North Dakota Bankers
Extraordinary Leadership for North Dakota Banks

ABA and ICBA Oppose Proposed Increase in Deposit Insurance Assessments

ABA and ICBA Oppose Proposed Increase in Deposit Insurance Assessments

Posted: Aug 24 2022
ABA and ICBA joined four trade associations in a comment letter opposing a proposed two basis-point increase in deposit insurance assessment rates, saying “such an aggressive assessment rate increase is unwarranted.”
 
The FDIC signaled in June its intent to raise rates starting during the first quarterly assessment period of 2023. The proposed increase—which would remain in effect until the Deposit Insurance Fund reserve ratio meets the FDIC’s long-term goal of 2%—would amount to a 54% increase in the current average assessment rate. The agency previously approved a DIF restoration plan to restore the reserve ratio to the statutory minimum of 1.35% in 2028, but a sustained increase in insured deposits due to the pandemic and major unrealized losses in its securities portfolio caused the reserve ratio to drop to 1.23% earlier this year.
 
In their letter, the associations said the analysis underpinning the proposed increase does not account for recent changes in deposit levels or interest rates. They also said the factors that caused the reserve ratio to fall and remain below its statutory minimum, and which the FDIC assumes will continue, will soon disappear. The groups added that the rate hike runs counter to what Congress intended when it adopted the legislative framework to raise rates, as lawmakers wanted to avoid the snap increases the agency is now proposing.
 
“Forgoing a procyclical increase, particularly when the DIF reserve ratio is projected to return to its statutory minimum without the need for any increases in assessments, will free up bank resources and better enable banks to maintain lending in support of economic activity during any economic downturn, thereby supporting the economy at large and, ultimately, the public,” the groups said.
 
To read the letter, visit: https://www.aba.com/-/media/documents/comment-letter/joint-trades-cmt-ltr-fdic-dif-assessment-rates.pdf
 
 

Designed and developed by Odney