Special Assessment Pursuant to Systemic Risk Determination, 83329-83349 [2023-25813]
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Federal Register / Vol. 88, No. 228 / Wednesday, November 29, 2023 / Rules and Regulations
B. The creditor makes a commitment
at consummation to extend a total
amount of credit in excess of the
threshold amount in effect at the time of
consummation. In these circumstances,
the loan remains exempt under
§ 1026.3(b) even if the total amount of
credit extended does not exceed the
threshold amount.
ii. Subsequent changes. If a creditor
makes a closed-end extension of credit
or commitment to extend closed-end
credit that exceeds the threshold
amount in effect at the time of
consummation, the closed-end loan
remains exempt under § 1026.3(b)
regardless of a subsequent increase in
the threshold amount. However, a
closed-end loan is not exempt under
§ 1026.3(b) merely because it is used to
satisfy and replace an existing exempt
loan, unless the new extension of credit
is itself exempt under the applicable
threshold amount. For example, assume
a closed-end loan that qualified for a
§ 1026.3(b) exemption at consummation
in year one is refinanced in year ten and
that the new loan amount is less than
the threshold amount in effect in year
ten. In these circumstances, the creditor
must comply with all of the applicable
requirements of this part with respect to
the year ten transaction if the original
loan is satisfied and replaced by the
new loan, which is not exempt under
§ 1026.3(b). See also comment 3(b)–6.
6. Addition of a security interest in
real property or a dwelling after account
opening or consummation. i. Open-end
credit. For open-end accounts, if after
account opening a security interest is
taken in real property, or in personal
property used or expected to be used as
the consumer’s principal dwelling, a
previously exempt account ceases to be
exempt under § 1026.3(b) and the
creditor must begin to comply with all
of the applicable requirements of this
part within a reasonable period of time.
See comment 3(b)–4.ii. If a security
interest is taken in the consumer’s
principal dwelling, the creditor must
also give the consumer the right to
rescind the security interest consistent
with § 1026.15.
ii. Closed-end credit. For closed-end
loans, if after consummation a security
interest is taken in real property, or in
personal property used or expected to
be used as the consumer’s principal
dwelling, an exempt loan remains
exempt under § 1026.3(b). However, the
addition of a security interest in the
consumer’s principal dwelling is a
transaction for purposes of § 1026.23,
and the creditor must give the consumer
the right to rescind the security interest
consistent with that section. See
§ 1026.23(a)(1) and its commentary. In
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contrast, if a closed-end loan that is
exempt under § 1026.3(b) is satisfied
and replaced by a loan that is secured
by real property, or by personal property
used or expected to be used as the
consumer’s principal dwelling, the new
loan is not exempt under § 1026.3(b),
and the creditor must comply with all
of the applicable requirements of this
part. See comment 3(b)–5.
7. Application to extensions secured
by mobile homes. Because a mobile
home can be a dwelling under
§ 1026.2(a)(19), the exemption in
§ 1026.3(b) does not apply to a credit
extension secured by a mobile home
that is used or expected to be used as
the principal dwelling of the consumer.
See comment 3(b)–6.
8. Transition rule for open-end
accounts exempt prior to July 21, 2011.
Section 1026.3(b)(2) applies only to
open-end accounts opened prior to July
21, 2011. Section 1026.3(b)(2) does not
apply if a security interest is taken by
the creditor in real property, or in
personal property used or expected to
be used as the consumer’s principal
dwelling. If, on July 20, 2011, an openend account is exempt under § 1026.3(b)
based on a firm commitment to extend
credit in excess of $25,000, the account
remains exempt under § 1026.3(b)(2)
until December 31, 2011 (unless the
firm commitment is reduced to $25,000
or less). If the firm commitment is
increased on or before December 31,
2011, to an amount in excess of $50,000,
the account remains exempt under
§ 1026.3(b)(1) regardless of subsequent
increases in the threshold amount as a
result of increases in the CPI–W. If the
firm commitment is not increased on or
before December 31, 2011, to an amount
in excess of $50,000, the account ceases
to be exempt under § 1026.3(b) based on
a firm commitment to extend credit. For
example:
i. Assume that, on July 20, 2011, the
account is exempt under § 1026.3(b)
based on the creditor’s firm
commitment to extend $30,000 in
credit. On November 1, 2011, the
creditor increases the firm commitment
on the account to $55,000. In these
circumstances, the account remains
exempt under § 1026.3(b)(1) regardless
of subsequent increases in the threshold
amount as a result of increases in the
CPI–W.
ii. Same facts as paragraph 8.i of this
section except, on November 1, 2011,
the creditor increases the firm
commitment on the account to $40,000.
In these circumstances, the account
ceases to be exempt under § 1026.3(b)(2)
after December 31, 2011, and the
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83329
creditor must begin to comply with the
applicable requirements of this part.
*
*
*
*
*
By order of the Board of Governors of the
Federal Reserve System, acting through the
Secretary of the Board under delegated
authority.
Michele Taylor Fennell,
Deputy Associate Secretary of the Board.
Brian Shearer,
Senior Advisor, Consumer Financial
Protection Bureau.
[FR Doc. 2023–25048 Filed 11–28–23; 8:45 am]
BILLING CODE 4810–AM–P; 6210–01–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 327
RIN 3064–AF93
Special Assessment Pursuant to
Systemic Risk Determination
Federal Deposit Insurance
Corporation (FDIC).
ACTION: Final rule.
AGENCY:
The FDIC is adopting a final
rule to implement a special assessment
to recover the loss to the Deposit
Insurance Fund (DIF or Fund) arising
from the protection of uninsured
depositors following the closures of
Silicon Valley Bank, Santa Clara, CA,
and Signature Bank, New York, NY. The
FDIC will collect the $16.3 billion
special assessment at a quarterly rate of
3.36 basis points, multiplied by an
insured depository institution’s (IDI)
estimated uninsured deposits, reported
for the quarter that ended 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 will collect
the special assessment over eight
quarterly assessment periods, although
the collection period may change due to
updates to the estimated loss pursuant
to the systemic risk determination or if
assessments collected change due to
corrective amendments to the amount of
uninsured deposits reported for the
December 31, 2022, reporting period.
DATES: The final rule is effective on
April 1, 2024, with the first collection
for the special assessment reflected on
the invoice for the first quarterly
assessment period of 2024 (i.e., January
1 through March 31, 2024), with a
payment date of June 28, 2024.
SUMMARY:
FOR FURTHER INFORMATION CONTACT:
Division of Insurance and Research:
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Federal Register / Vol. 88, No. 228 / Wednesday, November 29, 2023 / Rules and Regulations
Ashley Mihalik, Associate Director,
Financial Risk Management, 202–898–
3793, amihalik@fdic.gov; Kayla
Shoemaker, Senior Policy Analyst, 202–
898–6962, kashoemaker@fdic.gov; Legal
Division: Sheikha Kapoor, Assistant
General Counsel, 202–898–3960,
skapoor@fdic.gov; Ryan McCarthy,
Counsel, 202–898–7301, rymccarthy@
fdic.gov.
SUPPLEMENTARY INFORMATION:
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Table of Contents
I. Background
A. Silicon Valley Bank, Signature Bank,
and the Systemic Risk Exception
B. Legal Authority and Policy Objectives
C. The Proposed Rule
II. The Final Rule
A. Description of the Final Rule
B. Estimated Special Assessment Amount
C. Rate for the Special Assessment
D. Assessment Base and Scope of
Application for the Special Assessment
1. Comments Received on the Calculation
of the Special Assessment
2. Comments on the Reporting Date of
Uninsured Deposits for Special
Assessment Base
3. Comments Recommending Exclusions
From Uninsured Deposits for Special
Assessment Base
4. Final Assessment Base for the Special
Assessment
E. Prior Period Amendments
F. Initial Collection Period for the Special
Assessment
1. Comments Received on the Initial
Collection Period
2. Adjustments to the Loss Estimate,
Amendments to the Reported Amount of
Estimated Uninsured Deposits and the
Initial Collection Period for the Special
Assessment
G. Extended Special Assessment Collection
Period
H. One-Time Final Shortfall Special
Assessment
I. Collection of Special Assessment and
Any Shortfall Special Assessment
J. Payment Mechanism for the Special
Assessment and Any Shortfall Special
Assessment
K. Mergers, Consolidations, and
Terminations of Deposit Insurance
L. Accounting Treatment
M. Request for Revisions
III. Analysis and Expected Effects
A. Analysis of the Statutory Factors
1. The Types of Entities That Benefit
2. Effects on the Industry
3. Capital and Earnings Analysis
4. Economic Conditions
B. Alternatives Considered
C. Effective Date and Application Date of
the Final Rule
IV. Administrative Law Matters
A. Regulatory Flexibility Act
B. Paperwork Reduction Act
C. Riegle Community Development and
Regulatory Improvement Act
D. Plain Language
E. Congressional Review Act
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I. Background
A. Silicon Valley Bank, Signature Bank,
and the Systemic Risk Exception
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
FDIC was appointed as the receiver for
both institutions.1
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).2
On March 12, 2023, the Secretary of
the Treasury, acting on the
recommendation of the 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 depositors.3 The full
protection of 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 deposits—both insured and
uninsured—and substantially all assets
of these banks to newly created, fullservice FDIC-operated bridge banks,
1 See 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. See also 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/pressreleases/2023/pr23018.html.
2 12 U.S.C. 1823(c)(4)(G). As used in this final
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).
3 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.
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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 depositors of these banks.4 The
transfer of 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.5 On March 27, 2023, the FDIC
entered into a purchase and assumption
agreement with First-Citizens Bank &
Trust Company (First Citizens), with
loss-sharing provided on the
commercial loans it purchased from
Silicon Valley Bridge Bank.6
B. 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.7 As
required by the FDI Act, the 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.8
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 a systemic risk
determination. As detailed in the
4 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.
5 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.
6 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.
7 12 U.S.C. 1823(c)(4)(G)(ii)(I).
8 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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sections that follow, and as required by
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.9
exclusion, or different treatment, of
certain types of uninsured deposits
included in the special assessment base,
different reporting dates of estimated
uninsured deposits used to calculate the
assessment base, or adjustment of the $5
billion deduction from the special
assessment base. Commenters
additionally discussed a range of other
matters that are addressed in the
relevant sections below.
C. The Proposed Rule
On May 11, 2023, the Board approved
a notice of proposed rulemaking (the
proposed rule, or proposal) to
implement a special assessment, as
required by the FDI Act, to recover the
loss to the DIF arising from the
protection of uninsured depositors
following the closures of Silicon Valley
Bank and Signature Bank.10 The FDIC
proposed to collect a special assessment
that would be approximately equal to
the losses attributable to the protection
of uninsured depositors at these two
failed banks, which were estimated to
total $15.8 billion.
The FDIC proposed an annual special
assessment rate that would be derived
by dividing the loss estimate
attributable to the protection of
uninsured depositors by the assessment
base calculated for all IDIs subject to the
special assessment. The proposed
assessment base (special assessment
base) was 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, adjusted to
exclude the first $5 billion of uninsured
deposits at the banking organization
level.11
In response to the proposal, the FDIC
received 312 comment letters from
depository institutions, depository
institution holding companies, trade
associations, members of Congress, and
other interested parties.12 As further
detailed below, the majority of
commenters expressed support for the
proposal and for the scope of
application of the proposed rule,
including the $5 billion deduction
applied to the special assessment base.
Other comment letters suggested the
II. The Final Rule
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9 12
U.S.C. 1823(c)(4)(G)(ii)(III).
88 FR 32694 (May 22, 2023).
11 As used in this final rule, 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.
12 See comments on the proposal, available at
https://www.fdic.gov/resources/regulations/federalregister-publications/2023/2023-specialassessments-systemic-risk-determination-3064af93.html.
10 See
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A. Description of the Final Rule
After careful consideration of the
comments received on the proposal and
analysis of the applicable statutory
factors, the FDIC is adopting, as final,
the proposed special assessment, with
clarifications to promote transparency
and a modification to apply any
corrective amendments to estimated
uninsured deposits for the December 31,
2022, reporting period to the calculation
of the special assessment, following
adoption of the final rule.
The special assessment implemented
through this final rule will recover the
loss to the DIF arising from the
protection of uninsured depositors
following the closures of Silicon Valley
Bank and Signature Bank. The total
amount collected for the special
assessment will be approximately equal
to the estimated losses attributable to
the protection of uninsured depositors
at these two failed banks, which are
currently estimated to total $16.3
billion.
The majority of commenters
expressed support for the proposal and
for the scope of application, including
the $5 billion deduction applied to the
assessment base for the special
assessment. While some commenters
broadly objected to the collection of a
special assessment, the FDIC is required
by the FDI Act to take this action in
connection with the systemic risk
determination announced on March 12,
2023.13 In the FDIC’s view, the final
rule, consistent with the proposed rule,
reflects an appropriate balancing of the
goal of applying the special assessment
to the types of entities that benefited the
most from the protection of uninsured
depositors provided under the
determination of systemic risk while
ensuring equitable, transparent, and
consistent treatment. The final rule,
consistent with the proposed rule, also
allows for payments to be collected over
an extended period of time in order to
reduce the likelihood of overcollecting
and to mitigate the liquidity effects of
13 12
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U.S.C. 1823(c)(4)(G).
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83331
the special assessment by requiring
smaller, consistent quarterly payments.
B. Estimated Special Assessment
Amount
To determine the cost of the failures
attributable to the cost of covering
uninsured deposits pursuant to the
determination of systemic risk, 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 time of failure, the portion of the
total estimated loss of $0.9 billion that
is attributable to the protection of
uninsured depositors is $0.6 billion.
The cost estimate for the sale of the
Signature Bridge Bank to New York
Community Bancorp decreased
following the issuance of the proposal
from $2.4 billion to approximately $0.9
billion. The decline in the cost estimate
was primarily attributable to recoveries
from assets in receivership that were
higher than previously estimated offset,
in part, by higher costs of liabilities
assumed by the receivership.
At Silicon Valley Bank, for which 88
percent of deposits were uninsured at
the time of failure, the portion of the
total estimated loss of $17.8 billion that
is attributable to the protection of
uninsured depositors is $15.7 billion.
The cost estimate for the sale of the
Silicon Valley Bridge Bank to First
Citizens was revised following the
issuance of the proposal from $16.1
billion to approximately $17.8 billion
mainly due to recoveries from assets in
receivership that were less than
previously anticipated and higher costs
of liabilities assumed by the
receivership.
The revised cost estimates form the
basis for the current special assessment
calculation in this final rule. In total, of
the $18.7 billion in estimated losses at
the two banks and incurred by the DIF,
the estimated loss attributable to the
protection of uninsured depositors is
$16.3 billion, an increase of
approximately $500 million from the
estimate of $15.8 billion described in
the proposal.
As with all failed bank receiverships,
these loss estimates 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. As
noted below, the amount of the special
assessment will be adjusted as the loss
estimates change.
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Comments Received on the Estimated
Special Assessment Amount
One commenter suggested that the
special assessment should recover the
entire amount of estimated losses. As
proposed, and as required by statute, the
FDIC will recover through the special
assessment the $16.3 billion estimated
loss incurred as a result of the actions
taken by 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.
C. Rate for the Special Assessment
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The proposed special assessment rate
was derived by dividing the loss
estimate attributable to the protection of
uninsured depositors by the assessment
base calculated for all IDIs subject to the
special assessment as of December 31,
2022. As described in detail below, the
proposed assessment base was equal to
estimated uninsured deposits reported
for the quarter that ended
December 31, 2022, after applying the
$5 billion deduction.
Under the final rule, the FDIC will
impose a special assessment rate equal
to approximately 13.4 basis points
annually, an increase from the 12.5
basis point annual rate in the
proposal.14 Amendments to reported
estimated uninsured deposits filed since
the adoption of the proposed rule have
resulted in a lower total assessment
base. The decline in the total assessment
base combined with the increase in the
cost estimate have resulted in a higher
annual rate relative to the proposal.15 As
of November 2, 2023, the total
assessment base was $6.0 trillion. The
special assessment rate will not change
following the date of adoption of this
14 The proposed rule noted that the special
assessment rate in the proposal was 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. Estimates of the special assessment rate
and expected effects in the proposed rule generally
reflected any amendments to data reported through
February 21, 2023, for the reporting period that
ended December 31, 2022, while estimates for this
final rule reflect any amendments as of November
2, 2023. Given the closure of First Republic Bank,
San Francisco, CA, announced on May 1, 2023,
estimates in the proposed rule and this final 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.
15 The special assessment rate, base, and expected
effects in this final rule reflect any amendments to
data as of November 2, 2023, for the reporting
period that ended December 31, 2022.
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final rule through the duration of the
initial eight-quarter collection period.
The resulting quarterly rate is 3.36
basis points, or an annual rate of
approximately 13.4 basis points. Over
the initial eight-quarter collection
period, the FDIC projects that it will
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
$16.3 billion, totaling approximately
$2.0 billion per quarter.
D. Assessment Base and Scope of
Application for the Special Assessment
Under the proposal, each IDI’s
assessment base for the special
assessment would be equal to estimated
uninsured deposits as reported in the
Call Report or FFIEC 002 for the quarter
that ended December 31, 2022, after
applying the $5 billion deduction.16 As
a result of this deduction, most small
IDIs and IDIs that are part of a small
banking organization would not pay
anything towards the special
assessment. The special assessment
would not be applicable to any banking
organizations with total assets under $5
billion.
1. Comments Received on the
Calculation of the Special Assessment
The majority of commenters stated
that community banks should be
exempt from the special assessment.
The FDIC received 63 comments related
to the calculation of the special
assessment base and the scope of
application for the special assessment,
or the calculation of the special
assessment rate. Some of these
commenters stated that certain groups of
banks should be exempt from or pay
less of the special assessment, while one
commenter recommended that all banks
be subject to the special assessment.17
One commenter said that U.S. global
systemically important banks (GSIBs)
did not benefit from the actions taken
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. 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.
17 Among the groups of banks commenters stated
should be exempt from the special assessment were:
banks under a range of other asset or uninsured
deposit thresholds, banks not considered
systemically important financial institutions,
Community Development Financial Institutions
(CDFIs), Minority Depository Institutions (MDIs),
rural banks, and mutual banks.
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under the determination of systemic risk
and that although GSIBs served as a
source of strength to the banking sector,
they are responsible for a
disproportionate share of the special
assessment.
One commenter noted that given that
the FDIC is required by statute to
recover the estimated amount of loss
attributable to the protection of
uninsured depositors following the
determination of systemic risk, any
changes to the proposed special
assessment base will necessarily
redistribute the obligation among
banking organizations subject to the
special assessment.
Several commenters recommended
alternative measures for the special
assessment base, including total assets,
total deposits, uninsured deposits as a
percentage of total deposits, an
institution’s regular risk-based deposit
insurance assessment base, or to
otherwise take a more risk-based
approach to calculating the special
assessment base. One commenter
recommended a more detailed
approach, stating that the special
assessment base should be the entire
deposit base, or alternatively the entire
assessment base applied for regular
quarterly deposit insurance
assessments, for the largest institutions
and uninsured deposits for all other
banks, and that the rate for the special
assessment should incorporate an
adjusted tangible equity capital ratio
and a scalar to factor in interest rate
risk.
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,
the most recently available date
reflecting the amount of uninsured
deposits in each institution near or at
the time the determination of systemic
risk was made. Among banking
organizations that report uninsured
deposits, those with total assets between
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$1 billion and $5 billion are generally
the least reliant on uninsured deposits
for funding, with uninsured deposits
averaging 27.9 percent of assets,
compared with the largest banking
organizations with total assets greater
83333
than $250 billion, which had uninsured
deposits that averaged 35.1 percent of
assets.
TABLE 1—AVERAGE SHARE OF ASSETS FUNDED BY UNINSURED DEPOSITS, BY BANKING ORGANIZATION ASSET SIZE,
BASED ON DATA FOR THE DECEMBER 31, 2022, REPORTING PERIOD 1
[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 .........................................................................................................................................................
27.9
28.9
32.4
33.3
35.1
1 Table reflects data for the December 31, 2022, reporting period, and incorporates amendments, mergers, acquisitions and failures through
November 2, 2023.
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 33.0 percent,
compared with the largest banking
organizations with total assets greater
than $250 billion, which averaged 50.4
percent.
TABLE 2—UNINSURED DEPOSITS AS A PERCENTAGE OF TOTAL DOMESTIC DEPOSITS, BY BANKING ORGANIZATION ASSET
SIZE, BASED ON DATA FOR THE DECEMBER 31, 2022, REPORTING PERIOD 1
[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 .....................................................................................................................................................................
$50 to $250 Billion ...................................................................................................................................................................
Greater than $250 Billion .........................................................................................................................................................
ddrumheller on DSK120RN23PROD with RULES1
1 Reflects
33.0
35.0
40.3
42.8
50.4
reporting amendments to estimated uninsured deposits, mergers, acquisitions, and failures through November 2, 2023.
