Deposit Insurance

Position

• Our nation’s federal deposit insurance system is critical to depositor confidence in the banking system, to the protection of small depositors, and to the funding base of community banks. A strong Deposit Insurance Fund (DIF) is important to maintaining the public’s confidence the FDIC has adequate resources to protect the nation’s depositors.
• ICBA supports a deposit insurance assessment framework that is appropriately tiered and risk weighted.
• ICBA opposes sharp, procyclical increases to deposit insurance assessments.
• ICBA encourages the FDIC to create a systemic risk premium, which would require the nation’s largest TBTF institutions to pay a premium on their deposit insurance assessments based on the unique risk they pose to the DIF in the event one of these institutions required resolution.
• ICBA opposes increases to deposit insurance assessments that are based on the DIF achieving a 2% designated reserve ratio rather than the statutory minimum of 1.35%.

Background

Deposit insurance has been the stabilizing force of our nation’s banking system for more than 85 years. It promotes public confidence by providing safe and secure depositories for small businesses and individuals alike.

Deposit Insurance Fund Restoration Plan. The Federal Deposit Insurance Act requires the FDIC to maintain a minimum reserve ratio for the DIF of 1.35 percent and to establish a Deposit Insurance Fund Restoration Plan if the reserve ratio falls below the statutory minimum.

Due to economic stimulus measures enacted in response to the pandemic, and elevated savings rates during this time, quarterly deposit growth rates outpaced deposit growth in the DIF causing the reserve ratio to decline below the required 1.35 percent minimum.

In September 2020, the FDIC adopted a plan to restore the DIF by September 2028 and found no increases to deposit insurance assessments were necessary to do so. Nonetheless, the FDIC published a final rule in 2022 which uniformly increased the base deposit insurance assessment rate for all banks by 2 basis points until the DIF reaches a “designated reserve ratio” of 2 percent. The 2 percent goal is the FDIC’s long-term goal for the DIF reserve ratio – it is not a ratio the FDIC is required, under any law, to maintain.