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The FDIC said the reserve ratio for the Deposit Insurance Fund remains on track to reach the statutory minimum of 1.35% as early as 2026, and ahead of the Amended Restoration Plan deadline of Sept. 30, 2028.
Details: Since the previous semiannual update, the DIF reserve ratio increased by 6 basis points due to growth in the DIF balance and slower-than-average insured deposit growth, according to the FDIC report.
Background: On Sept. 15, 2020, the FDIC established the Restoration Plan to restore the DIF reserve ratio to at least 1.35% by the statutory deadline after extraordinary deposit growth during the first half of 2020 caused the DIF reserve ratio to decline below the statutory minimum. In June of 2022, the FDIC amended the Plan following projections that the reserve ratio may not reach the required minimum by the statutory deadline and increased deposit insurance assessment rates by 2 basis points for all insured depository institutions.
ICBA View: ICBA opposes uniform base deposit insurance increases and has consistently advocated the 2 basis point increase should cease once the DIF reserve ratio reaches 1.35%. The FDIC should lower deposit insurance assessments for community banks if the 2 basis point increase is no longer needed to reach the minimum statutory reserve ratio after 2026. In 2022 comments to the agency, ICBA called on the FDIC to reconsider deposit insurance increases that are drastic, prolonged, and disproportionately affect community banks.
More: In a prior comment letter, ICBA said the FDIC’s proposal would raise deposit insurance assessments by as much as 50 percent or more for many community banks and any assessment increase should focus on the largest institutions by requiring too-big-to-fail entities to pay a systemic risk premium to the DIF instead of raising rates on community banks.
Joint Letter: In a separate joint letter, ICBA and other groups said the FDIC proposal rests on faulty economic analysis related to projected interest earnings and deposit growth.