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.
As of March 31, 2023, banks in all
asset size groups experienced quarterly
declines in uninsured deposit balances,
but these declines were particularly
severe and widespread among banks
between $50 billion and $250 billion in
total assets. In addition, between
December 31, 2022, and March 31, 2023,
the eight U.S. GSIBs reported a
weighted average decline in uninsured
deposits of 2.1 percent, albeit slower
than the industry average of
approximately eight percent. However,
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changes in uninsured deposit balances
over this time period varied widely for
the GSIBs. Two of the eight GSIBs
experienced growth in uninsured
deposits of 2.6 percent and 2.0 percent
over this period while the other six
GSIBs experienced declines, some
significant, ranging between less than
two percent to nearly 17 percent.
Defining the assessment base for the
special assessment as estimated
uninsured deposits reported as of
December 31, 2022, and deducting $5
billion from a banking organization’s
assessment base, serves several
purposes. First, banking organizations
that reported $5 billion or less in
estimated uninsured deposits as of
December 31, 2022, would not be
subject to the special assessment.
Banking organizations that reported
more than $5 billion in estimated
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Frm 00029
Fmt 4700
Sfmt 4700
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 applying an asset size threshold,
were used to determine applicability,
and thereby ensuring more equitable
treatment. Otherwise, a situation may
arise in which a banking organization
just over a particular size threshold
would pay a special assessment, 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 but for the
determination of systemic risk. Indeed,
shortly after Silicon Valley Bank was
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Federal Register / Vol. 88, No. 228 / Wednesday, November 29, 2023 / Rules and Regulations
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 $5 billion
deduction from the assessment base, the
banks that benefited the most—banks of
larger asset sizes and that hold greater
amounts of uninsured deposits—will be
responsible for paying the special
assessment.
Second, the $5 billion deduction from
the assessment base results in most
small IDIs and IDIs that are part of a
small banking organization not paying
anything towards the special
assessment. The special assessment is
not applicable to any banking
organizations with total assets under $5
billion.18
Finally, deducting $5 billion from the
assessment base of estimated uninsured
deposits at the banking organization
level rather than at the IDI level for
banking organizations with more than
one subsidiary IDI ensures that banking
organizations with similar amounts of
estimated uninsured deposits pay a
similar special assessment, regardless of
banking organization structure. For
example, a banking organization with
multiple IDIs with large amounts of
estimated uninsured deposits will not
have an advantage over other banking
organizations with only one subsidiary
IDI with a similarly large amount of
estimated uninsured deposits because
instead of excluding $5 billion of
estimated uninsured deposits for each
IDI in one banking organization, the $5
billion deduction will be distributed
across multiple affiliated IDIs.
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 the
determination of systemic risk.19 The
assessment base of estimated uninsured
deposits with the $5 billion deduction
ensures that the banks that benefited
18 Some IDIs that report less than $5 billion in
estimated uninsured deposits will be subject to the
special assessment if they are part of banking
organizations with multiple IDIs that report a
combined total of estimated uninsured deposits in
excess of $5 billion.
19 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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most from the assistance provided
under the systemic risk determination
will be charged a special assessment 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 a higher special
assessment. For these reasons, the FDIC
is adopting the proposed exclusion of
the first $5 billion from estimated
uninsured deposits from the assessment
base for the special assessment, without
change.
2. Comments on the Reporting Date of
Uninsured Deposits for Special
Assessment Base
Under the proposal, each IDI’s
assessment base for the special
assessment would be equal to estimated
uninsured deposits as reported in the
Call Report or FFIEC 002 for the
December 31, 2022, reporting period,
after applying the $5 billion deduction.
The FDIC sought comment on whether
the special assessment base should be
equal to estimated uninsured deposits
reported as of December 31, 2022, or
reported as of some other date, and the
reasons for using a different date.
Two commenters expressed support
for the proposed December 31, 2022,
reporting date for uninsured deposits to
determine the special assessment base.
Thirteen commenters, including two
trade associations and three letters from
members of Congress, requested that
estimated uninsured deposits reported
as of a more recent date than December
31, 2022, be used to calculate the
assessment base for the special
assessment. Most of these commenters
suggested an alternative date, such as
March 31, 2023, or June 30, 2023, while
others suggested that the assessment
base should reference the estimated
uninsured deposits reported as of each
quarter-end during the collection period
or did not specify a date. Some
commenters that supported a later
reporting date said that institutions,
particularly mid-sized and regional
banks, that reported declines in
uninsured deposit balances after
December 31, 2022, should not be
charged a special assessment on
uninsured deposit balances that they no
longer hold or that are now insured.
In the FDIC’s view, estimated
uninsured deposits as of December 31,
2022, most closely approximate an
institution’s vulnerability to significant
deposit withdrawals in the absence of
the determination of systemic risk, and
therefore reflect the institutions that
most benefited from such
determination. An assessment base that
is calculated using the amount of
PO 00000
Frm 00030
Fmt 4700
Sfmt 4700
uninsured deposits as of December 31,
2022, would result in transparent and
consistent payments, best approximate
an institution’s vulnerability to deposit
withdrawals, and would result in a
more simplified framework for
calculating the special assessment. For
these reasons, the FDIC is adopting as
final the proposed special assessment
base of estimated uninsured deposits as
of December 31, 2022.
3. Comments Recommending
Exclusions From Uninsured Deposits for
Special Assessment Base
Under the proposed rule, the
assessment base for the special
assessment 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. The FDIC sought comment on
whether it should consider an
exemption for specific types of deposits
from the special assessment base, and
on what basis.
Multiple commenters supported the
exclusion of, or different treatment for,
certain types of uninsured deposits
included in the proposed assessment
base for the special assessment of
estimated uninsured deposits reported
as of December 31, 2022, less the $5
billion deduction.
a. Collateralized Deposits
The FDIC received 25 comments
requesting that the FDIC either exclude,
or provide a different treatment for,
collateralized deposits in the calculation
of the special assessment base. In
particular, commenters requested such
treatment for the uninsured portion of
public deposits, or deposits of states and
political subdivisions that are secured
or collateralized as required under state
law (also referred to as preferred
deposits). These commenters reasoned
that collateralized deposits are more
stable than other uninsured deposits
because they are secured, and therefore
pose little risk to the DIF. Seven of these
commenters requested the exclusion of
additional types of collateralized
deposits, including collateralized
operational deposits or trust-related
deposits that are required to be
collateralized under federal or state law
(e.g., fiduciary funds awaiting
investment or distribution), from the
special assessment base.
Banks report preferred deposits
annually for the December 31 Call
Report date, but they do not report other
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types of collateralized deposits such as
those mentioned by the commenters.20
Given that preferred deposits represent
only a subset of collateralized deposits,
providing an exclusion or different
treatment for this subset of deposits
would result in preferential treatment
for this subset of collateralized deposits
on the sole basis that these are the only
type of collateralized deposits for which
data were collected.
Moreover, even if banks reported data
on all collateralized deposits, in the
FDIC’s view, the presence of collateral
does not fully mitigate run risk.
Collateral may not always be sufficient
to cover the full amount of such a
deposit, depending on the economic
environment, and particularly in the
event of a liquidity crisis during which
loss in value may need to be realized.
Further, in certain types of resolutions,
collateralized deposits reduce the assets
available to the FDIC as receiver to
satisfy claims, including the FDIC’s
subrogated claim as deposit insurer, and
result in a higher loss to the DIF in the
event of a bank failure compared to a
bank holding the same level of deposits
that are not collateralized.
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b. Custody Bank Adjustments
The FDIC received one joint comment
from three custody banks stating that
the special assessment base should be
adjusted to mitigate the
disproportionate and unwarranted
impact on the custody bank business
model and on sound asset-liability and
risk management practices. The
commenters proposed various
adjustments: that the FDIC should allow
custody banks to exclude domestic
deposit balances placed with the
Federal Reserve from the measure of
estimated uninsured deposits used to
calculate the assessment base for the
special assessment; that the FDIC
should allow custody banks to deduct
75 percent of the domestic operational
deposits 21 from the assessment base for
the special assessment; or that the FDIC
should retain the regular risk-based
assessment methodology for the special
assessment while maintaining the
exclusion of the first $5 billion in
estimated uninsured deposits.
The FDIC disagrees. The banks that
benefited most from the assistance
provided under the systemic risk
20 Call Report Schedule RC–E, Part I,
Memorandum item 1.e. requires reporting of
preferred deposits (uninsured deposits of states and
political subdivisions in the U.S. which are secured
or collateralized as required under state law).
21 The commenter defined operational deposits as
residual cash custody banks hold for their clients
in deposit accounts to facilitate day-to-day
transactional activities related to client investment
assets.
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determination were large banks and
those that held greater amounts of
uninsured deposits, regardless of the
assets that those deposits were used to
fund. Custody banks, especially those
whose primary business is fiduciary and
custodial and safekeeping, hold large
amounts of uninsured deposits and
many of those uninsured deposits are
from depositors with large deposit
balances. Further, while certain deposits
held by custody banks, such as
operational deposits, may be more
stable than non-operational funding, in
the event of idiosyncratic stress,
counterparties likely would reduce the
amount of their operational deposits.22
The adjustments proposed in the joint
comment letter would result in custody
banks paying significantly lower
amounts of the special assessment
despite holding significant amounts of
uninsured deposits.
c. Intercompany Deposits
The FDIC received 12 comments
requesting the exclusion of, or different
treatment for, intercompany deposits in
the calculation of the special assessment
base. Commenters argued that
intercompany deposits, such as the
deposits of subsidiaries that are not IDIs,
deposits of other affiliates such as sister
companies that are not IDIs, or deposits
of a parent holding company of the IDI,
are stable and present minimal run risk
because entities within the banking
organization’s structure are unlikely to
withdraw funds in a crisis. Further,
some commenters argued that
intercompany deposits would not result
in a loss to the DIF because they would
not be provided deposit insurance
coverage or would not need deposit
insurance coverage in the event of the
bank’s failure. Some commenters noted
that the methodology for including
intercompany deposits in the
assessment base for the special
assessment may lead to double-counting
certain deposits at the banking
organization level for banking
organizations with multiple IDIs, to the
extent an IDI’s deposits with its
affiliates are funded with uninsured
deposits it has taken from a depositor.
There is no clear evidence that
intercompany deposits are more stable
relative to other deposits.
Organizational structures, board
members, governance, and decision
making can differ between entities
within the same banking organization.
Likewise, the behavior of creditors,
including uninsured depositors, of each
entity can differ. Further, an affiliated
entity’s deposits at a bank are insured to
22 See
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Frm 00031
Fmt 4700
Sfmt 4700
83335
the same extent as an unaffiliated
entity’s deposits in the event of the
bank’s failure. Each depositor is entitled
to deposit insurance as permitted by
law, and to pro rata receivership
distribution on the remaining,
uninsured balances. Additionally, it is
not possible to accurately estimate the
portion of uninsured deposits that are
intercompany deposits using existing
items on the Call Report.
Deposits are the most common
funding source for many banks.
Depositors and other creditors 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.
Any revisions to the methodology for
calculating the special assessment base,
such as excluding or adjusting for
certain types of uninsured deposits,
would change the allocation of the
special assessment, but the FDIC is
required by statute to recover the full
amount of the losses to the DIF incurred
as the result of the systemic risk
determination. As a result, any
exclusion for a type of uninsured
deposits from the special assessment
base would reduce the amount of the
special assessment for banking
organizations that hold those excluded,
uninsured deposits, and increase the
assessment burden for all other banks
holding other types of uninsured
deposits. For this reason, and for the
reasons described above, and consistent
with the proposal, the FDIC is not
excluding any particular type of
uninsured deposits from the assessment
base for the special assessment.
4. Final Assessment Base for the Special
Assessment
Following careful consideration of the
comments, and for the reasons
described above, the FDIC is adopting as
final the proposed assessment base for
the special assessment, while applying
any corrective amendments to estimated
uninsured deposits reported for the
December 31, 2022, reporting period in
calculating the assessment base. The
methodology adopted in this final rule
ensures that the banks that benefited
most from the assistance provided
under the systemic risk determination
will be charged a special assessment 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
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deposits paying a higher special
assessment.
Consistent with the proposal, each
IDI’s assessment base for the special
assessment will be equal to estimated
uninsured deposits as reported in the
Call Report or FFIEC 002 as of December
31, 2022, after applying the $5 billion
deduction. The deduction of the first $5
billion from estimated uninsured
deposits in the assessment base for the
special assessment is 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.23
For a banking organization that has
more than one subsidiary IDI, the
assessment base for the special
assessment is equal to the IDI’s total
estimated uninsured deposits reported
for the quarter that ended December 31,
2022, less its share of the $5 billion
deduction, which is based on its share
of total estimated uninsured deposits
held by all IDI affiliates in the banking
organization.24 Table 3 provides an
example of the calculation of the special
assessment for a banking organization
with three subsidiary IDIs.
TABLE 3—CALCULATION OF THE SPECIAL ASSESSMENT 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
Estimated
uninsured
deposits as
reported as of
December 31, 2022
IDI share of
banking
organization
estimated
uninsured deposits
[percent]
IDI Share of
$5 billion
deduction
(Column B *
$5 billion)
Assessment
base for
special
assessment
(Column A
¥Column C)
IDI share of
special assessment
(Column D * 26.9
basis points)/
current loss estimate
[percent]
IDI A .............................................
IDI B .............................................
IDI C .............................................
$50,000
40,000
10,000
50
40
10
$2,500
2,000
500
Based on data reported for the quarter
that ended December 31, 2022, and as
illustrated in Table 4 below, the FDIC
estimates that 114 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 81.3 percent of industry
assets, will be subject to the special
assessment, including 48 banking
organizations with total assets over $50
billion and 66 banking organizations
with total assets between $5 and $50
$47,500
38,000
9,500
0.79
0.63
0.16
billion. No banking organizations with
total assets under $5 billion would pay
the special assessment, based on data
for the December 31, 2022, reporting
period.25
TABLE 4—BANKING ORGANIZATIONS REQUIRED TO PAY SPECIAL ASSESSMENT, BASED ON DATA REPORTED FOR THE
DECEMBER 31, 2022, REPORTING PERIOD 1
Number of
banking
organizations
required to
pay special
assessment
Asset size of banking organization
Share of
special
assessment
[percent]
Share of
industry
assets
[percent]
Greater than $50 billion .......................................................................................
Between $5 and $50 billion .................................................................................
Under $5 billion ....................................................................................................
48
66
0
1.1
1.5
0.0
95.3
4.7
0.0
74.5
6.8
0.0
Total ..............................................................................................................
114
2.6
100.0
81.3
1 Reflects
reporting amendments to estimated uninsured deposits, mergers, acquisitions, and failures through November 2, 2023.
E. Prior Period Amendments
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Percentage of
all banking
organizations
in asset size
category
required to
pay special
assessment
[percent]
Under the proposal, amendments to
an IDI’s Call Report for the December
31, 2022, reporting period made after
the date of adoption of any final rule
23 IDIs with less than $1 billion in total assets as
of June 30, 2021, are 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, is
zero.
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would not have affected an institution’s
rate or base for the special assessment.
The FDIC is finalizing this aspect of
the rule, as proposed, but in calculating
the special assessment, will apply any
amendments made by IDIs to correct the
reporting of estimated uninsured
deposits that are confirmed through, or
associated with the result of, the FDIC’s
24 As used in this final rule, the term ‘‘affiliate’’
has the same meaning as defined in section 3 of the
FDI 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).
25 The special assessment rate, base, and expected
effects in this final rule reflect any amendments to
data as of November 2, 2023, for the reporting
period that ended December 31, 2022. These
estimates may change depending on any subsequent
amendments to reported estimates of uninsured
deposits.
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review of an institution’s reporting
methodology (as described below).
Following the issuance of the
proposed rule, the FDIC observed that
some IDIs were reporting or filing
amendments to the reporting of
estimated uninsured deposits for the
December 31, 2022, reporting period in
a manner that is inconsistent with the
instructions to the Call Report. For
example, some institutions incorrectly
reduced the reported amount of
uninsured deposits to the extent that
they are collateralized by pledged
assets; this is incorrect because in and
of itself, the existence of collateral has
no bearing on the portion of a deposit
that is covered by federal deposit
insurance. Additionally, some
institutions incorrectly reduced the
amount of uninsured deposits reported
on Schedule RC–O by excluding certain
intercompany deposit balances.
The FDIC did not receive any
comments on the proposed treatment of
prior period amendments. Some
commenters, however, raised concerns
about the accuracy of the amount of
estimated uninsured deposits reported
on the Call Report. The FDIC received
two comment letters indicating that
banks may be reporting uninsured
deposits differently, or in an
inconsistent manner, and one comment
letter indicating that some banks were
confused about whether to include
collateralized deposits in the amount of
estimated uninsured deposits reported
on the Call Report.
On July 24, 2023, the FDIC issued a
Financial Institution Letter (FIL) on
Estimated Uninsured Deposits
Reporting Expectations, reiterating
longstanding instructions and stating
that each IDI is responsible for the
accuracy of the data reported in its Call
Report and for filing amendments as
necessary to ensure Call Report
accuracy.26 The FIL stated that,
consistent with the requirement to file
accurate Call Reports, IDIs that
incorrectly reported uninsured deposits
should amend their Call Reports by
making the appropriate changes to the
data and submitting the revised data
file.
As a general matter, the amount of
estimated uninsured deposits reported
on the Call Report is monitored as one
of many indicators of safety and
soundness, and its accuracy, as with all
items collected on the Call Report, is of
the utmost importance. The reported
amount of estimated uninsured deposits
26 FDIC Financial Institution Letter (FIL 37–2023),
Estimated Uninsured Deposits Reporting
Expectations. https://www.fdic.gov/news/financialinstitution-letters/2023/fil23037.html.
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is also used to determine the amount of
estimated insured deposits in
calculating the DIF reserve ratio, which
is the ratio of the DIF balance to all
insured deposits.27
The FDIC is conducting a review
(Assessment Reporting Review) of the
reporting methodology for estimated
uninsured deposits and related items on
the Call Report because of the
importance of these items as indicators
of safety and soundness.28 The
Assessment Reporting Review may
result in amendments to uninsured
deposits and related items reported on
the Call Report if the FDIC determines
that an institution is not reporting these
items in accordance with the
instructions. Given the planned
Assessment Reporting Review, in
calculating this special assessment this
final rule applies any amendments
made by IDIs to correct the reporting of
estimated uninsured deposits that are
confirmed through, or associated with
the result of, the FDIC’s review of an
institution’s reporting methodology.
Under the final rule, the special
assessment rate and each banking
organization’s special assessment base
has been calculated using estimated
uninsured deposits for the December 31,
2022, reporting period as reported on
November 2, 2023.29 Amendments
made to an institution’s December 31,
2022, Call Report through November 2,
2023, have been accounted for in the
calculations, as proposed. In addition,
under the final rule, certain
amendments filed after November 2,
2023, will affect the calculation of an
institution’s special assessment base, as
described below.
In particular, if, as part of the FDIC’s
Assessment Reporting Review of an
institution’s reporting methodology
(described above), the FDIC finds that,
as of November 2, 2023, an institution
was not reporting uninsured deposits
for the December 31, 2022, reporting
period in accordance with the Call
Report instructions, and the institution
files a corrective amendment as a result
of the FDIC’s review after November 2,
2023, the FDIC will adjust the special
assessment base based on such
27 See section 3(y)(3) of the FDI Act, 12 U.S.C.
1813(y)(3).
28 Consistent with the FDIC’s practice of
conducting reviews under Section 7(b)(4) of the FDI
Act to confirm the correctness of any assessment,
the FDIC will review an institution’s reporting
methodology for estimated uninsured deposits and
related items. See 12 U.S.C. 1817(b)(4).
29 As proposed, the assessment base and rate
would be calculated as of the date the final rule is
adopted; however, under the final rule, this is
calculated on November 2, 2023, shortly before the
date of adoption, for operational and administrative
reasons.
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83337
corrective amendment for such
institution, and any affiliates, as
applicable, for all collection periods.
Additionally, if an institution files an
amendment to the reporting of
estimated uninsured deposits for the
December 31, 2022, reporting period
after November 2, 2023, and the FDIC
finds that such amendment brings the
reporting of uninsured deposits into
compliance with the Call Report
instructions, the FDIC will adjust the
special assessment base based on such
corrective amendment for such
institution, and any affiliates, as
applicable, for all collection periods. If
such institution is part of a banking
organization with multiple subsidiary
IDIs, such corrective amendments will
also affect the distribution of the $5
billion deduction from the banking
organization’s assessment base for all
collection periods.
Prior period amendments filed after
November 2, 2023, that are not the
result of corrections to errors or
misreporting will not affect an
institution’s special assessment base.
