Banking organizations oppose FDIC plan to raise deposit insurance rates


A coalition of banking organizations has challenged the Federal Deposit Insurance Corporation’s (FDIC) proposed increase in deposit insurance valuation rates.

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In a comment letter to the FDIC, the groups said the proposal was based on incomplete and outdated economic analysis and was unnecessary.

“The comprehensive legislative framework designed by Congress with respect to premium rates demonstrates that the proposed dramatic increase is inconsistent with legislative intent, unnecessarily punitive to banks, and could harm the economy,” the groups wrote. in the letter. “The timing of the currently proposed increase…is increasingly likely to coincide with the onset of a recession. The proposal therefore risks causing exactly the kind of pro-cyclical increase that Congress has sought to avoid and is therefore completely contrary to the intention of Congress.

The letter was signed by the Bank Policy Institute, the American Bankers Association, the Consumer Bankers Association, the Independent Community Bankers of America (ICBA), the National Bankers Association and the Mid-Size Bank Coalition of America.

The FDIC has proposed an increase of more than 50% above the current weighted average rating rate that banks pay for deposit insurance. In addition, banks would maintain these higher rates until the Deposit Insurance Fund reaches a designated reserve ratio of 2% of insured deposits. The FDIC said the increase was necessary to meet its legal requirements, but that claim is based on outdated economic analysis that does not take into account recent major changes in deposit or interest rate levels and outlook. , the banking groups said.

In addition, banking groups said the increase would impose significant costs, especially on smaller banks. If the increase had been in place in 2021, many community banks’ pre-tax income would have fallen by more than 5%, and several would have fallen by more than 25%.

The banking groups said the FDIC’s analysis makes two key unrealistic assumptions. First, it assumes that interest income and capital gains on its investments will be zero over the forecast horizon. Second, he assumes that deposits will increase by 3.5 or 4%. They say the proposed increase is not necessary to meet the agency’s obligations under the law.

Banking organizations are asking the FDIC to reassess the situation in six months and take into account the latest economic data.

“ICBA and community bankers nationwide are deeply concerned that the FDIC’s proposal to dramatically increase the rates on assessments that banks pay to fund deposit insurance will have a disproportionate impact on community banks. in a radical departure from the agency’s past assessment practices,” said ICBA President and CEO Rebeca Romero. said Rainy. “Rather than penalize the community banks that have led the nation’s financial services response to the pandemic, the FDIC should ensure that its plan properly recognizes that community banks should not be subject to the same assessments imposed on the most largest and most complex in the country.”


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