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FDIC Amends Assessment Regulations on Deposit Insurance

The FDIC adopted a final rule that amends the "risk-based deposit insurance assessment system applicable to all large insured depository institutions." The amendments, which were adopted as proposed, will reduce the cost impact of the current expected credit losses ("CECL") methodology-related capital transition provisions on temporary deposit insurance assessments.

Under the final rule, the FDIC will eliminate a double-counting issue that arises with respect to a number of financial measures that are used to ascertain deposit insurance assessments for large and complex banks. Specifically, the final rule amends the risk-based deposit insurance assessments by removing the double counting of certain CECL transitional amounts in some financial measures. This will address the fact that some deposit insurance assessment rates for large and highly complex banks do not accurately reflect such banks' risks to the FDIC's deposit insurance fund because certain CECL transitional amounts are included in the summation of both Tier 1 capital and reserves (which already include the implementation of CECL). The final rule will also recalibrate the calculation of the loss severity measures to address double-counting issues therein with respect to CECL transitional amounts.

The final rule is limited to the deposit insurance system as applied to large and highly complex banks. It will not impact the regulatory capital requirements, or the regulatory capital relief that has allowed banking organizations to incrementally implement the CECL transition regarding regulatory capital. The FDIC will "continue to apply the CECL regulatory capital transition provisions, with the regulatory capital relief provided to address concerns that . . . unexpected economic conditions at the time of CECL adoption could result in higher-than-anticipated increases in allowances."

The final rule will go into effect on April 1, 2021.

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