Modifications to an institution’s special
assessment base will take effect
beginning the collection quarter
following the date of amendment, and
the FDIC will apply such modifications
retroactively to the first quarterly
collection period, as applicable.
Any retroactive special assessment
amount due will be included, in full, on
the invoice for the quarter following the
date of the amendment. If the
amendment resulted in a downward
revision of the assessment base for the
special assessment, the banking
organization will be credited the
amount the institution overpaid, with
interest, and such amount, including
interest, will be applied to any
remaining amount of the special
assessment due from the banking
organization beginning in the quarter
following the date of the amendment. In
the unlikely event a credit remains after
the special assessment collection period
has ended, the excess credit amount
will be refunded to the banking
organization, with interest. The FDIC
will pay interest on credited amounts
resulting from amendments to correct
the reporting of estimated uninsured
deposits that are confirmed through, or
associated with the result of, the FDIC’s
Assessment Reporting Review of an
institution’s reporting methodology and
will collect interest on any retroactive
special assessment amounts due to the
FDIC as a result of such amendments.30
30 Interest payments collected will be applied to
any remaining amount of the special assessment
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F. Initial Collection Period for the
Special Assessment
Under the proposal, 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.
In order to mitigate the risk of
overcollecting as the loss estimates for
the failed banks are periodically
adjusted, to preserve liquidity at IDIs,
and in the interest of consistent and
predictable assessments, the special
assessment would be collected over
eight quarters.
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1. Comments Received on the Initial
Collection Period
The FDIC received three comments on
the length of the initial collection
period, with one commenter requesting
a longer collection period to help with
cash flow, one commenter requesting a
shorter collection period given the
ability of the banking industry to repay
the DIF for the special assessment as
quickly as possible, and one commenter
suggesting that banks should have the
option to fully fund obligations prior to
the end of the proposed collection
period.
The FDIC is required by statute to
place the excess funds collected through
the special assessment in the DIF.31 By
spreading out the collection period over
eight quarters, a length of time that
would enable the FDIC to develop a
more accurate 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 overcollecting.
Reducing the length of the collection
period could also adversely impact
liquidity. Therefore, the FDIC is
adopting the initial collection period of
eight quarters as proposed, with a
modification to allow corrective
amendments to estimated uninsured
deposits for the December 31, 2022,
reporting period, following adoption of
the final rule.
estimates for failed banks are
periodically adjusted as assets are sold,
liabilities are satisfied, and receivership
expenses are incurred. As proposed,
under the final rule, the FDIC will
review and consider any revisions to the
loss estimate each quarter of the
collection period. Given the planned
review of the reporting methodology for
estimated uninsured deposits, in
calculating the special assessment, the
final rule will additionally apply any
amendments to correct the reporting of
estimated uninsured deposits that are
confirmed through, or associated with
the result of, the FDIC’s review of an
institution’s reporting methodology.
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
assessment, due to revisions to the loss
estimate or due to amendments applied
to estimated uninsured deposits, the
FDIC will cease collection of the special
assessment before the end of the initial
eight-quarter collection period, in the
quarter after it has collected enough to
recover actual or estimated losses.32 The
FDIC will provide notice of any
cessation of collections at least 30 days
before the next payment is due.
equal the shortfall amount divided by
the total amount of uninsured deposits
less the $5 billion deduction for each
banking organization subject to the
special assessment, adjusted for failures
or amendments to correct the reporting
of estimated uninsured deposits
resulting from the FDIC’s Assessment
Reporting Review of an institution’s
reporting methodology that occurred
before or during the initial eight-quarter
collection period. In the interest of
consistency and predictability, the
quarterly rate will not exceed the 3.36
basis point quarterly special assessment
rate applied during the initial eightquarter collection period, and such
extended special assessment will be
collected for the minimum number of
quarters needed to recover the shortfall
amount at such quarterly rate.
The assessment base for such
extended special assessment will be as
described above, based on estimated
uninsured deposits reported as of
November 2, 2023, for the December 31,
2022, reporting period, adjusted for
amendments to correct reporting
resulting from the FDIC’s review of an
institution’s reporting methodology,
with a $5 billion deduction for each
banking organization.
G. Extended Special Assessment
Collection Period
H. One-Time Final Shortfall Special
Assessment
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 this special
assessment applies 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 collection period and
any extended collection period, and if
losses at the termination of the
receiverships exceed the amount
collected through such special
assessment, the FDIC proposed to
impose a one-time final shortfall special
assessment to collect the final shortfall
amount.
2. Adjustments to the Loss Estimate,
Amendments to the Reported Amount
of Estimated Uninsured Deposits and
the Initial Collection Period for the
Special Assessment
The estimated loss attributable to the
protection of uninsured depositors
pursuant to the systemic risk
determination is currently estimated to
total $16.3 billion. However, loss
Under the proposal, 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 eightquarter collection period, (the shortfall
amount), after providing notice of at
least 30 days before the first payment of
any extended special assessment is due.
The FDIC did not receive any
comments on the extended special
assessment collection period, and is
finalizing as proposed, while, in
calculating the special assessment,
applying any amendments to correct the
reporting of estimated uninsured
deposits that are confirmed through, or
associated with the result of, the FDIC’s
review of an institution’s reporting
methodology.
In the event that an extended
collection period is needed, the FDIC
will collect the shortfall amount on a
quarterly basis. The assessment rate for
any extended special assessment will
while the amount of interest paid by the FDIC will
be added to the amount required to recover
estimated losses.
31 12 U.S.C. 1823(c)(4)(G)(ii)(III).
32 Amendments to the reporting of estimated
uninsured deposits may result in a higher amount
collected, but the increase may not be of a
magnitude large enough to cease collection early.
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Comments Received on the One-Time
Final Shortfall Special Assessment
The FDIC received four comments on
the one-time final shortfall special
assessment. One supported the
proposed calculation. One commenter
recommended that if the amount
collected exceeds the final loss estimate,
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that the excess collected should be
credited against future assessments. One
commenter requested that the
assessment base methodology be
adjusted to incorporate a risk-based
component. One commenter said that
the one-time final shortfall special
assessment should be calculated at the
end of a recommended one-year
payment period.
The FDIC would only collect a onetime final shortfall special assessment if
the final loss amount at the termination
of the receiverships is not determined
until after the initial collection period
and any extended collection period, and
if losses at the termination of the
receiverships exceed the amount
collected through such special
assessment.
For the reasons described above, the
FDIC is adopting the one-time final
shortfall special assessment as
proposed, while, in calculating the
special assessment, applying any
amendments to correct the reporting of
estimated uninsured deposits that are
confirmed through, or associated with
the result of, FDIC’s review of an
institution’s reporting methodology.
The assessment base for such onetime final shortfall special assessment
will be as described above, based on
estimated uninsured deposits reported
as of November 2, 2023, for the
December 31, 2022, reporting period,
adjusted for amendments to correct
reporting resulting from the FDIC’s
review of an institution’s reporting
methodology, with a $5 billion
deduction for each banking
organization.
The FDIC will 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
for the quarter that ended December 31,
2022, adjusted for amendments to
correct reporting resulting from the
FDIC’s review of an institution’s
reporting methodology up to the
determination of the shortfall amount,
after applying the $5 billion deduction.
The entire one-time final shortfall
special assessment will be collected in
one quarter so that there are no missed
amounts due to amendments or failures
and to streamline the operational impact
on banking organizations. The FDIC will
provide banking organizations notice of
at least 45 days before payment of any
one-time final shortfall special
assessment is due and will consider the
statutory factors, including economic
conditions and the effects on the
industry, in deciding on the timing of
such payment.
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The FDIC will notify each IDI subject
to a one-time final 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
will be included in the IDI’s invoice for
its regular quarterly deposit insurance
assessment.
I. Collection of Special Assessment and
Any Shortfall Special Assessment
The special assessment and any
shortfall special assessment will 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 will
disclose the amount of any special
assessment or shortfall special
assessment due.
Comments Received on Communication
of Loss Estimates
Two commenters requested that the
FDIC communicate any revisions to the
loss estimate and updates on the
collection of the special assessment. To
increase transparency and in response
to comments on the proposal, the FDIC
is clarifying that it plans to
communicate any changes to the loss
estimate, as applicable, and to provide
updates on the collection of the special
assessment to banking organizations
subject to the special assessment. Such
updates will be communicated
primarily through quarterly assessment
invoices issued to institutions subject to
the special assessment. The FDIC also
publishes estimated losses and other
data on bank failures and assistance on
its publicly available website.33
J. Payment Mechanism for the Special
Assessment and Any Shortfall Special
Assessment
Each IDI is required to take any
actions necessary to allow the FDIC to
debit its special assessment and any
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 must ensure that sufficient U.S.
dollar 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 will be as provided for
nonpayment of an IDI’s regular
assessment.34
K. Mergers, Consolidations, and
Terminations of Deposit Insurance
Under the proposed rule, if an IDI
were to acquire—through merger or
consolidation—another IDI following
the adoption of this final rule or during
any special assessment collection
period, the acquiring IDI would be
required to pay the acquired IDI’s
special assessment, if any, including
any unpaid special assessment, in
addition to its own special assessment,
from the quarter of the acquisition
through the remainder of all special
assessment collection periods. Under
the proposal, in the event that the FDIC
extends the collection period or imposes
a one-time final shortfall assessment,
each banking organization’s assessment
base would be adjusted for mergers or
failures that occurred during the eightquarter collection period.
Under the proposed rule, 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, including the special
assessment, for the assessment periods
that its deposits are insured, but not
thereafter.35
When an IDI voluntarily terminates its
deposit insurance under the FDI Act,
under the proposal the IDI whose
insured status is terminating must,
among other things, continue to pay
assessments for the assessment periods
that its deposits are insured.36
Comments Received on Mergers,
Consolidations, and Terminations of
Deposit Insurance
One commenter expressed concern
that use of the December 31, 2022,
reporting date ignores recent acquisition
activity while another commenter
requested clarification that the estimates
in the proposed rule exclude the
uninsured deposits that New York
Community Bank assumed following its
acquisition of Signature Bank in March
2023.37 One commenter requested
clarification of the point at which
obligation to pay the special assessment
would end if a bank were to voluntarily
terminate its insured status during the
collection period, noting that this is
34 See
12 CFR 327.3(c).
12 CFR 327.6(c).
36 See 12 CFR 327.6(c).
37 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.
35 See
33 See FDIC BankFind Suite: Bank Failures &
Assistance Data, available at: https://
banks.data.fdic.gov/explore/failures. See also FDIC
Failed Bank List, available at: https://www.fdic.gov/
resources/resolutions/bank-failures/failed-banklist/.
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Federal Register / Vol. 88, No. 228 / Wednesday, November 29, 2023 / Rules and Regulations
relevant to when the special assessment
is reflected under International
Financial Reporting Standards (IFRS)
accounting principles.
The FDIC is clarifying that the
uninsured deposits of First Republic
Bank, Silicon Valley Bank, and
Signature Bank, which failed prior to
the adoption of the proposed rule, were
excluded from the proposed calculation
of the assessment rate and base for the
special assessment, and the estimated
expected effects in the proposed rule
and in this final rule, and is providing
clarification that such exclusion will be
adopted in the final rule. This exclusion
was intended to prevent
disincentivizing any potential future
acquisition activity following the
adoption of the proposed rule,
particularly given the uncertainty in the
banking sector at the time the proposal
was adopted.
The FDIC is adopting as final the
proposed provisions related to mergers,
acquisitions, and terminations of
deposit insurance, with two
adjustments. First, in the event that the
FDIC extends the collection period or
imposes a one-time final shortfall
assessment, each banking organization’s
assessment base will not be adjusted for
mergers or failures that occurred after
the adoption of this final rule or during
the eight-quarter collection period. In
the FDIC’s view, each banking
organization’s assessment base reflects
its relative benefit from the assistance
provided under the systemic risk
determination. This treatment would
ensure that an acquiring bank’s special
assessment, and any special assessment
assumed for an acquired bank,
continues to reflect each banking
organization’s relative benefit from the
assistance provided under the systemic
risk determination, and would have the
result that a banking organization
subject to the special assessment that
acquires another banking organization
also subject to the special assessment
would derive benefit from the $5 billion
deduction for both special assessment
payments. The FDIC is also clarifying
that the special assessment base of the
acquiring bank in a merger or
consolidation that occurred prior to the
March 12, 2023, determination of
systemic risk would be adjusted to
include the uninsured deposits of the
acquired bank and would derive benefit
of a single $5 billion deduction.
Calculating the assessment base in this
manner best reflects the structure of the
banking organization at the time the
determination of systemic risk was
made, and reflects the organization’s
relative benefit from the assistance
provided.
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Second, in order to avoid
incentivizing banks to voluntarily
terminate their insured status to avoid
paying the special assessment under the
final rule, the FDIC will require any
bank that voluntarily terminates its
insured status after the adoption of this
final rule or during any special
assessment collection period to pay the
entire remaining amount of its special
assessment at the same time its
obligation to pay regular deposit
insurance assessments would end.38
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.39 Therefore, an institution
will 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. In
addition, the General Instructions to the
Call Report provide guidance on ASC
Topic 855, Subsequent Events, which
may be applicable.40
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.
Comments Received on Accounting
Treatment
The FDIC received two comments that
supported restructuring the special
assessment as a prepaid expense that
could be amortized over a multi-year
period.
Structuring the special assessment as
a prepaid expense would reduce the
one-time effect on income but would
also reduce liquidity by the full amount
of the special assessment at payment. In
the FDIC’s view, the proposed structure
of the special assessment best promotes
maintenance of liquidity, which will
allow institutions to absorb any
potential unexpected setbacks while
38 See
12 CFR 327.6(c).
ASC paragraph 450–20–25–2.
40 See General Instructions to the Call Report,
available at: https://www.fdic.gov/resources/
bankers/call-reports/crinst-031-041/2022/2022-12generalinstructions.pdf.
39 FASB
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continuing to meet the credit needs of
the U.S. economy.
For these reasons, the FDIC is
declining to restructure the special
assessment as a prepaid expense.
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 CFR 327.3(f).41
III. 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 FDIC
deems appropriate and relevant to the
action taken or the assistance
provided.42
1. 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.43
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
Board and the Board of Governors voted
unanimously to recommend, and the
41 Existing regulation 12 CFR 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, the
request for review provision under 12 CFR 327.4(c)
would not be applicable to an IDI’s special
assessment or shortfall special assessment.
42 12 U.S.C. 1823(c)(4)(G)(ii)(III).
43 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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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 depositors.44
The full protection of 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.
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.
Between December 31, 2022, and
March 31, 2023, banks in all asset size
groups experienced quarterly declines
in uninsured deposit balances, but these
declines were particularly severe and
widespread among banks between $50
billion and $250 billion in total assets.
Between December 31, 2022, and March
31, 2023, the eight U.S. GSIBs reported
a weighted average decline in uninsured
deposits of 2.1 percent, but changes in
uninsured deposit balances over this
44 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.
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time period varied widely. Two of the
eight GSIBs experienced growth in
uninsured deposits of 2.6 percent and
2.0 percent over this period while the
other six GSIBs experienced declines,
some significant, ranging between less
than two percent to nearly 17 percent.
Generally speaking, larger banks
benefited the most from the stability
provided to the banking industry under
the systemic risk determination. Under
the final rule, the banks that benefited
most from the assistance provided
under the systemic risk determination
will be charged a special assessment 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 a higher special
assessment.
2. Effects on the Industry
In calculating the assessment base for
the special assessment, the FDIC will
deduct $5 billion from each IDI or
banking organization’s aggregate
estimated uninsured deposits reported
for the quarter that ended December 31,
2022. As a result, any institution that
did not report any uninsured deposits as
of December 31, 2022, will not be
subject to the special assessment.
Additionally, most small IDIs and IDIs
that are part of a small banking
organization will not pay anything
towards the special assessment. Some
small and mid-size IDIs will be subject
to the special assessment if they are
subsidiaries of a banking organization
with more than $5 billion in uninsured
deposits and such IDIs report positive
amounts of uninsured deposits after
application of the deduction, or if they
directly hold 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 for the quarter
ended December 31, 2022, and as
captured in Table 4 above, the FDIC
estimates that 114 banking organizations
will be subject to the special
assessment, including 48 banking
organizations with total assets over $50
billion and 66 banking organizations
with total assets between $5 and $50
billion. No banking organizations with
total assets under $5 billion will pay a
special assessment, based on data
reported as of December 31, 2022.45 46 It
45 The number of banking organizations subject to
the special assessment may change after the
publication of the final rule depending on any
mergers, consolidations, failures, or other
terminations of deposit insurance, or amendments
to reported estimates of uninsured deposits.
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83341
is anticipated that the same banking
organizations subject to the special
assessment would also be subject to any
extended special assessment or one-time
final shortfall special assessment, absent
the effects of any amendments to
estimated uninsured deposits, mergers,
consolidations, failures, or other
terminations of deposit insurance that
occur through the determination of such
extended special assessment or one-time
final shortfall special assessment.
3. Capital and Earnings Analysis
The FDIC has analyzed the effect of
the special assessment 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 for the December 31,
2022, reporting period, including
amendments filed through November 2,
2023, and assumes that pre-tax income
for the quarter in which a banking
organization will recognize the accrual
of a liability and an estimated loss (i.e.,
expense) from a loss contingency for the
special assessment, will equal the
average of their pre-tax income from
July 1, 2022, through June 30, 2023.47
To avoid the possibility of
underestimating effects on bank
earnings and capital, the analysis also
assumes that the effects of the special
assessment are not transferred to
customers in the form of changes in
borrowing rates, deposit rates, or service
fees. The analysis considers the effective
pre-tax cost of the special assessment in
calculating the effect on capital.48 49
A banking organization’s earnings
retention and dividend policies
influence the extent to which the
special assessment affects equity capital
46 Some IDIs that report less than $5 billion in
estimated uninsured deposits will be subject to the
special assessment if they are part of banking
organizations with multiple IDIs that report a
combined total of estimated uninsured deposits in
excess of $5 billion.
47 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.
48 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).
49 The analysis does not incorporate any tax
effects from an operating loss carry forward or carry
back.
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levels. A banking organization may
reduce the effect of recognizing the
accrual of a liability and an estimated
loss (i.e., expense) from a loss
contingency for the special assessment
or shortfall special assessment, by
adjusting downward the amount of
dividends. 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 from July 1, 2022,
through June 30, 2023. In the event that
the ratio of Tier 1 capital to assets falls
below four percent, however, this
assumption is modified such that the
banking organization retains the amount
necessary to reach a four percent
minimum and distributes any remaining
funds according to the dividend payout
rate.50
The FDIC estimates that it will collect
the estimated loss from protecting
uninsured depositors at Silicon Valley
Bank and Signature Bank of
approximately $16.3 billion, over the
initial eight-quarter collection period.
Banking organizations will 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 earnings of the
entire amount of the special assessment
to be collected over eight quarters
would occur in one quarter only.
Given the current loss estimate and
the assumptions in the analysis, the
FDIC estimates that, on average, the
special assessment will decrease the
50 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 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.
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dollar amount of Tier 1 capital of
banking organizations required to pay
the special assessment by an estimated
62 basis points.51 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 special
assessment.
For the four quarters that ended June
30, 2023, the banking industry reported
net income of $290.5 billion, nearly 13
percent higher than for the four quarters
that ended June 30, 2022, and above the
pre-pandemic average. The effect of the
special assessment on a banking
organization’s income is measured by
calculating the amount of the special
assessment as a percent of pre-tax
income (hereafter referred to as
‘‘income’’).
While the special assessment is
allocated based on estimated uninsured
deposits reported at the banking
organization level, IDIs will be
responsible for payment of the special
assessment. The FDIC analyzed the
effect of the special assessment on
income reported at the IDI-level for IDIs
subject to the special assessment 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 assessment by
aggregating the income reported by all
IDIs subject to the special assessment
within each banking organization since
the IDIs will be responsible for payment.
The FDIC analyzed the impact of the
special assessment on banking
organizations that were profitable based
on their average quarterly income from
July 1, 2022, to June 30, 2023.52
The effects on income of the entire
amount of the special assessment 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 special assessment
would result in an average one-quarter
reduction in income of 20.4 percent for
51 Estimated effects on capital are calculated
based on data reported as of June 30, 2023, 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 the special assessment.
52 There were two banking organizations that
would be required to pay the special assessment
that were unprofitable based on average quarterly
income from July 1, 2022, to June 30, 2023.
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banking organizations subject to the
special assessment.53
Comments Received on the Effect of the
Special Assessment on Capital and
Earnings
The FDIC received 13 comments,
including three comments from trade
associations, suggesting modifications to
change the timing of, or otherwise
mitigate the effect of the special
assessment on capital, earnings, and
regular deposit insurance assessments.
