Group of professionals discuss finance

Breaking news and expert analysis on legal and compliance issues

[Back To Home][Back To Archives]

From Banking and Finance Law Daily, January 21, 2016

FDIC interim rule would allow ‘well-managed’ small banks to use 18-month cycle

By Colleen M. Svelnis, J.D.

The Federal Deposit Insurance Corporation took two actions at its Jan. 21, 2016, meeting of its board of directors, adopting an interim rule that would allow “well-managed” community banks and thrifts with less than $1 billion in assets to qualify for the 18-month exam cycle, and issuing a revised Notice of Proposed Rulemaking on small bank deposit insurance assessments.

Meaningful regulatory relief. Along with the FDIC, the Federal Reserve Board and Office of the Comptroller of the Currency now plan to allow well-managed community banks and thrifts with less than $1 billion in assets to qualify for the 18-month exam cycle. The interim final rule follows authority granted by Congress in December 2015. The 18-month exam cycle has previously been limited to institutions with less than $500 million in assets. In his remarks before the board, Thomas J. Curry, the Comptroller of the Currency, stated that he hopes the change will “offer meaningful regulatory relief to a large group of community banks and thrifts with very little safety and soundness risk.”

Curry also announced that he had approved an identical interim final rule for institutions supervised by the Office of the Comptroller of the Currency. Curry expects that the 18-month cycle will reduce the burden on well-managed community banks and thrifts as well as allow the banking agencies to focus supervisory resources on institutions that “present capital, managerial, or other issues of significant supervisory concern.”

Revised assessments for small banks. The FDIC is seeking comments on its proposal that would amend the way small banks are assessed for deposit insurance. According to the FDIC release, the proposal would revise the methodology that the FDIC uses to determine risk-based assessments for small banks (those with less than $10 billion in assets) to help ensure that banks that take on greater risks pay more for deposit insurance than their less risky counterparts. The agency issued an initial proposal on this issue in June 2015 (see Banking and Finance Law Daily, June 16, 2015). The updated proposal reflects comments received last year on topics including the calculation of asset growth and the treatment of reciprocal deposits and Federal Home Loan Bank advances. Comments must be received by 30 days following publication of the notice in the Federal Register.

In a statement, Chairman Martin J. Gruenberg said that the agency received almost 500 comments on the proposed rule. According to Gruenberg, the revised proposal “would allow assessments to better differentiate riskier banks from safer banks just as well as last year's proposal, and would allocate the costs of maintaining a strong Deposit Insurance Fund accordingly.” Gruenberg stated that the revised proposal is revenue neutral.

Along with the revised proposal, the FDIC is also publishing an online assessment calculator that will allow institutions to estimate their assessment rates under the revised proposal.

Changes from 2015 proposal. According to the FDIC’s Financial Institution Letter, FIL-7-2016, the new proposal would:

  • revise the previously proposed one-year asset growth measure;
  • use a brokered deposit ratio; consistent with a number of comments, this ratio would treat reciprocal deposits and Federal Home Loan Bank advances the same way the current system does––rather than the previously proposed core deposit ratio––as a measure in the financial ratios method for calculating assessment rates for all established small banks;
  • remove the existing brokered deposit adjustment for established small banks, which currently applies to banks outside Risk Category I; and
  • revise the weights assigned to the proposed measures in the financial ratios method based upon a re-estimation of the underlying statistical model.

MainStory: TopStory BankingOperations DepositInsurance FinancialStability OversightInvestigations

Back to Top

Banking and Finance Law Daily

Introducing Wolters Kluwer Banking and Finance Law Daily — a daily reporting service created by attorneys, for attorneys — providing same-day coverage of breaking news, court decisions, legislation, and regulatory activity.


A complete daily report of the news that affects your world

  • View full summaries of federal and state court decisions.
  • Access full text of legislative and regulatory developments.
  • Customize your daily email by topic and/or jurisdiction.
  • Search archives for stories of interest.

Not just news — the right news

  • Get expert analysis written by subject matter specialists—created by attorneys for attorneys.
  • Track law firms and organizations in the headlines with our new “Who’s in the News” feature.
  • Promote your firm with our new reprint policy.

24/7 access for a 24/7 world

  • Forward information with special copyright permissions, encouraging collaboration between counsel and colleagues.
  • Save time with mobile apps for your BlackBerry, iPhone, iPad, Android, or Kindle.
  • Access all links from any mobile device without being prompted for user name and password.