SLIDE 1
The Evolution of FDIC Deposit Insurance Assessments
Donna Saulnier and Ashley Mihalik
Learning Objectives
- The evolution of FDIC assessments
- The history of invoicing & collection
- Risk mitigation strategies
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The Evolution of FDIC Deposit Insurance Assessments Donna Saulnier - - PowerPoint PPT Presentation
The Evolution of FDIC Deposit Insurance Assessments Donna Saulnier - - PowerPoint PPT Presentation
The Evolution of FDIC Deposit Insurance Assessments Donna Saulnier and Ashley Mihalik 2 Learning Objectives The evolution of FDIC assessments The history of invoicing & collection Risk mitigation strategies 3 Original
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Original Assessment System
- Fixed rate – all banks paid a uniform rate
- Initial nominal assessment rate set = 8.33 bps * domestic deposits
- Starting in 1950, included rebates
- Role of fund management
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Risk-Based Assessments
1993 First risk- based assessment system
- Based on capital
levels and supervisory groups
2006 Revisions to risk-based pricing
- Separate pricing
for large and small banks
- Financial ratios
predict probability
- f downgrade
2008 Changes during the Financial Crisis
- Adjustments for
liabilities that could affect potential losses to the DIF
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Current Assessment System
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2010 Dodd-Frank Act
- Changes to fund
management
- Assessment base
2011 Large Bank Pricing Changes
- Scorecards for
large banks and highly complex banks
- Financial ratios
predict risk ranking
2016 Small Bank Pricing Changes
- Based on
experience during 2 banking crises
- Financial ratios
predict probability
- f failure
SLIDE 6
Assessment Rate Schedule
Established Small Banks Large & Highly Complex Institutions CAMELS Composite Rating 1 or 2 3 4 or 5 Initial Base Assessment Rate (IBAR) 3 to 16 6 to 30 16 to 30 3 to 30 Unsecured Debt Adjustment a
- 5 to 0
- 5 to 0
- 5 to 0
- 5 to 0
Brokered Deposit Adjustment N/A N/A N/A 0 to 10 Total Base Assessment Rate 1.5 to 16 3 to 30 11 to 30 1.5 to 40
Note: Assessment base equals average consolidated total assets minus average tangible equity, with additional reductions for custodial banks and banker’s banks.
a The unsecured debt adjustment is limited to the lesser of 5 basis points or 50 percent of the IBAR; thus, for example, the maximum
unsecured debt adjustment for an institution with an IBAR of 5 basis points is 2.5 basis points. The rate schedule shown does not include the depository institution debt adjustment, which increases assessments by 50 basis points for each dollar of long-term unsecured debt held by a bank that was issued by another insured institution, to the extent that the debt exceeds 3 percent of Tier 1 capital.
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Original Paper-Based Process
History of Invoicing & Collection
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Paper-Based Process
- Paper forms completed semiannually by banker
- Similar to IRS tax forms
- Mailed to FDIC lockbox along with a paper check
- Required reconciling when checks were posted to the wrong bank
- > 40% error rate
- Semiannual error verification process
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History of Invoicing & Collection
Current Electronic Bill Presentment & Collection
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Electronic Bill Presentment & Collection
- Invoices prepared by FDIC quarterly using data reported by banks
- Banks required to review the invoice, to notify FDIC of errors, and
to ensure funds are available for payment from a designated account
- Assessment premiums are collected quarterly via ACH direct debit
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Risk Mitigation
- Source system reconcilements
- Dual-control processes
- Quarterly internal control self-assessments
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Risk Mitigation
- Annual audits by Government Accountability Office (GAO)
- Structured Compliance Review Programs
- Assessment Base Reviews
- High-Risk Asset Reviews
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For more information…
https://www.fdic.gov/deposit/insurance/assessments/
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Contact Information:
Donna Saulnier – dsaulnier@fdic.gov Ashley Mihalik – amihalik@fdic.gov
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