Seven commenters supported an
optional transition period or a similar
approach to allow banking organizations
to phase in the effects of the special
assessment on their regulatory capital
ratios over the eight-quarter collection
period.
One commenter said that for purposes
of calculating requirements and
guidance related to levels of dividends
and stock repurchases, and for
examination findings related to
earnings, the reduction in earnings
resulting from the payment of the
special assessment should be
disregarded, or at least be amortized
over the collection period. The same
commenter also requested an
adjustment to eliminate the impact of
the special assessment on regular
quarterly deposit insurance assessments
for large banks and highly complex
banks.54
As described above, given the loss
estimate and the assumptions applied in
the analysis, the FDIC estimates that, on
average, the special assessment will
decrease the dollar amount of Tier 1
capital of banking organizations subject
to the special assessment by an
estimated 62 basis points. 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 special
assessment. As described above, the
effect of the special assessment on Tier
1 capital is minimal and is not
estimated to cause any institutions to
fall below the minimum capital
requirement; therefore, the FDIC is not
adopting a transition period to phase in
the special assessment’s effect on
regulatory capital.
53 Earnings or income are quarterly income before
assessments and taxes. Quarterly income is
assumed to equal average income from July 1, 2022,
to June 30, 2023.
54 For regular deposit insurance assessment
purposes, a large bank is generally defined as an
institution with $10 billion or more in total assets,
and a highly complex bank is generally defined as
an institution that has $50 billion or more in total
assets and is controlled by a parent holding
company that has $500 billion or more in total
assets, or is a processing bank or trust company. See
12 CFR 327.8(f) and (g).
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Table 5 shows that approximately 66
percent of profitable banking
organizations subject to the proposal are
projected to have a special assessment
of less than 20 percent of one quarter’s
income, including 23 percent with a
special assessment of less than 5 percent
of income. Another 34 percent of
83343
profitable banking organizations subject
to the proposal are projected to have a
special assessment equal to or exceeding
20 percent of one quarter’s income.
TABLE 5—ESTIMATED ONE-QUARTER EFFECT OF ENTIRE AMOUNT OF THE SPECIAL ASSESSMENT ON INCOME FOR
PROFITABLE BANKING ORGANIZATIONS SUBJECT TO THE SPECIAL ASSESSMENT 1
Number of
banking
organizations
Special assessment as percent of income
Percent of
banking
organizations
Assets of
banking
organizations
[$ billions]
Percent
of assets
Over 30 ..........................................................................................................
20 to 30 ..........................................................................................................
10 to 20 ..........................................................................................................
5 to 10 ............................................................................................................
Less than 5 ....................................................................................................
15
23
28
20
25
14
21
25
18
23
5,838
6,308
5,504
805
1,034
30
32
28
4
5
Total ........................................................................................................
111
100
19,489
100
1 Income is defined as quarterly pre-tax income. Quarterly income is assumed to equal the average of income from July 1, 2022, through June
30, 2023. For purposes of this analysis, the effects on income of the entire amount of the special assessment to be collected over eight quarters
are assumed to occur in one quarter only. The special assessment as a percent of income is an estimate of the one-time accrual of the full eight
quarters of the special assessment 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 June 30, 2023. Excludes two banking organizations that would be required to pay the special assessment that were unprofitable. Also excludes one foreign banking organization subject to the special assessment. Some columns do not add
to total due to rounding. Special assessment estimates are based on uninsured deposits for the December 31, 2022, report date and incorporate
amendments, mergers, acquisitions and failures through November 2, 2023.
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In order to preserve liquidity at IDIs,
and in the interest of consistent and
predictable assessments, the special
assessment will be collected over eight
quarters. The special assessments is
applicable for the first quarterly
assessment period of 2024. Given that
the proposal was approved by the Board
and published in the Federal Register in
May 2023, institutions were provided
time to prepare and plan for the special
assessment.
4. Economic Conditions
On September 7, 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 second quarter of 2023. Overall,
key banking industry metrics remained
favorable in the quarter.55
Net income declined from the
previous quarter due to accounting
gains on failed bank acquisitions that
occurred in the first and the second
quarter. However, excluding these
nonrecurring gains, net income was
relatively flat from the prior quarter. Net
income remained relatively high by
historical measures in the second
quarter, although the banking industry
reported a tighter net interest margin
and funding pressures driven by
increasing rates paid on deposits as well
as high rates paid on non-deposit
liabilities. Loan expansion continued,
asset quality metrics were favorable, and
55 FDIC Quarterly Banking Profile, Second
Quarter 2023. https://www.fdic.gov/analysis/
quarterly-banking-profile/qbp/2023jun/.
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the banking industry remained wellcapitalized.
The banking industry continues to
face significant downside risks from the
effects of inflation, rising market interest
rates, and geopolitical uncertainty.
These risks could cause credit quality
deterioration and weakness in
profitability, which may lead to more
stringent underwriting standards, a
slowdown in loan growth, higher
provision expenses, and liquidity
constraints. Also, commercial real estate
portfolios are under pressure from
higher interest rates as loans mature and
require refinancing, and office
properties are experiencing weak
demand for space and softening
property values.
Despite these challenges, the state of
the U.S. banking system remains sound
and institutions are well positioned to
absorb a special assessment.56
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, 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
56 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.
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determination.57 The FDIC considered
several alternatives while developing
this final rule, but believes, on balance,
that the proposed special assessment is
the most appropriate and
straightforward manner in which to
collect the special assessment.
Accordingly, and after consideration of
the statutory factors as described above,
the FDIC is adopting as final the
proposed special assessment, with
changes to promote transparency and to
apply any corrective amendments to the
reporting of estimated uninsured
deposits to the calculation of the special
assessment. Brief descriptions of the
alternatives, along with explanations of
why the final rule is preferable to the
alternatives, are as follows:
Alternative 1: One-Time Special
Assessment
The first alternative the FDIC
considered would have imposed a onetime special assessment. Under this
alternative, 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
57 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).
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amount of a one-time special assessment
would equal the entire initial loss
estimate. Calculation of the special
assessment, 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.58
Similar to this alternative, one
commenter suggested that banks should
have the option to fully fund obligations
prior to the end of the proposed time
period. While under both the final rule
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 order to
spread the liquidity impact over
multiple quarters and to mitigate the
risk of overcollecting.
Alternative 2: Asset Size Applicability
Threshold
A second alternative the FDIC
considered would be to base
applicability on an asset size 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. One commenter
supported this approach.
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 the determination of
systemic risk.59 Large banks and
regional banks, and particularly those
58 12
59 12
U.S.C. 1823(c)(4)(G)(ii)(III).
U.S.C. 1823(c)(4)(G)(ii)(III).
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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 methodology adopted
under the final rule, including the $5
billion deduction from estimated
uninsured deposits, and an alternative
asset-size-based applicability threshold
would effectively remove the smallest
institutions from eligibility, the
deduction of $5 billion from each
banking organization’s estimated
uninsured deposits in calculating the
special assessment helps 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.
support for the proposal and for the
scope of application, including the $5
billion deduction applied to the
assessment base for the special
assessment.
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, and
given the general support for the
deduction of $5 billion from the
assessment base for the special
assessment, the FDIC rejected this
alternative in favor of allocating the
special assessment to larger institutions
with the largest amounts of uninsured
deposits as of December 31, 2022, and
that experienced significant and
widespread declines in uninsured
deposits between December 31, 2022,
and March 31, 2023, with the result that
smaller institutions would not have to
contribute 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. Generally
speaking, larger banks benefited the
most from the stability provided to the
banking industry under the systemic
risk determination.
Alternative 3: Assessment Base Equal to
All Uninsured Deposits, Without $5
Billion Deduction
A third alternative the FDIC
considered would be to eliminate the $5
billion deduction from the assessment
base for the special assessment, and
allocate the special assessment among
IDIs based on each IDI or banking
organization’s total estimated uninsured
deposits as of December 31, 2022. This
alternative 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 all IDIs
with total assets of $1 billion or more.60
Relative to the methodology applied in
final rule, more IDIs would pay the
special assessment under this
alternative, and IDIs with greater
amounts of uninsured deposits would
generally pay a lower special
assessment relative to the methodology
applied in the final rule since the
special assessment would be allocated
across a significantly larger number of
institutions. As stated previously, the
majority of commenters expressed
Alternative 4: Special Assessment Based
on Each Institution’s Percentage of
Uninsured Deposits to Total Deposits
A fourth alternative the FDIC
considered would be to allocate the
special assessment 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.61 Two
commenters supported an assessment
base for the special assessment equal to
uninsured deposits as a percentage of
total deposits or to otherwise apply a
60 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.
61 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.
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calculation that would result in a larger
special assessment for institutions with
a greater reliance on uninsured deposits
for funding.
Under this alternative, IDIs with a
greater reliance on uninsured deposits
would generally pay the greatest amount
of the special assessment; however, the
special assessment would be allocated
across a large number of institutions,
unless a threshold is imposed. Even
with a threshold based on assets or
another measure, this alternative would
result in institutions of vastly different
asset sizes and with different dollar
amounts of uninsured deposits paying a
similar dollar amount of the special
assessment. For example, an institution
just above the asset threshold would pay
the same special assessment as a much
larger institution with the same reliance
on uninsured deposits. It also would
result in some smaller banking
organizations paying potentially
significant amounts of the special
assessment, 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 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. 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 methodology in the final
rule results in a larger special
assessment 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 final rule and all
alternatives described above, the special
assessment 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 fifth alternative the
FDIC considered would be to collect 50
percent of the special assessment during
the initial four-quarter collection period
based on estimated uninsured deposits
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reported by all IDIs as of December 31,
2022, and collect the remaining special
assessment for an additional fourquarter 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
assessment to the institutions that had
the largest amounts of uninsured
deposits at the time of the determination
of systemic risk.
The remaining special assessment
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
because in the FDIC’s view, estimated
uninsured deposits as of December 31,
2022, most closely approximate an
institution’s vulnerability to significant
deposit withdrawals in the absence of
the determination of systemic risk, and
therefore reflect the institutions that
most benefited from such
determination. Additionally, three
commenters supported the use of an
alternative measure in the special
assessment base specifically for the
reason that they believe use of
uninsured deposits in the assessment
base discourages banks from holding
uninsured deposits. This alternative
may also change the timing of accrual of
the contingent liability by banks. The
final rule’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 the special assessment.
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Alternative 6: Apply Special
Assessment Rate to Regular Assessment
Base, With or Without Application of a
$5 Billion Deduction
A sixth alternative the FDIC
considered is 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.62 Under this alternative, the
FDIC estimates that it would need to
charge an annual assessment rate of 3.97
basis points over two years to recover
estimated losses without the $5 billion
deduction, or 4.84 basis points with the
$5 billion deduction; however, a
significantly larger number of banking
organizations would be subject to the
special assessment relative to the
proposal. Two commenters supported
use of the regular assessment base to
calculate the special assessment.
Under this alternative, the IDIs with
the largest assessment base would pay
the greatest amount of the special
assessment. IDIs for which certain assets
are excluded in the calculation of the
regular assessment base would pay a
lower special assessment due to their
smaller assessment base.
This alternative would result in
smaller banking organizations,
regardless of reliance on uninsured
deposits for funding, paying potentially
significant amounts of the special
assessment. 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 the special
assessment due to these exclusions,
despite holding significant amounts of
uninsured deposits. The FDIC rejected
this alternative for these reasons.
In the FDIC’s view, the final rule
reflects an appropriate balancing of the
statutory requirement to apply the
special assessment to the types of
entities that benefited the 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 final rule also allows
for payments to be collected over an
extended period of time in order to
mitigate the liquidity effects of the
special assessment by requiring smaller,
62 See
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consistent quarterly payments. On
balance, in the FDIC’s view, the final
rule 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. Effective Date and Application Date
of the Final Rule
The FDIC is issuing this final rule
with an effective date of April 1, 2024.
The first collection for the special
assessment will be reflected on the
invoice for the first quarterly assessment
period of 2024 (i.e., January 1 through
March 31, 2024), with a payment date
of June 28, 2024, and the FDIC will
continue to collect the special
assessment for an anticipated total of
eight quarterly assessment periods.
Because the estimated loss pursuant to
the systemic risk determination will be
periodically adjusted, and to allow for
any corrective amendments to the
amount of uninsured deposits reported
for the December 31, 2022, reporting
period applied to the calculation of the
special assessment, the FDIC retains the
ability to cease collection early, impose
an extended special assessment
collection period after the initial eightquarter collection period to collect the
difference between losses and the
amounts collected, and impose a onetime final shortfall special assessment
after both receiverships terminate.
IV. Administrative Law Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA)
generally requires an agency, in
connection with a final rule, to prepare
and make available for public comment
a final regulatory flexibility analysis that
describes the impact of the final rule on
small entities.63 However, a final
regulatory flexibility analysis is not
required if the agency certifies that the
final rule will not 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.64
63 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
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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.65 Because the final rule relates
directly to the rates imposed on FDICinsured institutions, the final rule is not
subject to the RFA. Nonetheless, the
FDIC is voluntarily presenting
information in this RFA section.
The FDIC insures 4,654 institutions as
of June 30, 2023, of which 3,373 are
small entities.66 As discussed
previously, the final rule implements a
special assessment on IDIs that are part
of banking organizations that reported
$5 billion or more in uninsured deposits
for the reporting period that ended
December 31, 2022. Given that no small
entity has reported $5 billion or more in
uninsured deposits, the FDIC does not
believe the final rule will have a direct
effect on any small entity.
The FDIC invited comments regarding
the supporting information provided in
the RFA section in the proposed rule,
but did not receive comments on this
topic.
B. Paperwork Reduction Act
The Paperwork Reduction Act of
1995 67 (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 final
rule does not create any new, or 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) 68 requires that the Federal
banking agencies, including the FDIC, in
determining the effective date and
administrative compliance requirements
quarters, to determine whether the insured
depository institution is ’’small’’ for the purposes of
RFA.
65 5 U.S.C. 601(2).
66 June 30, 2023, Call Report data, the most
current Call Reports for which the FDIC can
determine which insured depository institutions are
‘‘small’’ for purposes of RFA.
67 44 U.S.C. 3501–3521.
68 12 U.S.C. 4802(a).
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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
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.69
The final rule does 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.
The FDIC invited comments regarding
the application of RCDRIA in the
proposed rule, but did not receive
comments on this topic. Nevertheless,
the requirements of RCDRIA have been
considered in setting the final effective
date.
D. Plain Language
Section 722 of the Gramm-LeachBliley Act 70 requires the Federal
banking agencies to use plain language
in all proposed and final rulemakings
published in the Federal Register after
January 1, 2000. FDIC staff believes the
final rule is presented in a simple and
straightforward manner. The FDIC
invited comments regarding the use of
plain language in the proposed rule but
did not receive any comments on this
topic.
E. Congressional Review Act
For purposes of the Congressional
Review Act, the OMB makes a
determination as to whether a final rule
constitutes a ‘‘major’’ rule.71 If a rule is
deemed a ‘‘major rule’’ by the OMB, the
Congressional Review Act generally
provides that the rule may not take
effect until at least 60 days following its
publication.72
The Congressional Review Act defines
a ‘‘major rule’’ as any rule that the
Administrator of the Office of
69 12
U.S.C. 4802(b).
Law 106–102, section 722, 113 Stat.
1338, 1471 (1999), 12 U.S.C. 4809.
71 5 U.S.C. 801 et seq.
72 5 U.S.C. 801(a)(3).
70 Public
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Information and Regulatory Affairs of
the OMB finds has resulted in or is
likely to result in: (1) an annual effect
on the economy of $100,000,000 or
more; (2) a major increase in costs or
prices for consumers, individual
industries, Federal, State, or local
government agencies or geographic
regions; or (3) significant adverse effects
on competition, employment,
investment, productivity, innovation, or
on the ability of United States-based
enterprises to compete with foreignbased enterprises in domestic and
export markets.73
The OMB has determined that the
final rule is a major rule for purposes of
the Congressional Review Act and the
FDIC will submit the final rule and
other appropriate reports to Congress
and the Government Accountability
Office for review.
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 amends 12 CFR part 327 as
follows:
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:
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§ 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 (i) of this section and, if
necessary, the extended special
assessment period as defined in
paragraph (j) of this section, and if
further necessary, on a one-time basis as
described in paragraph (m) of this
section.
(b) Losses to the Deposit Insurance
Fund. As used in this section, ‘‘losses to
the Deposit Insurance Fund’’ refers to
73 5
U.S.C. 804(2).
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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 quarterly special
assessment amount. 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 (i)(2) or (j)(3) of this section,
as appropriate, by the institution’s
special assessment base as defined in
paragraph (i)(3) or (j)(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. The FDIC shall
also advise each insured depository
institution subject to the special
assessment of any revisions, if any, to
losses to the Deposit Insurance Fund as
defined in paragraph (b) of this section.
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 quarterly special
assessment amount. 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
quarterly certified statement invoice for
the calendar quarter in which the
special assessment was imposed.
(f) 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 later of:
(1) November 2, 2023, adjusted for
mergers prior to March 12, 2023; or
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(2) The date of the institution’s most
recent amendment to its Call Report or
FFIEC 002 for the quarter ended
December 31, 2022, if such amendment
arises from, or is confirmed through, the
FDIC’s Assessment Reporting Review.
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 the special
assessment or a shortfall special
assessment under this section, the
amount of uninsured deposits for such
institutions as of December 31, 2022, is
zero.
(g) $5 billion deduction from the
special assessment base—institution’s
portion. For purposes of this section, an
institution’s portion of the $5 billion
deduction 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.
(h) 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).
(i) 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 earlier of the
last quarterly assessment period of 2025
or the first quarterly assessment period
that 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 3.36
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; minus
(B) $5 billion; 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:
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(A) The institution’s uninsured
deposits; minus
(B) The institution’s portion of the $5
billion deduction; provided, however,
that an institution’s special assessment
base cannot be negative.
(j) 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
minimum number of quarters required
to recover the shortfall amount at a rate
under paragraph (j)(3) of this section
that is at or below 3.36 basis points per
quarter.
(3) Assessment rate during extended
special assessment period. The
quarterly assessment rate during the
extended special assessment period will
be the shortfall amount, divided by the
total amount of uninsured deposits,
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, divided by the minimum
number of quarters that results in the
quarterly rate being no greater than 3.36
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; minus
(B) $5 billion; 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; minus
(B) The institution’s portion of the $5
billion deduction, adjusted for
termination of insurance as of the last
assessment period of 2025; provided,
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however, that an institution’s special
assessment base cannot be negative.
(k) Effect of mergers, consolidations,
and other terminations of insurance on
the special assessment—(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 assessment or
one-time final shortfall special
assessment 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 and subsequent quarters. 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 from the quarter of the
acquisition through the remainder of the
initial and extended special assessment
period, including any one-time final
shortfall special assessment.
(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,
the special assessment and any shortfall
special assessment shall be paid
consistent with § 327.6(c). When an
insured depository institution
voluntarily terminates its deposit
insurance, the institution shall be liable
for any unpaid special assessment or
one-time final shortfall special
assessment outstanding at the time of
the termination and all future special
assessments, if any, the institution
would have been invoiced through the
remainder of the initial or extended
special assessment period, as
applicable, including any one-time final
shortfall special assessment for which
the institution has been given notice
before termination. Any special
assessment or one-time final shortfall
special assessment liabilities will be
included, in full, on the final quarterly
assessment invoice following voluntary
termination.
(l) Corrective reporting amendments—
(1) Recalculation of quarterly special
assessment amount. Corrective
amendments to an institution’s
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uninsured deposits that arise from, or
are confirmed through, the FDIC’s
Assessment Reporting Review will
apply retroactively beginning the first
quarterly collection period of the initial
special assessment period. An
institution’s special assessment base
and portion of the $5 billion deduction,
along with the portion of the $5 billion
deduction allocated to the institution’s
affiliated insured depository
institutions, will be recalculated for
prior collection quarters. Any
overpayment or underpayment in prior
collection quarters as a result of the
recalculation will be invoiced as
described in paragraph (l)(2) of this
section.
(2) Invoicing overpayment and
underpayment. Any underpayment of
the special assessment by an institution
as the result of corrective amendments
to uninsured deposits will be included,
in full and with interest, on the invoice
for the quarter following the date a
corrective amendment is filed. If a
corrective amendment results in an
overpayment of the special assessment,
the institution will be credited the
overpayment amount, with interest, and
such amount will be applied to the
institution’s subsequent special
assessment invoices beginning in the
quarter following the date of the
amendment. If any excess credit amount
remains after the end of the initial and
any extended special assessment
period(s), the excess credit amount shall
be refunded to the institution. Payment
and collection of interest on amounts
resulting from overpayment and
underpayment of the special assessment
shall be consistent with § 327.7.
