The FDIC Board this morning issued a proposed rule that would change the assessment base -- beginning with the second quarter and payable at the end of September -- from adjusted domestic deposits to a bank’s average consolidated total assets minus average tangible equity, as required by the Dodd-Frank Act. The proposal defines tangible equity as Tier 1 capital.

Since the new base is larger than the current base, the FDIC proposal also would lower assessment rates to between 2.5 and 9 basis points on the broader base for banks in the lowest risk category, and 30 to 45 basis points for banks in the highest risk category.

The proposal would eliminate the adjustment to the rate paid for secured liabilities, including Federal Home Loan Bank advances, since these will be part of the new assessment base. The proposal also would create a new depository institution debt adjustment (DIDA) that increases the assessment rate of an institution that holds long-term unsecured debt issued by another insured depository institution. The DIDA amounts to 50 basis points for every dollar of long-term unsecured debt held.

FDIC’s proposal also would change the amount of, and cap on, the unsecured debt adjustment to the assessment base; eliminate Tier 1 capital from the definition of unsecured debt; and tweak the formula for the current brokered deposits adjustment.

Separately, the board issued a revised proposal that would create a scorecard-based assessment rate for banks with more than $10 billion in assets and for large, highly complex institutions. The scorecards would include financial measures that are predictive of long-term performance.

The proposal replaces one issued by the Board in April and includes an adjustment to the treatment of brokered deposits and unsecured liabilities and eliminates higher rates associated with excessive reliance on secured funding. The new proposal follows ABA’s suggestion that subjective adjustments on the final rate assessed be limited.

Amounts for all risk categories are in basis points annually.
* The unsecured debt adjustment could not exceed the lesser of 5 basis points or 50 percent of an institution’s initial base assessment rate.
** Total base assessment rates do not include the proposed depository institution debt adjustment.

ABA has learned that FDIC will have a new assessment rate calculator available on its website later this week. Both proposals will have a 45-day comment period upon publication in the Federal Register. Read the new assessment base proposal.  Read the large bank assessment system proposal. For more information, contact ABA's Rob Strand.

Source: ABA Daily Newsbytes