FDIC Proposes to Update Accounting Calculations for Deposit Insurance Assessments

The FDIC proposed updating the accounting standards in the risk-based deposit insurance assessment system applicable to insured depository institutions with over $10 billion in assets. The amendments would modify two financial measures: (i) the underperforming assets ratio; and (ii) the higher risk assets ratio.

Consistent with the Financial Account Standards Board's issuance of Accounting Standards Update No. 2022-02 (ASU 2022-02)("Financial Instruments—Credit Losses"), the proposal would, among other things, replace restructured loans or troubled debt restructurings in the calculation of such ratios with a new term: "modifications to borrowers experiencing financial difficulty."

The FDIC stated that it "does not have the information necessary to estimate the expected effects of the proposal to incorporate the new accounting standard into the large and highly complex bank scorecards" since most banks are not yet reporting "modifications to borrowers experiencing financial difficulty."

Comments are due on the proposal within 30 days of publication in the Federal Register. The FDIC stated that it expects to issue a final rule with an effective date of January 1, 2023, but also expects most large or highly complex banks to achieve compliance with the rule prior to the effective date.