(m) One-time final shortfall special
assessment. If the aggregate amount of
the special assessment collected during
the initial and any 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 one-time final
shortfall special assessment. The FDIC
shall notify each insured depository
institution of the amount of such
institution’s one-time final shortfall
special assessment no later than 45 days
before such shortfall assessment is due.
(2) Aggregate one-time final shortfall
special assessment amount. The
aggregate amount of the one-time final
shortfall special assessment imposed
across all insured depository
institutions shall equal the losses to the
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Deposit Insurance Fund, as of
termination of the receiverships to
which the March 12, 2023, systemic risk
determination applied, minus the
aggregate amount of the special
assessment collected under this section
through initial and extended special
assessment periods, including the net
amount of interest paid or received as a
result of overpayments and
underpayments.
(3) One-time 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, as
described in paragraph (f) of this
section, 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.
(4) One-time final shortfall special
assessment base—(i) The one-time 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; minus
(B) $5 billion; provided, however, that
an institution’s one-time final shortfall
special assessment base cannot be
negative.
(ii) The one-time 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; minus
(B) The institution’s portion of the $5
billion deduction, adjusted for
termination of insurance as of the
assessment period preceding the final
shortfall assessment period; provided,
however, that an institution’s one-time
final shortfall special assessment base
cannot be negative.
(5) Calculation of one-time 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 onetime final shortfall special assessment
base.
(6) One-time final special assessment.
The one-time final shortfall special
assessment shall be collected on a onetime quarterly basis after losses to the
Deposit Insurance Fund are determined
after termination of the receiverships to
which the March 12, 2023, systemic risk
determination applied.
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(7) Payment, invoicing, and mergers.
Paragraphs (d), (e), and (k) of this
section are applicable to the one-time
shortfall special assessment.
(n) 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).
(o) Special assessment collection in
excess of losses. Any special assessment
collected under this section that exceeds
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.
(p) 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 November 16,
2023.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2023–25813 Filed 11–28–23; 8:45 am]
BILLING CODE 6714–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. FAA–2023–2152; Project
Identifier MCAI–2023–00798–T; Amendment
39–22607; AD 2023–23–05]
RIN 2120–AA64
Airworthiness Directives; Bombardier,
Inc., Airplanes
Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule; request for
comments.
AGENCY:
The FAA is adopting a new
airworthiness directive (AD) for certain
Bombardier, Inc., Model BD–100–1A10
airplanes. This AD was prompted by a
design review of the avionic
architecture of the pitch trim indication
and alerting system that revealed
software errors could generate
misleading pitch trim indication to the
crew, leading to incorrect horizontal
stabilizer positioning at takeoff. This AD
requires revising the Emergency
Procedures and Normal Procedures of
SUMMARY:
PO 00000
Frm 00045
Fmt 4700
Sfmt 4700
83349
the existing airplane flight manual
(AFM) to ensure the horizontal
stabilizer is correctly configured prior to
takeoff. The FAA is issuing this AD to
address the unsafe condition on these
products.
This AD is effective December
14, 2023.
The Director of the Federal Register
approved the incorporation by reference
of certain publications listed in this AD
as of December 14, 2023.
The FAA must receive comments on
this AD by January 16, 2024.
ADDRESSES: You may send comments,
using the procedures found in 14 CFR
11.43 and 11.45, by any of the following
methods:
• Federal eRulemaking Portal: Go to
regulations.gov. Follow the instructions
for submitting comments.
• Fax: 202–493–2251.
• Mail: U.S. Department of
Transportation, Docket Operations, M–
30, West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue SE,
Washington, DC 20590.
• Hand Delivery: Deliver to Mail
address above between 9 a.m. and 5
p.m., Monday through Friday, except
Federal holidays.
AD Docket: You may examine the AD
docket at regulations.gov under Docket
No. FAA–2023–2152; or in person at
Docket Operations between 9 a.m. and
5 p.m., Monday through Friday, except
Federal holidays. The AD docket
contains this final rule, the mandatory
continuing airworthiness information
(MCAI), any comments received, and
other information. The street address for
Docket Operations is listed above.
Material Incorporated by Reference:
• For service information identified
in this final rule, contact Bombardier
Business Aircraft Customer Response
Center, 400 Coˆte-Vertu Road West,
Dorval, Que´bec H4S 1Y9, Canada;
telephone 514–855–2999; email ac.yul@
aero.bombardier.com; website
bombardier.com.
• You may view this referenced
service information at the FAA,
Airworthiness Products Section,
Operational Safety Branch, 2200 South
216th St., Des Moines, WA. For
information on the availability of this
material at the FAA, call 206–231–3195.
It is also available at regulations.gov
under Docket No. FAA–2023–2152.
FOR FURTHER INFORMATION CONTACT:
Gabriel Kim, Aviation Safety Engineer,
FAA, 1600 Stewart Avenue, Suite 410,
Westbury, NY 11590; telephone 516–
228–7300; email 9-avs-nyaco-cos@
faa.gov.
DATES:
SUPPLEMENTARY INFORMATION:
E:\FR\FM\29NOR1.SGM
29NOR1
]]>Agencies
[Federal Register Volume 88, Number 228 (Wednesday, November 29, 2023)]
[Rules and Regulations]
[Pages 83329-83349]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25813]
=======================================================================
-----------------------------------------------------------------------
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 327
RIN 3064-AF93
Special Assessment Pursuant to Systemic Risk Determination
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The FDIC is adopting a final rule to implement a special
assessment to recover the loss to the Deposit Insurance Fund (DIF or
Fund) arising from the protection of uninsured depositors following the
closures of Silicon Valley Bank, Santa Clara, CA, and Signature Bank,
New York, NY. The FDIC will collect the $16.3 billion special
assessment at a quarterly rate of 3.36 basis points, multiplied by an
insured depository institution's (IDI) estimated uninsured deposits,
reported for the quarter that ended 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 will
collect the special assessment over eight quarterly assessment periods,
although the collection period may change due to updates to the
estimated loss pursuant to the systemic risk determination or if
assessments collected change due to corrective amendments to the amount
of uninsured deposits reported for the December 31, 2022, reporting
period.
DATES: The final rule is effective on April 1, 2024, with the first
collection for the special assessment reflected on the invoice for the
first quarterly assessment period of 2024 (i.e., January 1 through
March 31, 2024), with a payment date of June 28, 2024.
FOR FURTHER INFORMATION CONTACT: Division of Insurance and Research:
[[Page 83330]]
Ashley Mihalik, Associate Director, Financial Risk Management, 202-898-
3793, [email protected]; Kayla Shoemaker, Senior Policy Analyst, 202-
898-6962, [email protected]; Legal Division: Sheikha Kapoor,
Assistant General Counsel, 202-898-3960, [email protected]; Ryan
McCarthy, Counsel, 202-898-7301, [email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. Silicon Valley Bank, Signature Bank, and the Systemic Risk
Exception
B. Legal Authority and Policy Objectives
C. The Proposed Rule
II. The Final Rule
A. Description of the Final Rule
B. Estimated Special Assessment Amount
C. Rate for the Special Assessment
D. Assessment Base and Scope of Application for the Special
Assessment
1. Comments Received on the Calculation of the Special
Assessment
2. Comments on the Reporting Date of Uninsured Deposits for
Special Assessment Base
3. Comments Recommending Exclusions From Uninsured Deposits for
Special Assessment Base
4. Final Assessment Base for the Special Assessment
E. Prior Period Amendments
F. Initial Collection Period for the Special Assessment
1. Comments Received on the Initial Collection Period
2. Adjustments to the Loss Estimate, Amendments to the Reported
Amount of Estimated Uninsured Deposits and the Initial Collection
Period for the Special Assessment
G. Extended Special Assessment Collection Period
H. One-Time Final Shortfall Special Assessment
I. Collection of Special Assessment and Any Shortfall Special
Assessment
J. Payment Mechanism for the Special Assessment and Any
Shortfall Special Assessment
K. Mergers, Consolidations, and Terminations of Deposit
Insurance
L. Accounting Treatment
M. Request for Revisions
III. Analysis and Expected Effects
A. Analysis of the Statutory Factors
1. The Types of Entities That Benefit
2. Effects on the Industry
3. Capital and Earnings Analysis
4. Economic Conditions
B. Alternatives Considered
C. Effective Date and Application Date of the Final Rule
IV. Administrative Law Matters
A. Regulatory Flexibility Act
B. Paperwork Reduction Act
C. Riegle Community Development and Regulatory Improvement Act
D. Plain Language
E. Congressional Review Act
I. Background
A. Silicon Valley Bank, Signature Bank, and the Systemic Risk Exception
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 FDIC was appointed as the receiver for both
institutions.\1\
---------------------------------------------------------------------------
\1\ See 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. See also
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).\2\
---------------------------------------------------------------------------
\2\ 12 U.S.C. 1823(c)(4)(G). As used in this final 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 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
depositors.\3\ The full protection of depositors, rather than imposing
losses on uninsured depositors, was intended to strengthen public
confidence in the nation's banking system.
---------------------------------------------------------------------------
\3\ 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 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
depositors of these banks.\4\ The transfer of deposits was completed
under the systemic risk exception declared on March 12, 2023.
---------------------------------------------------------------------------
\4\ 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.\5\ On March 27, 2023, the
FDIC entered into a purchase and assumption agreement with First-
Citizens Bank & Trust Company (First Citizens), with loss-sharing
provided on the commercial loans it purchased from Silicon Valley
Bridge Bank.\6\
---------------------------------------------------------------------------
\5\ 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.
\6\ 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.
---------------------------------------------------------------------------
B. 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.\7\ As required by the FDI Act, the
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.\8\
---------------------------------------------------------------------------
\7\ 12 U.S.C. 1823(c)(4)(G)(ii)(I).
\8\ 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 a systemic risk
determination. As detailed in the
[[Page 83331]]
sections that follow, and as required by 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.\9\
---------------------------------------------------------------------------
\9\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
---------------------------------------------------------------------------
C. The Proposed Rule
On May 11, 2023, the Board approved a notice of proposed rulemaking
(the proposed rule, or proposal) to implement a special assessment, as
required by the FDI Act, to recover the loss to the DIF arising from
the protection of uninsured depositors following the closures of
Silicon Valley Bank and Signature Bank.\10\ The FDIC proposed to
collect a special assessment that would be approximately equal to the
losses attributable to the protection of uninsured depositors at these
two failed banks, which were estimated to total $15.8 billion.
---------------------------------------------------------------------------
\10\ See 88 FR 32694 (May 22, 2023).
---------------------------------------------------------------------------
The FDIC proposed an annual special assessment rate that would be
derived by dividing the loss estimate attributable to the protection of
uninsured depositors by the assessment base calculated for all IDIs
subject to the special assessment. The proposed assessment base
(special assessment base) was 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, adjusted to exclude the first $5 billion of uninsured deposits at
the banking organization level.\11\
---------------------------------------------------------------------------
\11\ As used in this final rule, 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.
---------------------------------------------------------------------------
In response to the proposal, the FDIC received 312 comment letters
from depository institutions, depository institution holding companies,
trade associations, members of Congress, and other interested
parties.\12\ As further detailed below, the majority of commenters
expressed support for the proposal and for the scope of application of
the proposed rule, including the $5 billion deduction applied to the
special assessment base. Other comment letters suggested the exclusion,
or different treatment, of certain types of uninsured deposits included
in the special assessment base, different reporting dates of estimated
uninsured deposits used to calculate the assessment base, or adjustment
of the $5 billion deduction from the special assessment base.
Commenters additionally discussed a range of other matters that are
addressed in the relevant sections below.
---------------------------------------------------------------------------
\12\ See comments on the proposal, available at https://www.fdic.gov/resources/regulations/federal-register-publications/2023/2023-special-assessments-systemic-risk-determination-3064-af93.html.
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II. The Final Rule
A. Description of the Final Rule
After careful consideration of the comments received on the
proposal and analysis of the applicable statutory factors, the FDIC is
adopting, as final, the proposed special assessment, with
clarifications to promote transparency and a modification to apply any
corrective amendments to estimated uninsured deposits for the December
31, 2022, reporting period to the calculation of the special
assessment, following adoption of the final rule.
The special assessment implemented through this final rule will
recover the loss to the DIF arising from the protection of uninsured
depositors following the closures of Silicon Valley Bank and Signature
Bank. The total amount collected for the special assessment will be
approximately equal to the estimated losses attributable to the
protection of uninsured depositors at these two failed banks, which are
currently estimated to total $16.3 billion.
The majority of commenters expressed support for the proposal and
for the scope of application, including the $5 billion deduction
applied to the assessment base for the special assessment. While some
commenters broadly objected to the collection of a special assessment,
the FDIC is required by the FDI Act to take this action in connection
with the systemic risk determination announced on March 12, 2023.\13\
In the FDIC's view, the final rule, consistent with the proposed rule,
reflects an appropriate balancing of the goal of applying the special
assessment to the types of entities that benefited the most from the
protection of uninsured depositors provided under the determination of
systemic risk while ensuring equitable, transparent, and consistent
treatment. The final rule, consistent with the proposed rule, also
allows for payments to be collected over an extended period of time in
order to reduce the likelihood of overcollecting and to mitigate the
liquidity effects of the special assessment by requiring smaller,
consistent quarterly payments.
---------------------------------------------------------------------------
\13\ 12 U.S.C. 1823(c)(4)(G).
---------------------------------------------------------------------------
B. Estimated Special Assessment Amount
To determine the cost of the failures attributable to the cost of
covering uninsured deposits pursuant to the determination of systemic
risk, 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 time of failure, the portion of the total estimated loss of $0.9
billion that is attributable to the protection of uninsured depositors
is $0.6 billion. The cost estimate for the sale of the Signature Bridge
Bank to New York Community Bancorp decreased following the issuance of
the proposal from $2.4 billion to approximately $0.9 billion. The
decline in the cost estimate was primarily attributable to recoveries
from assets in receivership that were higher than previously estimated
offset, in part, by higher costs of liabilities assumed by the
receivership.
At Silicon Valley Bank, for which 88 percent of deposits were
uninsured at the time of failure, the portion of the total estimated
loss of $17.8 billion that is attributable to the protection of
uninsured depositors is $15.7 billion. The cost estimate for the sale
of the Silicon Valley Bridge Bank to First Citizens was revised
following the issuance of the proposal from $16.1 billion to
approximately $17.8 billion mainly due to recoveries from assets in
receivership that were less than previously anticipated and higher
costs of liabilities assumed by the receivership.
The revised cost estimates form the basis for the current special
assessment calculation in this final rule. In total, of the $18.7
billion in estimated losses at the two banks and incurred by the DIF,
the estimated loss attributable to the protection of uninsured
depositors is $16.3 billion, an increase of approximately $500 million
from the estimate of $15.8 billion described in the proposal.
As with all failed bank receiverships, these loss estimates 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.
As noted below, the amount of the special assessment will be adjusted
as the loss estimates change.
[[Page 83332]]
Comments Received on the Estimated Special Assessment Amount
One commenter suggested that the special assessment should recover
the entire amount of estimated losses. As proposed, and as required by
statute, the FDIC will recover through the special assessment the $16.3
billion estimated loss incurred as a result of the actions taken by 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.
C. Rate for the Special Assessment
The proposed special assessment rate was derived by dividing the
loss estimate attributable to the protection of uninsured depositors by
the assessment base calculated for all IDIs subject to the special
assessment as of December 31, 2022. As described in detail below, the
proposed assessment base was equal to estimated uninsured deposits
reported for the quarter that ended December 31, 2022, after applying
the $5 billion deduction.
Under the final rule, the FDIC will impose a special assessment
rate equal to approximately 13.4 basis points annually, an increase
from the 12.5 basis point annual rate in the proposal.\14\ Amendments
to reported estimated uninsured deposits filed since the adoption of
the proposed rule have resulted in a lower total assessment base. The
decline in the total assessment base combined with the increase in the
cost estimate have resulted in a higher annual rate relative to the
proposal.\15\ As of November 2, 2023, the total assessment base was
$6.0 trillion. The special assessment rate will not change following
the date of adoption of this final rule through the duration of the
initial eight-quarter collection period.
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\14\ The proposed rule noted that the special assessment rate in
the proposal was 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. Estimates of
the special assessment rate and expected effects in the proposed
rule generally reflected any amendments to data reported through
February 21, 2023, for the reporting period that ended December 31,
2022, while estimates for this final rule reflect any amendments as
of November 2, 2023. Given the closure of First Republic Bank, San
Francisco, CA, announced on May 1, 2023, estimates in the proposed
rule and this final 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.
\15\ The special assessment rate, base, and expected effects in
this final rule reflect any amendments to data as of November 2,
2023, for the reporting period that ended December 31, 2022.
---------------------------------------------------------------------------
The resulting quarterly rate is 3.36 basis points, or an annual
rate of approximately 13.4 basis points. Over the initial eight-quarter
collection period, the FDIC projects that it will 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 $16.3 billion, totaling
approximately $2.0 billion per quarter.
D. Assessment Base and Scope of Application for the Special Assessment
Under the proposal, each IDI's assessment base for the special
assessment would be equal to estimated uninsured deposits as reported
in the Call Report or FFIEC 002 for the quarter that ended December 31,
2022, after applying the $5 billion deduction.\16\ As a result of this
deduction, most small IDIs and IDIs that are part of a small banking
organization would not pay anything towards the special assessment. The
special assessment would not be applicable to any banking organizations
with total assets under $5 billion.
---------------------------------------------------------------------------
\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. 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.
---------------------------------------------------------------------------
1. Comments Received on the Calculation of the Special Assessment
The majority of commenters stated that community banks should be
exempt from the special assessment. The FDIC received 63 comments
related to the calculation of the special assessment base and the scope
of application for the special assessment, or the calculation of the
special assessment rate. Some of these commenters stated that certain
groups of banks should be exempt from or pay less of the special
assessment, while one commenter recommended that all banks be subject
to the special assessment.\17\ One commenter said that U.S. global
systemically important banks (GSIBs) did not benefit from the actions
taken under the determination of systemic risk and that although GSIBs
served as a source of strength to the banking sector, they are
responsible for a disproportionate share of the special assessment.
---------------------------------------------------------------------------
\17\ Among the groups of banks commenters stated should be
exempt from the special assessment were: banks under a range of
other asset or uninsured deposit thresholds, banks not considered
systemically important financial institutions, Community Development
Financial Institutions (CDFIs), Minority Depository Institutions
(MDIs), rural banks, and mutual banks.
---------------------------------------------------------------------------
One commenter noted that given that the FDIC is required by statute
to recover the estimated amount of loss attributable to the protection
of uninsured depositors following the determination of systemic risk,
any changes to the proposed special assessment base will necessarily
redistribute the obligation among banking organizations subject to the
special assessment.
Several commenters recommended alternative measures for the special
assessment base, including total assets, total deposits, uninsured
deposits as a percentage of total deposits, an institution's regular
risk-based deposit insurance assessment base, or to otherwise take a
more risk-based approach to calculating the special assessment base.
One commenter recommended a more detailed approach, stating that the
special assessment base should be the entire deposit base, or
alternatively the entire assessment base applied for regular quarterly
deposit insurance assessments, for the largest institutions and
uninsured deposits for all other banks, and that the rate for the
special assessment should incorporate an adjusted tangible equity
capital ratio and a scalar to factor in interest rate risk.
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, the most recently available date
reflecting the amount of uninsured deposits in each institution near or
at the time the determination of systemic risk was made. Among banking
organizations that report uninsured deposits, those with total assets
between
[[Page 83333]]
$1 billion and $5 billion are generally the least reliant on uninsured
deposits for funding, with uninsured deposits averaging 27.9 percent of
assets, compared with the largest banking organizations with total
assets greater than $250 billion, which had uninsured deposits that
averaged 35.1 percent of assets.
Table 1--Average Share of Assets Funded by Uninsured Deposits, by
Banking Organization Asset Size, Based on Data for the December 31,
2022, Reporting Period \1\
[Percent]
------------------------------------------------------------------------
Average share of
assets funded by
Asset size of banking organization uninsured deposits
[percent]
------------------------------------------------------------------------
$1 to $5 Billion.................................. 27.9
$5 to $10 Billion................................. 28.9
$10 to $50 Billion................................ 32.4
$50 to $250 Billion............................... 33.3
Greater than $250 Billion......................... 35.1
------------------------------------------------------------------------
\1\ Table reflects data for the December 31, 2022, reporting period, and
incorporates amendments, mergers, acquisitions and failures through
November 2, 2023.
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 33.0 percent,
compared with the largest banking organizations with total assets
greater than $250 billion, which averaged 50.4 percent.
