income (Call Report) or Report of Assets and Liabilities
of U.S. Branches and Agencies of Foreign Banks (FFIEC 002) for the
quarter ended December 31, 2022, reported as of the date this rule is
adopted. Institutions with less than $1 billion in total assets as of
June 30, 2021, were not required to report such items; therefore, for
purposes of calculating special assessments or a shortfall special
assessment under this section, the amount of uninsured deposits for
such institutions as of December 31, 2022, is zero. Amendments to an
institution's Call Report or FFIEC 002 subsequent to the date this rule
is adopted by the Board do not affect the amount of the institution's
uninsured deposits for purposes of calculating special assessments or
shortfall special assessments under this section.
(i) Special assessment base--institution's portion of the $5
billion deduction. For purposes of paragraphs (f)(3)(ii)(B) and
(g)(4)(ii)(B) of this section, an institution's portion shall equal the
ratio of the institution's uninsured deposits to the sum of the
institution's uninsured deposits and the uninsured deposits of all of
the institution's affiliated insured depository institutions,
multiplied by $5 billion.
(j) Affiliates. For the purposes of this section, an affiliated
insured depository institution is an insured depository institution
that meets the definition of ``affiliate'' in section 3 of the FDI Act,
12 U.S.C. 1813(w)(6).
(k) Effect of mergers, consolidations, and other terminations of
insurance on special assessments--(1) Final quarterly certified invoice
for acquired institution. The surviving or resulting insured depository
institution in a merger or consolidation shall be liable for any unpaid
special assessments or final shortfall special assessments outstanding
at the time of the merger or consolidation on the part of the
institution that is not the resulting or surviving institution
consistent with Sec. 327.6.
(2) Special assessment for quarter in which the merger or
consolidation occurs. If an insured depository institution is the
surviving or resulting institution in a merger or consolidation or
acquires all or substantially all of the assets, or assumes all or
substantially all of the deposit liabilities, of an insured depository
institution, then the surviving or resulting insured depository
institution or the insured depository institution that acquires such
assets or assumes such deposit liabilities, shall be liable for the
acquired institutions' special assessment, if any, from the quarter of
the acquisition through the remainder of the initial or extended
special assessment period, including any final shortfall special
assessments.
(3) Other termination. When the insured status of an institution is
terminated, and the deposit liabilities of such institution are not
assumed by another insured depository institution, special assessments
and any shortfall special assessments shall be paid consistent with
Sec. 327.6(c).
(l) One-time final shortfall special assessment. If the aggregate
amount of special assessments collected during the initial or extended
special assessment period(s) do not meet or exceed the losses to the
Deposit Insurance Fund, as calculated after the receiverships resulting
from the March 12, 2023 systemic risk determination are terminated,
insured depository institutions shall pay a one-time final shortfall
special assessment in accordance with this paragraph.
(1) Notification of final shortfall special assessment. The FDIC
shall notify each insured depository institution of the amount of such
institution's final shortfall special assessment no later than 45 days
before such shortfall assessment is due.
(2) Aggregate final shortfall special assessment amount. The
aggregate amount of the final shortfall special assessment imposed
across all insured depository institutions shall equal the losses to
the Deposit Insurance Fund, as of termination of the receiverships to
which the March 12, 2023, systemic risk determination applied, minus
the aggregate amount of special assessments collected under this
section through initial and extended special assessment periods.
(3) Final shortfall special assessment rate. The final shortfall
special assessment rate shall be the aggregate final shortfall special
assessment amount divided by the total amount of uninsured deposits for
the quarter ended December 31, 2022, adjusted for mergers,
consolidation, and termination of insurance as of the assessment period
preceding the final shortfall special assessment period, minus the $5
billion deduction for each insured depository institution or each
institution's portion of the $5 billion deduction, determined according
to paragraph (i) of this section.
(4) Final shortfall special assessment base. (i) The final
shortfall special assessment base for an insured depository institution
that has no affiliated insured depository institution shall equal:
(A) The institution's uninsured deposits, as described in paragraph
(h) of this section, adjusted for mergers, consolidation, and
termination of
[[Page 32709]]
insurance as of the assessment period preceding the final short fall
assessment period; minus
(B) The $5 billion deduction; provided, however, that an
institution's final shortfall special assessment base cannot be
negative.
(ii) The final shortfall special assessment base for an insured
depository institution that has one or more affiliated insured
depository institutions shall equal:
(A) The institution's uninsured deposits, as described in paragraph
(h) of this section, adjusted for mergers, consolidation, and
termination of insurance as of the assessment period preceding the
final shortfall assessment period; minus
(B) The institution's portion of the $5 billion deduction,
determined according to paragraph (i) of this section; provided,
however, that an institution's final shortfall special assessment base
cannot be negative.
(5) Calculation of final shortfall special assessment. An insured
depository institution's final shortfall special assessment shall be
calculated by multiplying the final shortfall special assessment rate
by the institution's final shortfall special assessment base as defined
in paragraph (l)(4) of this section.
(6) One-time final special assessment. The one-time final shortfall
special assessment shall be collected on a one-time quarterly basis
after final losses to the Deposit Insurance Fund are determined after
termination of the receiverships to which the March 12, 2023, systemic
risk determination applied.
(7) Payment, invoicing, and mergers. Paragraphs (d), (e), and (k)
of this section are applicable to the one-time shortfall special
assessment.
(m) Request for revisions. An insured depository institution may
submit a written request for revision of the computation of any special
assessment or shortfall special assessment pursuant to this part
consistent with Sec. 327.3(f).
(n) Special assessment collection in excess of losses. Any special
assessments collected under this section that exceed the losses to the
Deposit Insurance Fund, as of termination of the receiverships to which
the March 12, 2023, systemic risk determination applied, shall be
placed in the Deposit Insurance Fund.
(o) Rule of construction. Nothing in this section shall prevent the
FDIC from imposing additional special assessments as required to
recover current or future losses to the Deposit Insurance Fund
resulting from any systemic risk determination under 12 U.S.C.
1823(c)(4)(G).
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on May 11, 2023.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2023-10447 Filed 5-19-23; 8:45 am]
BILLING CODE 6714-01-P
