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FDIC Approves Controversial Deposit Insurance Assessment Rate Increase

FDIC Approves Controversial Deposit Insurance Assessment Rate Increase

Posted: Oct 26 2022
Despite opposition by the banking industry and some members of Congress, last week, the FDIC board unanimously approved a rule increasing deposit insurance assessment rates for banks by two basis points beginning with the first quarterly assessment period of 2023.  The rule, which represents a 54 percent increase in the current average assessment rate, will remain in effect until the Deposit Insurance Fund (DIF) reserve ratio meets the agency’s long-term goal of 2 percent.
 
When the DIF reserve ratio fell from 1.41% in 2019 to 1.30% in 2020 due to the surge of deposits into banks in reaction to the pandemic, the FDIC approved a restoration plan to restore the fund to the statutory minimum of 1.35% by 2028. However, a sustained inflow in deposits and major unrealized losses in its securities portfolio caused the reserve ratio to decline to 1.23% in March. In remarks during the board meeting, Acting Chairman Martin Gruenberg said the rate increase is now necessary because the banking industry faces significant downside risks from inflation, slowing economic growth and geopolitical uncertainty. “It is better to take prudent but modest action earlier in the statutory eight-year period to reach the minimum reserve ratio than to delay and potentially have to consider a procyclical assessment increase,” he said.
 
To read the FDIC Statement, visit: https://www.fdic.gov/news/press-releases/2022/pr22073.html
 

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