Table 2--Uninsured Deposits as a Percentage of Total Domestic Deposits,
by Banking Organization Asset Size, Based on Data for the December 31,
2022, Reporting Period \1\
[Percent]
------------------------------------------------------------------------
Ratio of uninsured
deposits to total
Asset Size of banking organization domestic deposits
[percent]
------------------------------------------------------------------------
$1 to $5 Billion.................................. 33.0
$5 to $10 Billion................................. 35.0
$10 to $50 Billion................................ 40.3
$50 to $250 Billion............................... 42.8
Greater than $250 Billion......................... 50.4
------------------------------------------------------------------------
\1\ Reflects reporting amendments to estimated uninsured deposits,
mergers, acquisitions, and failures through November 2, 2023.
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.
As of March 31, 2023, banks in all asset size groups experienced
quarterly declines in uninsured deposit balances, but these declines
were particularly severe and widespread among banks between $50 billion
and $250 billion in total assets. In addition, between December 31,
2022, and March 31, 2023, the eight U.S. GSIBs reported a weighted
average decline in uninsured deposits of 2.1 percent, albeit slower
than the industry average of approximately eight percent. However,
changes in uninsured deposit balances over this time period varied
widely for the GSIBs. Two of the eight GSIBs experienced growth in
uninsured deposits of 2.6 percent and 2.0 percent over this period
while the other six GSIBs experienced declines, some significant,
ranging between less than two percent to nearly 17 percent.
Defining the assessment base for the special assessment as
estimated uninsured deposits reported as of December 31, 2022, and
deducting $5 billion from a banking organization's assessment base,
serves several purposes. First, banking organizations that reported $5
billion or less in estimated uninsured deposits as of December 31,
2022, would not be subject to the special assessment. 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 applying an asset size
threshold, were used to determine applicability, and thereby ensuring
more equitable treatment. Otherwise, a situation may arise in which a
banking organization just over a particular size threshold would pay a
special assessment, 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 but for the determination of systemic risk. Indeed, shortly after
Silicon Valley Bank was
[[Page 83334]]
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 $5 billion deduction from the assessment base,
the banks that benefited the most--banks of larger asset sizes and that
hold greater amounts of uninsured deposits--will be responsible for
paying the special assessment.
Second, the $5 billion deduction from the assessment base results
in most small IDIs and IDIs that are part of a small banking
organization not paying anything towards the special assessment. The
special assessment is not applicable to any banking organizations with
total assets under $5 billion.\18\
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\18\ Some IDIs that report less than $5 billion in estimated
uninsured deposits will be subject to the special assessment if they
are part of banking organizations with multiple IDIs that report a
combined total of estimated uninsured deposits in excess of $5
billion.
---------------------------------------------------------------------------
Finally, deducting $5 billion from the assessment base of estimated
uninsured deposits at the banking organization level rather than at the
IDI level for banking organizations with more than one subsidiary IDI
ensures that banking organizations with similar amounts of estimated
uninsured deposits pay a similar special assessment, regardless of
banking organization structure. For example, a banking organization
with multiple IDIs with large amounts of estimated uninsured deposits
will not have an advantage over other banking organizations with only
one subsidiary IDI with a similarly large amount of estimated uninsured
deposits because instead of excluding $5 billion of estimated uninsured
deposits for each IDI in one banking organization, the $5 billion
deduction will be distributed across multiple affiliated IDIs.
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 the determination of systemic risk.\19\
The assessment base of estimated uninsured deposits with the $5 billion
deduction ensures that the banks that benefited most from the
assistance provided under the systemic risk determination will be
charged a special assessment 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 a
higher special assessment. For these reasons, the FDIC is adopting the
proposed exclusion of the first $5 billion from estimated uninsured
deposits from the assessment base for the special assessment, without
change.
---------------------------------------------------------------------------
\19\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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2. Comments on the Reporting Date of Uninsured Deposits for Special
Assessment Base
Under the proposal, each IDI's assessment base for the special
assessment would be equal to estimated uninsured deposits as reported
in the Call Report or FFIEC 002 for the December 31, 2022, reporting
period, after applying the $5 billion deduction. The FDIC sought
comment on whether the special assessment base should be equal to
estimated uninsured deposits reported as of December 31, 2022, or
reported as of some other date, and the reasons for using a different
date.
Two commenters expressed support for the proposed December 31,
2022, reporting date for uninsured deposits to determine the special
assessment base. Thirteen commenters, including two trade associations
and three letters from members of Congress, requested that estimated
uninsured deposits reported as of a more recent date than December 31,
2022, be used to calculate the assessment base for the special
assessment. Most of these commenters suggested an alternative date,
such as March 31, 2023, or June 30, 2023, while others suggested that
the assessment base should reference the estimated uninsured deposits
reported as of each quarter-end during the collection period or did not
specify a date. Some commenters that supported a later reporting date
said that institutions, particularly mid-sized and regional banks, that
reported declines in uninsured deposit balances after December 31,
2022, should not be charged a special assessment on uninsured deposit
balances that they no longer hold or that are now insured.
In the FDIC's view, estimated uninsured deposits as of December 31,
2022, most closely approximate an institution's vulnerability to
significant deposit withdrawals in the absence of the determination of
systemic risk, and therefore reflect the institutions that most
benefited from such determination. An assessment base that is
calculated using the amount of uninsured deposits as of December 31,
2022, would result in transparent and consistent payments, best
approximate an institution's vulnerability to deposit withdrawals, and
would result in a more simplified framework for calculating the special
assessment. For these reasons, the FDIC is adopting as final the
proposed special assessment base of estimated uninsured deposits as of
December 31, 2022.
3. Comments Recommending Exclusions From Uninsured Deposits for Special
Assessment Base
Under the proposed rule, the assessment base for the special
assessment 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. The FDIC sought comment on whether it should consider an
exemption for specific types of deposits from the special assessment
base, and on what basis.
Multiple commenters supported the exclusion of, or different
treatment for, certain types of uninsured deposits included in the
proposed assessment base for the special assessment of estimated
uninsured deposits reported as of December 31, 2022, less the $5
billion deduction.
a. Collateralized Deposits
The FDIC received 25 comments requesting that the FDIC either
exclude, or provide a different treatment for, collateralized deposits
in the calculation of the special assessment base. In particular,
commenters requested such treatment for the uninsured portion of public
deposits, or deposits of states and political subdivisions that are
secured or collateralized as required under state law (also referred to
as preferred deposits). These commenters reasoned that collateralized
deposits are more stable than other uninsured deposits because they are
secured, and therefore pose little risk to the DIF. Seven of these
commenters requested the exclusion of additional types of
collateralized deposits, including collateralized operational deposits
or trust-related deposits that are required to be collateralized under
federal or state law (e.g., fiduciary funds awaiting investment or
distribution), from the special assessment base.
Banks report preferred deposits annually for the December 31 Call
Report date, but they do not report other
[[Page 83335]]
types of collateralized deposits such as those mentioned by the
commenters.\20\ Given that preferred deposits represent only a subset
of collateralized deposits, providing an exclusion or different
treatment for this subset of deposits would result in preferential
treatment for this subset of collateralized deposits on the sole basis
that these are the only type of collateralized deposits for which data
were collected.
---------------------------------------------------------------------------
\20\ Call Report Schedule RC-E, Part I, Memorandum item 1.e.
requires reporting of preferred deposits (uninsured deposits of
states and political subdivisions in the U.S. which are secured or
collateralized as required under state law).
---------------------------------------------------------------------------
Moreover, even if banks reported data on all collateralized
deposits, in the FDIC's view, the presence of collateral does not fully
mitigate run risk. Collateral may not always be sufficient to cover the
full amount of such a deposit, depending on the economic environment,
and particularly in the event of a liquidity crisis during which loss
in value may need to be realized. Further, in certain types of
resolutions, collateralized deposits reduce the assets available to the
FDIC as receiver to satisfy claims, including the FDIC's subrogated
claim as deposit insurer, and result in a higher loss to the DIF in the
event of a bank failure compared to a bank holding the same level of
deposits that are not collateralized.
b. Custody Bank Adjustments
The FDIC received one joint comment from three custody banks
stating that the special assessment base should be adjusted to mitigate
the disproportionate and unwarranted impact on the custody bank
business model and on sound asset-liability and risk management
practices. The commenters proposed various adjustments: that the FDIC
should allow custody banks to exclude domestic deposit balances placed
with the Federal Reserve from the measure of estimated uninsured
deposits used to calculate the assessment base for the special
assessment; that the FDIC should allow custody banks to deduct 75
percent of the domestic operational deposits \21\ from the assessment
base for the special assessment; or that the FDIC should retain the
regular risk-based assessment methodology for the special assessment
while maintaining the exclusion of the first $5 billion in estimated
uninsured deposits.
---------------------------------------------------------------------------
\21\ The commenter defined operational deposits as residual cash
custody banks hold for their clients in deposit accounts to
facilitate day-to-day transactional activities related to client
investment assets.
---------------------------------------------------------------------------
The FDIC disagrees. The banks that benefited most from the
assistance provided under the systemic risk determination were large
banks and those that held greater amounts of uninsured deposits,
regardless of the assets that those deposits were used to fund. Custody
banks, especially those whose primary business is fiduciary and
custodial and safekeeping, hold large amounts of uninsured deposits and
many of those uninsured deposits are from depositors with large deposit
balances. Further, while certain deposits held by custody banks, such
as operational deposits, may be more stable than non-operational
funding, in the event of idiosyncratic stress, counterparties likely
would reduce the amount of their operational deposits.\22\ The
adjustments proposed in the joint comment letter would result in
custody banks paying significantly lower amounts of the special
assessment despite holding significant amounts of uninsured deposits.
---------------------------------------------------------------------------
\22\ See 79 FR at 61502 (Oct. 10, 2014).
---------------------------------------------------------------------------
c. Intercompany Deposits
The FDIC received 12 comments requesting the exclusion of, or
different treatment for, intercompany deposits in the calculation of
the special assessment base. Commenters argued that intercompany
deposits, such as the deposits of subsidiaries that are not IDIs,
deposits of other affiliates such as sister companies that are not
IDIs, or deposits of a parent holding company of the IDI, are stable
and present minimal run risk because entities within the banking
organization's structure are unlikely to withdraw funds in a crisis.
Further, some commenters argued that intercompany deposits would not
result in a loss to the DIF because they would not be provided deposit
insurance coverage or would not need deposit insurance coverage in the
event of the bank's failure. Some commenters noted that the methodology
for including intercompany deposits in the assessment base for the
special assessment may lead to double-counting certain deposits at the
banking organization level for banking organizations with multiple
IDIs, to the extent an IDI's deposits with its affiliates are funded
with uninsured deposits it has taken from a depositor.
There is no clear evidence that intercompany deposits are more
stable relative to other deposits. Organizational structures, board
members, governance, and decision making can differ between entities
within the same banking organization. Likewise, the behavior of
creditors, including uninsured depositors, of each entity can differ.
Further, an affiliated entity's deposits at a bank are insured to the
same extent as an unaffiliated entity's deposits in the event of the
bank's failure. Each depositor is entitled to deposit insurance as
permitted by law, and to pro rata receivership distribution on the
remaining, uninsured balances. Additionally, it is not possible to
accurately estimate the portion of uninsured deposits that are
intercompany deposits using existing items on the Call Report.
Deposits are the most common funding source for many banks.
Depositors and other creditors 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.
Any revisions to the methodology for calculating the special
assessment base, such as excluding or adjusting for certain types of
uninsured deposits, would change the allocation of the special
assessment, but the FDIC is required by statute to recover the full
amount of the losses to the DIF incurred as the result of the systemic
risk determination. As a result, any exclusion for a type of uninsured
deposits from the special assessment base would reduce the amount of
the special assessment for banking organizations that hold those
excluded, uninsured deposits, and increase the assessment burden for
all other banks holding other types of uninsured deposits. For this
reason, and for the reasons described above, and consistent with the
proposal, the FDIC is not excluding any particular type of uninsured
deposits from the assessment base for the special assessment.
4. Final Assessment Base for the Special Assessment
Following careful consideration of the comments, and for the
reasons described above, the FDIC is adopting as final the proposed
assessment base for the special assessment, while applying any
corrective amendments to estimated uninsured deposits reported for the
December 31, 2022, reporting period in calculating the assessment base.
The methodology adopted in this final rule ensures that the banks that
benefited most from the assistance provided under the systemic risk
determination will be charged a special assessment 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
[[Page 83336]]
deposits paying a higher special assessment.
Consistent with the proposal, each IDI's assessment base for the
special assessment will be equal to estimated uninsured deposits as
reported in the Call Report or FFIEC 002 as of December 31, 2022, after
applying the $5 billion deduction. The deduction of the first $5
billion from estimated uninsured deposits in the assessment base for
the special assessment is 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.\23\
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\23\ IDIs with less than $1 billion in total assets as of June
30, 2021, are 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, is zero.
---------------------------------------------------------------------------
For a banking organization that has more than one subsidiary IDI,
the assessment base for the special assessment is equal to the IDI's
total estimated uninsured deposits reported for the quarter that ended
December 31, 2022, less its share of the $5 billion deduction, which is
based on its share of total estimated uninsured deposits held by all
IDI affiliates in the banking organization.\24\ Table 3 provides an
example of the calculation of the special assessment for a banking
organization with three subsidiary IDIs.
---------------------------------------------------------------------------
\24\ As used in this final rule, the term ``affiliate'' has the
same meaning as defined in section 3 of the FDI 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).
---------------------------------------------------------------------------
Table 3--Calculation of the Special Assessment 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
----------------------------------------------------------------------------------------------------
Assessment
Estimated uninsured IDI share of banking IDI Share of base for IDI share of special
deposits as organization $5 billion special assessment (Column D *
reported as of estimated uninsured deduction assessment 26.9 basis points)/
December 31, 2022 deposits [percent] (Column B * $5 (Column A - current loss estimate
billion) Column C) [percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
IDI A.............................................. $50,000 50 $2,500 $47,500 0.79
IDI B.............................................. 40,000 40 2,000 38,000 0.63
IDI C.............................................. 10,000 10 500 9,500 0.16
--------------------------------------------------------------------------------------------------------------------------------------------------------
Based on data reported for the quarter that ended December 31,
2022, and as illustrated in Table 4 below, the FDIC estimates that 114
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 81.3 percent of industry assets, will be
subject to the special assessment, including 48 banking organizations
with total assets over $50 billion and 66 banking organizations with
total assets between $5 and $50 billion. No banking organizations with
total assets under $5 billion would pay the special assessment, based
on data for the December 31, 2022, reporting period.\25\
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\25\ The special assessment rate, base, and expected effects in
this final rule reflect any amendments to data as of November 2,
2023, for the reporting period that ended December 31, 2022. These
estimates may change depending on any subsequent amendments to
reported estimates of uninsured deposits.
Table 4--Banking Organizations Required To Pay Special Assessment, Based on Data Reported for the December 31,
2022, Reporting Period \1\
----------------------------------------------------------------------------------------------------------------
Percentage of
all banking
Number of organizations
banking in asset size Share of Share of
Asset size of banking organization organizations category special industry
required to pay required to pay assessment assets
special special [percent] [percent]
assessment assessment
[percent]
----------------------------------------------------------------------------------------------------------------
Greater than $50 billion............................ 48 1.1 95.3 74.5
Between $5 and $50 billion.......................... 66 1.5 4.7 6.8
Under $5 billion.................................... 0 0.0 0.0 0.0
-----------------------------------------------------------
Total........................................... 114 2.6 100.0 81.3
----------------------------------------------------------------------------------------------------------------
\1\ Reflects reporting amendments to estimated uninsured deposits, mergers, acquisitions, and failures through
November 2, 2023.
E. Prior Period Amendments
Under the proposal, 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 have affected an institution's rate or base
for the special assessment.
The FDIC is finalizing this aspect of the rule, as proposed, but in
calculating the special assessment, will apply any amendments made by
IDIs to correct the reporting of estimated uninsured deposits that are
confirmed through, or associated with the result of, the FDIC's
[[Page 83337]]
review of an institution's reporting methodology (as described below).
Following the issuance of the proposed rule, the FDIC observed that
some IDIs were reporting or filing amendments to the reporting of
estimated uninsured deposits for the December 31, 2022, reporting
period in a manner that is inconsistent with the instructions to the
Call Report. For example, some institutions incorrectly reduced the
reported amount of uninsured deposits to the extent that they are
collateralized by pledged assets; this is incorrect because in and of
itself, the existence of collateral has no bearing on the portion of a
deposit that is covered by federal deposit insurance. Additionally,
some institutions incorrectly reduced the amount of uninsured deposits
reported on Schedule RC-O by excluding certain intercompany deposit
balances.
The FDIC did not receive any comments on the proposed treatment of
prior period amendments. Some commenters, however, raised concerns
about the accuracy of the amount of estimated uninsured deposits
reported on the Call Report. The FDIC received two comment letters
indicating that banks may be reporting uninsured deposits differently,
or in an inconsistent manner, and one comment letter indicating that
some banks were confused about whether to include collateralized
deposits in the amount of estimated uninsured deposits reported on the
Call Report.
On July 24, 2023, the FDIC issued a Financial Institution Letter
(FIL) on Estimated Uninsured Deposits Reporting Expectations,
reiterating longstanding instructions and stating that each IDI is
responsible for the accuracy of the data reported in its Call Report
and for filing amendments as necessary to ensure Call Report
accuracy.\26\ The FIL stated that, consistent with the requirement to
file accurate Call Reports, IDIs that incorrectly reported uninsured
deposits should amend their Call Reports by making the appropriate
changes to the data and submitting the revised data file.
---------------------------------------------------------------------------
\26\ FDIC Financial Institution Letter (FIL 37-2023), Estimated
Uninsured Deposits Reporting Expectations. https://www.fdic.gov/news/financial-institution-letters/2023/fil23037.html.
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As a general matter, the amount of estimated uninsured deposits
reported on the Call Report is monitored as one of many indicators of
safety and soundness, and its accuracy, as with all items collected on
the Call Report, is of the utmost importance. The reported amount of
estimated uninsured deposits is also used to determine the amount of
estimated insured deposits in calculating the DIF reserve ratio, which
is the ratio of the DIF balance to all insured deposits.\27\
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\27\ See section 3(y)(3) of the FDI Act, 12 U.S.C. 1813(y)(3).
---------------------------------------------------------------------------
The FDIC is conducting a review (Assessment Reporting Review) of
the reporting methodology for estimated uninsured deposits and related
items on the Call Report because of the importance of these items as
indicators of safety and soundness.\28\ The Assessment Reporting Review
may result in amendments to uninsured deposits and related items
reported on the Call Report if the FDIC determines that an institution
is not reporting these items in accordance with the instructions. Given
the planned Assessment Reporting Review, in calculating this special
assessment this final rule applies any amendments made by IDIs to
correct the reporting of estimated uninsured deposits that are
confirmed through, or associated with the result of, the FDIC's review
of an institution's reporting methodology.
---------------------------------------------------------------------------
\28\ Consistent with the FDIC's practice of conducting reviews
under Section 7(b)(4) of the FDI Act to confirm the correctness of
any assessment, the FDIC will review an institution's reporting
methodology for estimated uninsured deposits and related items. See
12 U.S.C. 1817(b)(4).
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Under the final rule, the special assessment rate and each banking
organization's special assessment base has been calculated using
estimated uninsured deposits for the December 31, 2022, reporting
period as reported on November 2, 2023.\29\ Amendments made to an
institution's December 31, 2022, Call Report through November 2, 2023,
have been accounted for in the calculations, as proposed. In addition,
under the final rule, certain amendments filed after November 2, 2023,
will affect the calculation of an institution's special assessment
base, as described below.
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\29\ As proposed, the assessment base and rate would be
calculated as of the date the final rule is adopted; however, under
the final rule, this is calculated on November 2, 2023, shortly
before the date of adoption, for operational and administrative
reasons.
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In particular, if, as part of the FDIC's Assessment Reporting
Review of an institution's reporting methodology (described above), the
FDIC finds that, as of November 2, 2023, an institution was not
reporting uninsured deposits for the December 31, 2022, reporting
period in accordance with the Call Report instructions, and the
institution files a corrective amendment as a result of the FDIC's
review after November 2, 2023, the FDIC will adjust the special
assessment base based on such corrective amendment for such
institution, and any affiliates, as applicable, for all collection
periods. Additionally, if an institution files an amendment to the
reporting of estimated uninsured deposits for the December 31, 2022,
reporting period after November 2, 2023, and the FDIC finds that such
amendment brings the reporting of uninsured deposits into compliance
with the Call Report instructions, the FDIC will adjust the special
assessment base based on such corrective amendment for such
institution, and any affiliates, as applicable, for all collection
periods. If such institution is part of a banking organization with
multiple subsidiary IDIs, such corrective amendments will also affect
the distribution of the $5 billion deduction from the banking
organization's assessment base for all collection periods.
Prior period amendments filed after November 2, 2023, that are not
the result of corrections to errors or misreporting will not affect an
institution's special assessment base. Modifications to an
institution's special assessment base will take effect beginning the
collection quarter following the date of amendment, and the FDIC will
apply such modifications retroactively to the first quarterly
collection period, as applicable.
