FDIC Plans to Cut Deposit-Insurance Assessments

The FDIC plans to scale back its resolution-planning rule for large banks. Chair Travis Hill said the agency would reward those that can provide key data quickly with lower deposit-insurance assessments.

In remarks before the Chamber of Commerce, Mr. Hill said the FDIC would (i) slim down its insured depository institution resolution planning requirements ("IDI Rule") to focus on the operational information it needs to sell a failed bank, and (ii) add a "resolution readiness adjustment" that would let large banks lower their quarterly assessment if they can rapidly populate a virtual data room or give the FDIC advance access to their systems.

Mr. Hill said the FDIC would also raise and index the $10 billion threshold for its large-bank assessment scorecard and reduce assessments - by a full two basis points for small banks and a smaller amount for large banks, which could match the cut through the readiness adjustment. The Deposit Insurance Fund's reserve ratio stands at 1.43 percent, he said, the highest since the 1960s. He said , the FDIC would keep building toward a 2 percent target.

Mr. Hill also said the FDIC was weighing replacing its Part 370 ("Recordkeeping for Timely Deposit Insurance Determination") rule (which requires banks with more than two million deposit accounts to build their own deposit-insurance-determination systems) with a lighter standard, citing gains in the FDIC's own capacity. He said the FDIC would revamp its Part 371 ("Recordkeeping Requirements for Qualified Financial Contracts") rule to require a narrower, more useful set of data.

Mr. Hill urged Congress to add a de minimis exception to the statutory "least-cost test," so the FDIC could cover uninsured deposits when doing so costs only marginally more - easing a perception that uninsured depositors take losses at small banks but not large ones. He also cited steps to draw more nonbank capital into failed-bank bidding and to speed resolution contracting.