Any retroactive special assessment amount due will be included, in
full, on the invoice for the quarter following the date of the
amendment. If the amendment resulted in a downward revision of the
assessment base for the special assessment, the banking organization
will be credited the amount the institution overpaid, with interest,
and such amount, including interest, will be applied to any remaining
amount of the special assessment due from the banking organization
beginning in the quarter following the date of the amendment. In the
unlikely event a credit remains after the special assessment collection
period has ended, the excess credit amount will be refunded to the
banking organization, with interest. The FDIC will pay interest on
credited amounts resulting from amendments to correct the reporting of
estimated uninsured deposits that are confirmed through, or associated
with the result of, the FDIC's Assessment Reporting Review of an
institution's reporting methodology and will collect interest on any
retroactive special assessment amounts due to the FDIC as a result of
such amendments.\30\
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\30\ Interest payments collected will be applied to any
remaining amount of the special assessment while the amount of
interest paid by the FDIC will be added to the amount required to
recover estimated losses.
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[[Page 83338]]
F. Initial Collection Period for the Special Assessment
Under the proposal, 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. In order to mitigate the risk of overcollecting as the loss
estimates for the failed banks are periodically adjusted, to preserve
liquidity at IDIs, and in the interest of consistent and predictable
assessments, the special assessment would be collected over eight
quarters.
1. Comments Received on the Initial Collection Period
The FDIC received three comments on the length of the initial
collection period, with one commenter requesting a longer collection
period to help with cash flow, one commenter requesting a shorter
collection period given the ability of the banking industry to repay
the DIF for the special assessment as quickly as possible, and one
commenter suggesting that banks should have the option to fully fund
obligations prior to the end of the proposed collection period.
The FDIC is required by statute to place the excess funds collected
through the special assessment in the DIF.\31\ By spreading out the
collection period over eight quarters, a length of time that would
enable the FDIC to develop a more accurate 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
overcollecting. Reducing the length of the collection period could also
adversely impact liquidity. Therefore, the FDIC is adopting the initial
collection period of eight quarters as proposed, with a modification to
allow corrective amendments to estimated uninsured deposits for the
December 31, 2022, reporting period, following adoption of the final
rule.
---------------------------------------------------------------------------
\31\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
---------------------------------------------------------------------------
2. Adjustments to the Loss Estimate, Amendments to the Reported Amount
of Estimated Uninsured Deposits and the Initial Collection Period for
the Special Assessment
The estimated loss attributable to the protection of uninsured
depositors pursuant to the systemic risk determination is currently
estimated to total $16.3 billion. However, loss estimates for failed
banks are periodically adjusted as assets are sold, liabilities are
satisfied, and receivership expenses are incurred. As proposed, under
the final rule, the FDIC will review and consider any revisions to the
loss estimate each quarter of the collection period. Given the planned
review of the reporting methodology for estimated uninsured deposits,
in calculating the special assessment, the final rule will additionally
apply any amendments to correct the reporting of estimated uninsured
deposits that are confirmed through, or associated with the result of,
the FDIC's review of an institution's reporting methodology.
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 assessment, due to revisions to the loss estimate or
due to amendments applied to estimated uninsured deposits, the FDIC
will cease collection of the special assessment before the end of the
initial eight-quarter collection period, in the quarter after it has
collected enough to recover actual or estimated losses.\32\ The FDIC
will provide notice of any cessation of collections at least 30 days
before the next payment is due.
---------------------------------------------------------------------------
\32\ Amendments to the reporting of estimated uninsured deposits
may result in a higher amount collected, but the increase may not be
of a magnitude large enough to cease collection early.
---------------------------------------------------------------------------
G. Extended Special Assessment Collection Period
Under the proposal, 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 before the first payment of any extended special
assessment is due.
The FDIC did not receive any comments on the extended special
assessment collection period, and is finalizing as proposed, while, in
calculating the special assessment, applying any amendments to correct
the reporting of estimated uninsured deposits that are confirmed
through, or associated with the result of, the FDIC's review of an
institution's reporting methodology.
In the event that an extended collection period is needed, the FDIC
will collect the shortfall amount on a quarterly basis. The assessment
rate for any extended special assessment will equal the shortfall
amount divided by the total amount of uninsured deposits less the $5
billion deduction for each banking organization subject to the special
assessment, adjusted for failures or amendments to correct the
reporting of estimated uninsured deposits resulting from the FDIC's
Assessment Reporting Review of an institution's reporting methodology
that occurred before or during the initial eight-quarter collection
period. In the interest of consistency and predictability, the
quarterly rate will not exceed the 3.36 basis point quarterly special
assessment rate applied during the initial eight-quarter collection
period, and such extended special assessment will be collected for the
minimum number of quarters needed to recover the shortfall amount at
such quarterly rate.
The assessment base for such extended special assessment will be as
described above, based on estimated uninsured deposits reported as of
November 2, 2023, for the December 31, 2022, reporting period, adjusted
for amendments to correct reporting resulting from the FDIC's review of
an institution's reporting methodology, with a $5 billion deduction for
each banking organization.
H. One-Time Final Shortfall Special Assessment
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 this special assessment
applies 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 collection
period and any extended collection period, and if losses at the
termination of the receiverships exceed the amount collected through
such special assessment, the FDIC proposed to impose a one-time final
shortfall special assessment to collect the final shortfall amount.
Comments Received on the One-Time Final Shortfall Special Assessment
The FDIC received four comments on the one-time final shortfall
special assessment. One supported the proposed calculation. One
commenter recommended that if the amount collected exceeds the final
loss estimate,
[[Page 83339]]
that the excess collected should be credited against future
assessments. One commenter requested that the assessment base
methodology be adjusted to incorporate a risk-based component. One
commenter said that the one-time final shortfall special assessment
should be calculated at the end of a recommended one-year payment
period.
The FDIC would only collect a one-time final shortfall special
assessment if the final loss amount at the termination of the
receiverships is not determined until after the initial collection
period and any extended collection period, and if losses at the
termination of the receiverships exceed the amount collected through
such special assessment.
For the reasons described above, the FDIC is adopting the one-time
final shortfall special assessment as proposed, while, in calculating
the special assessment, applying any amendments to correct the
reporting of estimated uninsured deposits that are confirmed through,
or associated with the result of, FDIC's review of an institution's
reporting methodology.
The assessment base for such one-time final shortfall special
assessment will be as described above, based on estimated uninsured
deposits reported as of November 2, 2023, for the December 31, 2022,
reporting period, adjusted for amendments to correct reporting
resulting from the FDIC's review of an institution's reporting
methodology, with a $5 billion deduction for each banking organization.
The FDIC will 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 for the quarter that ended December 31, 2022,
adjusted for amendments to correct reporting resulting from the FDIC's
review of an institution's reporting methodology up to the
determination of the shortfall amount, after applying the $5 billion
deduction.
The entire one-time final shortfall special assessment will be
collected in one quarter so that there are no missed amounts due to
amendments or failures and to streamline the operational impact on
banking organizations. The FDIC will provide banking organizations
notice of at least 45 days before payment of any one-time final
shortfall special assessment is due and will consider the statutory
factors, including economic conditions and the effects on the industry,
in deciding on the timing of such payment.
The FDIC will notify each IDI subject to a one-time final 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 will be included in the IDI's invoice
for its regular quarterly deposit insurance assessment.
I. Collection of Special Assessment and Any Shortfall Special
Assessment
The special assessment and any shortfall special assessment will 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 will disclose the amount of any
special assessment or shortfall special assessment due.
Comments Received on Communication of Loss Estimates
Two commenters requested that the FDIC communicate any revisions to
the loss estimate and updates on the collection of the special
assessment. To increase transparency and in response to comments on the
proposal, the FDIC is clarifying that it plans to communicate any
changes to the loss estimate, as applicable, and to provide updates on
the collection of the special assessment to banking organizations
subject to the special assessment. Such updates will be communicated
primarily through quarterly assessment invoices issued to institutions
subject to the special assessment. The FDIC also publishes estimated
losses and other data on bank failures and assistance on its publicly
available website.\33\
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\33\ See FDIC BankFind Suite: Bank Failures & Assistance Data,
available at: https://banks.data.fdic.gov/explore/failures. See also
FDIC Failed Bank List, available at: https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/.
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J. Payment Mechanism for the Special Assessment and Any Shortfall
Special Assessment
Each IDI is required to take any actions necessary to allow the
FDIC to debit its special assessment and any 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 must ensure that sufficient U.S. dollar 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 will be as provided for nonpayment of an IDI's regular
assessment.\34\
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\34\ See 12 CFR 327.3(c).
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K. Mergers, Consolidations, and Terminations of Deposit Insurance
Under the proposed rule, if an IDI were to acquire--through merger
or consolidation--another IDI following the adoption of this final rule
or during any special assessment collection period, the acquiring IDI
would be required to pay the acquired IDI's special assessment, if any,
including any unpaid special assessment, in addition to its own special
assessment, from the quarter of the acquisition through the remainder
of all special assessment collection periods. Under the proposal, in
the event that the FDIC extends the collection period or imposes a one-
time final shortfall assessment, each banking organization's assessment
base would be adjusted for mergers or failures that occurred during the
eight-quarter collection period.
Under the proposed rule, 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, including the special
assessment, for the assessment periods that its deposits are insured,
but not thereafter.\35\
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\35\ See 12 CFR 327.6(c).
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When an IDI voluntarily terminates its deposit insurance under the
FDI Act, under the proposal the IDI whose insured status is terminating
must, among other things, continue to pay assessments for the
assessment periods that its deposits are insured.\36\
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\36\ See 12 CFR 327.6(c).
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Comments Received on Mergers, Consolidations, and Terminations of
Deposit Insurance
One commenter expressed concern that use of the December 31, 2022,
reporting date ignores recent acquisition activity while another
commenter requested clarification that the estimates in the proposed
rule exclude the uninsured deposits that New York Community Bank
assumed following its acquisition of Signature Bank in March 2023.\37\
One commenter requested clarification of the point at which obligation
to pay the special assessment would end if a bank were to voluntarily
terminate its insured status during the collection period, noting that
this is
[[Page 83340]]
relevant to when the special assessment is reflected under
International Financial Reporting Standards (IFRS) accounting
principles.
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\37\ 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.
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The FDIC is clarifying that the uninsured deposits of First
Republic Bank, Silicon Valley Bank, and Signature Bank, which failed
prior to the adoption of the proposed rule, were excluded from the
proposed calculation of the assessment rate and base for the special
assessment, and the estimated expected effects in the proposed rule and
in this final rule, and is providing clarification that such exclusion
will be adopted in the final rule. This exclusion was intended to
prevent disincentivizing any potential future acquisition activity
following the adoption of the proposed rule, particularly given the
uncertainty in the banking sector at the time the proposal was adopted.
The FDIC is adopting as final the proposed provisions related to
mergers, acquisitions, and terminations of deposit insurance, with two
adjustments. First, in the event that the FDIC extends the collection
period or imposes a one-time final shortfall assessment, each banking
organization's assessment base will not be adjusted for mergers or
failures that occurred after the adoption of this final rule or during
the eight-quarter collection period. In the FDIC's view, each banking
organization's assessment base reflects its relative benefit from the
assistance provided under the systemic risk determination. This
treatment would ensure that an acquiring bank's special assessment, and
any special assessment assumed for an acquired bank, continues to
reflect each banking organization's relative benefit from the
assistance provided under the systemic risk determination, and would
have the result that a banking organization subject to the special
assessment that acquires another banking organization also subject to
the special assessment would derive benefit from the $5 billion
deduction for both special assessment payments. The FDIC is also
clarifying that the special assessment base of the acquiring bank in a
merger or consolidation that occurred prior to the March 12, 2023,
determination of systemic risk would be adjusted to include the
uninsured deposits of the acquired bank and would derive benefit of a
single $5 billion deduction. Calculating the assessment base in this
manner best reflects the structure of the banking organization at the
time the determination of systemic risk was made, and reflects the
organization's relative benefit from the assistance provided.
Second, in order to avoid incentivizing banks to voluntarily
terminate their insured status to avoid paying the special assessment
under the final rule, the FDIC will require any bank that voluntarily
terminates its insured status after the adoption of this final rule or
during any special assessment collection period to pay the entire
remaining amount of its special assessment at the same time its
obligation to pay regular deposit insurance assessments would end.\38\
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\38\ See 12 CFR 327.6(c).
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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.\39\
Therefore, an institution will 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. In addition, the General Instructions to the Call Report
provide guidance on ASC Topic 855, Subsequent Events, which may be
applicable.\40\
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\39\ FASB ASC paragraph 450-20-25-2.
\40\ See General Instructions to the Call Report, available at:
https://www.fdic.gov/resources/bankers/call-reports/crinst-031-041/2022/2022-12-generalinstructions.pdf.
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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.
Comments Received on Accounting Treatment
The FDIC received two comments that supported restructuring the
special assessment as a prepaid expense that could be amortized over a
multi-year period.
Structuring the special assessment as a prepaid expense would
reduce the one-time effect on income but would also reduce liquidity by
the full amount of the special assessment at payment. In the FDIC's
view, the proposed structure of the special assessment 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.
For these reasons, the FDIC is declining to restructure the special
assessment as a prepaid expense.
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 CFR 327.3(f).\41\
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\41\ Existing regulation 12 CFR 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, the
request for review provision under 12 CFR 327.4(c) would not be
applicable to an IDI's special assessment or shortfall special
assessment.
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III. 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
FDIC deems appropriate and relevant to the action taken or the
assistance provided.\42\
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\42\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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1. 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.\43\
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\43\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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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 Board and the Board of Governors voted
unanimously to recommend, and the
[[Page 83341]]
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 depositors.\44\ The full
protection of depositors, rather than imposing losses on uninsured
depositors, was intended to strengthen public confidence in the
nation's banking system.
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\44\ 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.
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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.
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.
Between December 31, 2022, and March 31, 2023, banks in all asset
size groups experienced quarterly declines in uninsured deposit
balances, but these declines were particularly severe and widespread
among banks between $50 billion and $250 billion in total assets.
Between December 31, 2022, and March 31, 2023, the eight U.S. GSIBs
reported a weighted average decline in uninsured deposits of 2.1
percent, but changes in uninsured deposit balances over this time
period varied widely. Two of the eight GSIBs experienced growth in
uninsured deposits of 2.6 percent and 2.0 percent over this period
while the other six GSIBs experienced declines, some significant,
ranging between less than two percent to nearly 17 percent.
Generally speaking, larger banks benefited the most from the
stability provided to the banking industry under the systemic risk
determination. Under the final rule, the banks that benefited most from
the assistance provided under the systemic risk determination will be
charged a special assessment 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 a
higher special assessment.
2. Effects on the Industry
In calculating the assessment base for the special assessment, the
FDIC will deduct $5 billion from each IDI or banking organization's
aggregate estimated uninsured deposits reported for the quarter that
ended December 31, 2022. As a result, any institution that did not
report any uninsured deposits as of December 31, 2022, will not be
subject to the special assessment. Additionally, most small IDIs and
IDIs that are part of a small banking organization will not pay
anything towards the special assessment. Some small and mid-size IDIs
will be subject to the special assessment if they are subsidiaries of a
banking organization with more than $5 billion in uninsured deposits
and such IDIs report positive amounts of uninsured deposits after
application of the deduction, or if they directly hold 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 for the quarter ended December 31, 2022, and
as captured in Table 4 above, the FDIC estimates that 114 banking
organizations will be subject to the special assessment, including 48
banking organizations with total assets over $50 billion and 66 banking
organizations with total assets between $5 and $50 billion. No banking
organizations with total assets under $5 billion will pay a special
assessment, based on data reported as of December 31,
2022.45 46 It is anticipated that the same banking
organizations subject to the special assessment would also be subject
to any extended special assessment or one-time final shortfall special
assessment, absent the effects of any amendments to estimated uninsured
deposits, mergers, consolidations, failures, or other terminations of
deposit insurance that occur through the determination of such extended
special assessment or one-time final shortfall special assessment.
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\45\ The number of banking organizations subject to the special
assessment may change after the publication of the final rule
depending on any mergers, consolidations, failures, or other
terminations of deposit insurance, or amendments to reported
estimates of uninsured deposits.
\46\ Some IDIs that report less than $5 billion in estimated
uninsured deposits will be subject to the special assessment if they
are part of banking organizations with multiple IDIs that report a
combined total of estimated uninsured deposits in excess of $5
billion.
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3. Capital and Earnings Analysis
The FDIC has analyzed the effect of the special assessment 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 for
the December 31, 2022, reporting period, including amendments filed
through November 2, 2023, and assumes that pre-tax income for the
quarter in which a banking organization will recognize the accrual of a
liability and an estimated loss (i.e., expense) from a loss contingency
for the special assessment, will equal the average of their pre-tax
income from July 1, 2022, through June 30, 2023.\47\
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\47\ 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.
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To avoid the possibility of underestimating effects on bank
earnings and capital, the analysis also assumes that the effects of the
special assessment are not transferred to customers in the form of
changes in borrowing rates, deposit rates, or service fees. The
analysis considers the effective pre-tax cost of the special assessment
in calculating the effect on capital.48 49
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\48\ 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).
\49\ The analysis does not incorporate any tax effects from an
operating loss carry forward or carry back.
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A banking organization's earnings retention and dividend policies
influence the extent to which the special assessment affects equity
capital
[[Page 83342]]
levels. A banking organization may reduce the effect of recognizing the
accrual of a liability and an estimated loss (i.e., expense) from a
loss contingency for the special assessment or shortfall special
assessment, by adjusting downward the amount of dividends. 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 from July 1, 2022,
through June 30, 2023. In the event that the ratio of Tier 1 capital to
assets falls below four percent, however, this assumption is modified
such that the banking organization retains the amount necessary to
reach a four percent minimum and distributes any remaining funds
according to the dividend payout rate.\50\
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\50\ 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 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.
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The FDIC estimates that it will collect the estimated loss from
protecting uninsured depositors at Silicon Valley Bank and Signature
Bank of approximately $16.3 billion, over the initial eight-quarter
collection period. Banking organizations will 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 earnings of the entire amount
of the special assessment to be collected over eight quarters would
occur in one quarter only.
Given the current loss estimate and the assumptions in the
analysis, the FDIC estimates that, on average, the special assessment
will decrease the dollar amount of Tier 1 capital of banking
organizations required to pay the special assessment by an estimated 62
basis points.\51\ 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 special assessment.
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\51\ Estimated effects on capital are calculated based on data
reported as of June 30, 2023, 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 the
special assessment.
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For the four quarters that ended June 30, 2023, the banking
industry reported net income of $290.5 billion, nearly 13 percent
higher than for the four quarters that ended June 30, 2022, and above
the pre-pandemic average. The effect of the special assessment on a
banking organization's income is measured by calculating the amount of
the special assessment as a percent of pre-tax income (hereafter
referred to as ``income'').
While the special assessment is allocated based on estimated
uninsured deposits reported at the banking organization level, IDIs
will be responsible for payment of the special assessment. The FDIC
analyzed the effect of the special assessment on income reported at the
IDI-level for IDIs subject to the special assessment 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 assessment by aggregating the income reported
by all IDIs subject to the special assessment within each banking
organization since the IDIs will be responsible for payment. The FDIC
analyzed the impact of the special assessment on banking organizations
that were profitable based on their average quarterly income from July
1, 2022, to June 30, 2023.\52\
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\52\ There were two banking organizations that would be required
to pay the special assessment that were unprofitable based on
average quarterly income from July 1, 2022, to June 30, 2023.
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The effects on income of the entire amount of the special
assessment 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 special assessment would result in an
average one-quarter reduction in income of 20.4 percent for banking
organizations subject to the special assessment.\53\
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\53\ Earnings or income are quarterly income before assessments
and taxes. Quarterly income is assumed to equal average income from
July 1, 2022, to June 30, 2023.
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Comments Received on the Effect of the Special Assessment on Capital
and Earnings
The FDIC received 13 comments, including three comments from trade
associations, suggesting modifications to change the timing of, or
otherwise mitigate the effect of the special assessment on capital,
earnings, and regular deposit insurance assessments. Seven commenters
supported an optional transition period or a similar approach to allow
banking organizations to phase in the effects of the special assessment
on their regulatory capital ratios over the eight-quarter collection
period.
One commenter said that for purposes of calculating requirements
and guidance related to levels of dividends and stock repurchases, and
for examination findings related to earnings, the reduction in earnings
resulting from the payment of the special assessment should be
disregarded, or at least be amortized over the collection period. The
same commenter also requested an adjustment to eliminate the impact of
the special assessment on regular quarterly deposit insurance
assessments for large banks and highly complex banks.\54\
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\54\ For regular deposit insurance assessment purposes, a large
bank is generally defined as an institution with $10 billion or more
in total assets, and a highly complex bank is generally defined as
an institution that has $50 billion or more in total assets and is
controlled by a parent holding company that has $500 billion or more
in total assets, or is a processing bank or trust company. See 12
CFR 327.8(f) and (g).
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As described above, given the loss estimate and the assumptions
applied in the analysis, the FDIC estimates that, on average, the
special assessment will decrease the dollar amount of Tier 1 capital of
banking organizations subject to the special assessment by an estimated
62 basis points. No banking organizations are estimated to fall below
the minimum capital requirement (a four percent Tier 1 capital-to-
assets ratio) as a result of the special assessment. As described
above, the effect of the special assessment on Tier 1 capital is
minimal and is not estimated to cause any institutions to fall below
the minimum capital requirement; therefore, the FDIC is not adopting a
transition period to phase in the special assessment's effect on
regulatory capital.
[[Page 83343]]
Table 5 shows that approximately 66 percent of profitable banking
organizations subject to the proposal are projected to have a special
assessment of less than 20 percent of one quarter's income, including
23 percent with a special assessment of less than 5 percent of income.
Another 34 percent of profitable banking organizations subject to the
proposal are projected to have a special assessment equal to or
exceeding 20 percent of one quarter's income.
Table 5--Estimated One-Quarter Effect of Entire Amount of the Special Assessment on Income for Profitable
Banking Organizations Subject to the Special Assessment \1\
----------------------------------------------------------------------------------------------------------------
Assets of
Number of Percent of banking Percent of
Special assessment as percent of income banking banking organizations assets
organizations organizations [$ billions]
----------------------------------------------------------------------------------------------------------------
Over 30......................................... 15 14 5,838 30
20 to 30........................................ 23 21 6,308 32
10 to 20........................................ 28 25 5,504 28
5 to 10......................................... 20 18 805 4
Less than 5..................................... 25 23 1,034 5
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Total....................................... 111 100 19,489 100
----------------------------------------------------------------------------------------------------------------
\1\ Income is defined as quarterly pre-tax income. Quarterly income is assumed to equal the average of income
from July 1, 2022, through June 30, 2023. For purposes of this analysis, the effects on income of the entire
amount of the special assessment to be collected over eight quarters are assumed to occur in one quarter only.
The special assessment as a percent of income is an estimate of the one-time accrual of the full eight
quarters of the special assessment 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 June 30, 2023. Excludes two
banking organizations that would be required to pay the special assessment that were unprofitable. Also
excludes one foreign banking organization subject to the special assessment. Some columns do not add to total
due to rounding. Special assessment estimates are based on uninsured deposits for the December 31, 2022,
report date and incorporate amendments, mergers, acquisitions and failures through November 2, 2023.
In order to preserve liquidity at IDIs, and in the interest of
consistent and predictable assessments, the special assessment will be
collected over eight quarters. The special assessments is applicable
for the first quarterly assessment period of 2024. Given that the
proposal was approved by the Board and published in the Federal
Register in May 2023, institutions were provided time to prepare and
plan for the special assessment.
4. Economic Conditions
On September 7, 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 second
quarter of 2023. Overall, key banking industry metrics remained
favorable in the quarter.\55\
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\55\ FDIC Quarterly Banking Profile, Second Quarter 2023.
https://www.fdic.gov/analysis/quarterly-banking-profile/qbp/2023jun/.
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Net income declined from the previous quarter due to accounting
gains on failed bank acquisitions that occurred in the first and the
second quarter. However, excluding these nonrecurring gains, net income
was relatively flat from the prior quarter. Net income remained
relatively high by historical measures in the second quarter, although
the banking industry reported a tighter net interest margin and funding
pressures driven by increasing rates paid on deposits as well as high
rates paid on non-deposit liabilities. Loan expansion continued, asset
quality metrics were favorable, and the banking industry remained well-
capitalized.
The banking industry continues to face significant downside risks
from the effects of inflation, rising market interest rates, and
geopolitical uncertainty. These risks could cause credit quality
deterioration and weakness in profitability, which may lead to more
stringent underwriting standards, a slowdown in loan growth, higher
provision expenses, and liquidity constraints. Also, commercial real
estate portfolios are under pressure from higher interest rates as
loans mature and require refinancing, and office properties are
experiencing weak demand for space and softening property values.
Despite these challenges, the state of the U.S. banking system
remains sound and institutions are well positioned to absorb a special
assessment.\56\
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\56\ 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.
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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, 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.\57\ The FDIC considered several alternatives while
developing this final rule, but believes, on balance, that the proposed
special assessment is the most appropriate and straightforward manner
in which to collect the special assessment. Accordingly, and after
consideration of the statutory factors as described above, the FDIC is
adopting as final the proposed special assessment, with changes to
promote transparency and to apply any corrective amendments to the
reporting of estimated uninsured deposits to the calculation of the
special assessment. Brief descriptions of the alternatives, along with
explanations of why the final rule is preferable to the alternatives,
are as follows:
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\57\ 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).
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Alternative 1: One-Time Special Assessment
The first alternative the FDIC considered would have imposed a one-
time special assessment. Under this alternative, 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
[[Page 83344]]
amount of a one-time special assessment would equal the entire initial
loss estimate. Calculation of the special assessment, 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.\58\
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\58\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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Similar to this alternative, one commenter suggested that banks
should have the option to fully fund obligations prior to the end of
the proposed time period. While under both the final rule 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 order to spread the liquidity impact over multiple
quarters and to mitigate the risk of overcollecting.
Alternative 2: Asset Size Applicability Threshold
A second alternative the FDIC considered would be to base
applicability on an asset size 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. One commenter supported this approach.
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 the
determination of systemic risk.\59\ 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.
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\59\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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While both the methodology adopted under the final rule, including
the $5 billion deduction from estimated uninsured deposits, and an
alternative asset-size-based applicability threshold would effectively
remove the smallest institutions from eligibility, the deduction of $5
billion from each banking organization's estimated uninsured deposits
in calculating the special assessment helps 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 the FDIC considered would be to eliminate the
$5 billion deduction from the assessment base for the special
assessment, and allocate the special assessment among IDIs based on
each IDI or banking organization's total estimated uninsured deposits
as of December 31, 2022. This alternative 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 all IDIs with total assets of $1 billion or more.\60\
Relative to the methodology applied in final rule, more IDIs would pay
the special assessment under this alternative, and IDIs with greater
amounts of uninsured deposits would generally pay a lower special
assessment relative to the methodology applied in the final rule since
the special assessment would be allocated across a significantly larger
number of institutions. As stated previously, the majority of
commenters expressed support for the proposal and for the scope of
application, including the $5 billion deduction applied to the
assessment base for the special assessment.
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\60\ 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.
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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, and given the general support for the deduction of $5
billion from the assessment base for the special assessment, the FDIC
rejected this alternative in favor of allocating the special assessment
to larger institutions with the largest amounts of uninsured deposits
as of December 31, 2022, and that experienced significant and
widespread declines in uninsured deposits between December 31, 2022,
and March 31, 2023, with the result that smaller institutions would not
have to contribute 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. Generally
speaking, larger banks benefited the most from the stability provided
to the banking industry under the systemic risk determination.
Alternative 4: Special Assessment Based on Each Institution's
Percentage of Uninsured Deposits to Total Deposits
A fourth alternative the FDIC considered would be to allocate the
special assessment 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.\61\ Two commenters supported an
assessment base for the special assessment equal to uninsured deposits
as a percentage of total deposits or to otherwise apply a
[[Page 83345]]
calculation that would result in a larger special assessment for
institutions with a greater reliance on uninsured deposits for funding.
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\61\ 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.
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Under this alternative, IDIs with a greater reliance on uninsured
deposits would generally pay the greatest amount of the special
assessment; however, the special assessment would be allocated across a
large number of institutions, unless a threshold is imposed. Even with
a threshold based on assets or another measure, this alternative would
result in institutions of vastly different asset sizes and with
different dollar amounts of uninsured deposits paying a similar dollar
amount of the special assessment. For example, an institution just
above the asset threshold would pay the same special assessment as a
much larger institution with the same reliance on uninsured deposits.
It also would result in some smaller banking organizations paying
potentially significant amounts of the special assessment, 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 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. 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 methodology in the final rule results in a larger special
assessment 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 final rule and all alternatives described above, the
special assessment 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 fifth alternative the FDIC
considered would be to collect 50 percent of the special assessment
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 assessment 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 assessment to
the institutions that had the largest amounts of uninsured deposits at
the time of the determination of systemic risk.
The remaining special assessment 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 because in the FDIC's view, estimated uninsured
deposits as of December 31, 2022, most closely approximate an
institution's vulnerability to significant deposit withdrawals in the
absence of the determination of systemic risk, and therefore reflect
the institutions that most benefited from such determination.
Additionally, three commenters supported the use of an alternative
measure in the special assessment base specifically for the reason that
they believe use of uninsured deposits in the assessment base
discourages banks from holding uninsured deposits. This alternative may
also change the timing of accrual of the contingent liability by banks.
The final rule'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
the special assessment.
Alternative 6: Apply Special Assessment Rate to Regular Assessment
Base, With or Without Application of a $5 Billion Deduction
A sixth alternative the FDIC considered is 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.\62\ Under this alternative, the FDIC estimates that it
would need to charge an annual assessment rate of 3.97 basis points
over two years to recover estimated losses without the $5 billion
deduction, or 4.84 basis points with the $5 billion deduction; however,
a significantly larger number of banking organizations would be subject
to the special assessment relative to the proposal. Two commenters
supported use of the regular assessment base to calculate the special
assessment.
---------------------------------------------------------------------------
\62\ See 12 CFR 327.5.
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Under this alternative, the IDIs with the largest assessment base
would pay the greatest amount of the special assessment. IDIs for which
certain assets are excluded in the calculation of the regular
assessment base would pay a lower special assessment due to their
smaller assessment base.
This alternative would result in smaller banking organizations,
regardless of reliance on uninsured deposits for funding, paying
potentially significant amounts of the special assessment. 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 the special
assessment due to these exclusions, despite holding significant amounts
of uninsured deposits. The FDIC rejected this alternative for these
reasons.
In the FDIC's view, the final rule reflects an appropriate
balancing of the statutory requirement to apply the special assessment
to the types of entities that benefited the 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 final rule also allows for payments to be collected
over an extended period of time in order to mitigate the liquidity
effects of the special assessment by requiring smaller,
[[Page 83346]]
consistent quarterly payments. On balance, in the FDIC's view, the
final rule 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. Effective Date and Application Date of the Final Rule
The FDIC is issuing this final rule with an effective date of April
1, 2024. The first collection for the special assessment will be
reflected on the invoice for the first quarterly assessment period of
2024 (i.e., January 1 through March 31, 2024), with a payment date of
June 28, 2024, and the FDIC will continue to collect the special
assessment for an anticipated total of eight quarterly assessment
periods. Because the estimated loss pursuant to the systemic risk
determination will be periodically adjusted, and to allow for any
corrective amendments to the amount of uninsured deposits reported for
the December 31, 2022, reporting period applied to the calculation of
the special assessment, the FDIC retains the ability to cease
collection early, impose an extended special assessment collection
period after the initial eight-quarter collection period to collect the
difference between losses and the amounts collected, and impose a one-
time final shortfall special assessment after both receiverships
terminate.
IV. Administrative Law Matters
A. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires an agency,
in connection with a final rule, to prepare and make available for
public comment a final regulatory flexibility analysis that describes
the impact of the final rule on small entities.\63\ However, a final
regulatory flexibility analysis is not required if the agency certifies
that the final rule will not 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.\64\ 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.\65\ Because the final rule relates
directly to the rates imposed on FDIC-insured institutions, the final
rule is not subject to the RFA. Nonetheless, the FDIC is voluntarily
presenting information in this RFA section.
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\63\ 5 U.S.C. 601 et seq.
\64\ 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.
\65\ 5 U.S.C. 601(2).
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The FDIC insures 4,654 institutions as of June 30, 2023, of which
3,373 are small entities.\66\ As discussed previously, the final rule
implements a special assessment on IDIs that are part of banking
organizations that reported $5 billion or more in uninsured deposits
for the reporting period that ended December 31, 2022. Given that no
small entity has reported $5 billion or more in uninsured deposits, the
FDIC does not believe the final rule will have a direct effect on any
small entity.
---------------------------------------------------------------------------
\66\ June 30, 2023, Call Report data, the most current Call
Reports for which the FDIC can determine which insured depository
institutions are ``small'' for purposes of RFA.
---------------------------------------------------------------------------
The FDIC invited comments regarding the supporting information
provided in the RFA section in the proposed rule, but did not receive
comments on this topic.
B. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 \67\ (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 final rule does not create any new, or 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.
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\67\ 44 U.S.C. 3501-3521.
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C. Riegle Community Development and Regulatory Improvement Act
Section 302(a) of the Riegle Community Development and Regulatory
Improvement Act of 1994 (RCDRIA) \68\ 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 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.\69\
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\68\ 12 U.S.C. 4802(a).
\69\ 12 U.S.C. 4802(b).
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The final rule does 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. The
FDIC invited comments regarding the application of RCDRIA in the
proposed rule, but did not receive comments on this topic.
Nevertheless, the requirements of RCDRIA have been considered in
setting the final effective date.
D. Plain Language
Section 722 of the Gramm-Leach-Bliley Act \70\ requires the Federal
banking agencies to use plain language in all proposed and final
rulemakings published in the Federal Register after January 1, 2000.
FDIC staff believes the final rule is presented in a simple and
straightforward manner. The FDIC invited comments regarding the use of
plain language in the proposed rule but did not receive any comments on
this topic.
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\70\ Public Law 106-102, section 722, 113 Stat. 1338, 1471
(1999), 12 U.S.C. 4809.
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E. Congressional Review Act
For purposes of the Congressional Review Act, the OMB makes a
determination as to whether a final rule constitutes a ``major''
rule.\71\ If a rule is deemed a ``major rule'' by the OMB, the
Congressional Review Act generally provides that the rule may not take
effect until at least 60 days following its publication.\72\
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\71\ 5 U.S.C. 801 et seq.
\72\ 5 U.S.C. 801(a)(3).
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The Congressional Review Act defines a ``major rule'' as any rule
that the Administrator of the Office of
[[Page 83347]]
Information and Regulatory Affairs of the OMB finds has resulted in or
is likely to result in: (1) an annual effect on the economy of
$100,000,000 or more; (2) a major increase in costs or prices for
consumers, individual industries, Federal, State, or local government
agencies or geographic regions; or (3) significant adverse effects on
competition, employment, investment, productivity, innovation, or on
the ability of United States-based enterprises to compete with foreign-
based enterprises in domestic and export markets.\73\
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\73\ 5 U.S.C. 804(2).
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The OMB has determined that the final rule is a major rule for
purposes of the Congressional Review Act and the FDIC will submit the
final rule and other appropriate reports to Congress and the Government
Accountability Office for review.
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 amends 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 (i) of this section and, if necessary, the
extended special assessment period as defined in paragraph (j) of this
section, and if further necessary, on a one-time basis as described in
paragraph (m) 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 quarterly special assessment amount. 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 (i)(2) or (j)(3) of this section, as appropriate,
by the institution's special assessment base as defined in paragraph
(i)(3) or (j)(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. The FDIC shall also
advise each insured depository institution subject to the special
assessment of any revisions, if any, to losses to the Deposit Insurance
Fund as defined in paragraph (b) of this section. 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 quarterly special assessment amount. 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) 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 later of:
(1) November 2, 2023, adjusted for mergers prior to March 12, 2023;
or
(2) The date of the institution's most recent amendment to its Call
Report or FFIEC 002 for the quarter ended December 31, 2022, if such
amendment arises from, or is confirmed through, the FDIC's Assessment
Reporting Review. 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 the special assessment or a
shortfall special assessment under this section, the amount of
uninsured deposits for such institutions as of December 31, 2022, is
zero.
(g) $5 billion deduction from the special assessment base--
institution's portion. For purposes of this section, an institution's
portion of the $5 billion deduction 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.
(h) 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).
(i) 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 earlier of the last quarterly assessment period of 2025 or
the first quarterly assessment period that 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 3.36 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; minus
(B) $5 billion; 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:
[[Page 83348]]
(A) The institution's uninsured deposits; minus
(B) The institution's portion of the $5 billion deduction;
provided, however, that an institution's special assessment base cannot
be negative.
(j) 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 minimum
number of quarters required to recover the shortfall amount at a rate
under paragraph (j)(3) of this section that is at or below 3.36 basis
points per quarter.
(3) Assessment rate during extended special assessment period. The
quarterly assessment rate during the extended special assessment period
will be the shortfall amount, divided by the total amount of uninsured
deposits, 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, divided by the
minimum number of quarters that results in the quarterly rate being no
greater than 3.36 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; minus
(B) $5 billion; 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; minus
(B) The institution's portion of the $5 billion deduction, adjusted
for termination of insurance as of the last assessment period of 2025;
provided, however, that an institution's special assessment base cannot
be negative.
(k) Effect of mergers, consolidations, and other terminations of
insurance on the special assessment--(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 assessment or one-time final shortfall special
assessment 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 and subsequent quarters. 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 from the
quarter of the acquisition through the remainder of the initial and
extended special assessment period, including any one-time final
shortfall special assessment.
(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, the special
assessment and any shortfall special assessment shall be paid
consistent with Sec. 327.6(c). When an insured depository institution
voluntarily terminates its deposit insurance, the institution shall be
liable for any unpaid special assessment or one-time final shortfall
special assessment outstanding at the time of the termination and all
future special assessments, if any, the institution would have been
invoiced through the remainder of the initial or extended special
assessment period, as applicable, including any one-time final
shortfall special assessment for which the institution has been given
notice before termination. Any special assessment or one-time final
shortfall special assessment liabilities will be included, in full, on
the final quarterly assessment invoice following voluntary termination.
(l) Corrective reporting amendments--(1) Recalculation of quarterly
special assessment amount. Corrective amendments to an institution's
uninsured deposits that arise from, or are confirmed through, the
FDIC's Assessment Reporting Review will apply retroactively beginning
the first quarterly collection period of the initial special assessment
period. An institution's special assessment base and portion of the $5
billion deduction, along with the portion of the $5 billion deduction
allocated to the institution's affiliated insured depository
institutions, will be recalculated for prior collection quarters. Any
overpayment or underpayment in prior collection quarters as a result of
the recalculation will be invoiced as described in paragraph (l)(2) of
this section.
(2) Invoicing overpayment and underpayment. Any underpayment of the
special assessment by an institution as the result of corrective
amendments to uninsured deposits will be included, in full and with
interest, on the invoice for the quarter following the date a
corrective amendment is filed. If a corrective amendment results in an
overpayment of the special assessment, the institution will be credited
the overpayment amount, with interest, and such amount will be applied
to the institution's subsequent special assessment invoices beginning
in the quarter following the date of the amendment. If any excess
credit amount remains after the end of the initial and any extended
special assessment period(s), the excess credit amount shall be
refunded to the institution. Payment and collection of interest on
amounts resulting from overpayment and underpayment of the special
assessment shall be consistent with Sec. 327.7.
(m) One-time final shortfall special assessment. If the aggregate
amount of the special assessment collected during the initial and any
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 one-time final shortfall special assessment.
The FDIC shall notify each insured depository institution of the amount
of such institution's one-time final shortfall special assessment no
later than 45 days before such shortfall assessment is due.
(2) Aggregate one-time final shortfall special assessment amount.
The aggregate amount of the one-time final shortfall special assessment
imposed across all insured depository institutions shall equal the
losses to the
[[Page 83349]]
Deposit Insurance Fund, as of termination of the receiverships to which
the March 12, 2023, systemic risk determination applied, minus the
aggregate amount of the special assessment collected under this section
through initial and extended special assessment periods, including the
net amount of interest paid or received as a result of overpayments and
underpayments.
(3) One-time 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, as described in paragraph (f) of this section,
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.
(4) One-time final shortfall special assessment base--(i) The one-
time 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; minus
(B) $5 billion; provided, however, that an institution's one-time
final shortfall special assessment base cannot be negative.
(ii) The one-time 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; minus
(B) The institution's portion of the $5 billion deduction, adjusted
for termination of insurance as of the assessment period preceding the
final shortfall assessment period; provided, however, that an
institution's one-time final shortfall special assessment base cannot
be negative.
(5) Calculation of one-time 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 one-time final shortfall special
assessment base.
(6) One-time final special assessment. The one-time final shortfall
special assessment shall be collected on a one-time quarterly basis
after 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.
(n) 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).
(o) Special assessment collection in excess of losses. Any special
assessment collected under this section that exceeds 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.
(p) 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 November 16, 2023.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2023-25813 Filed 11-28-23; 8:45 am]
BILLING CODE 6714-01-P
