[Federal Register Volume 75, Number 226 (Wednesday, November 24, 2010)]
[Proposed Rules]
[Pages 72581-72609]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-29137]
[[Page 72581]]
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Part III
Federal Deposit Insurance Corporation
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12 CFR Part 327
Assessments, Assessment Base and Rates; Proposed Rule
Federal Register / Vol. 75 , No. 226 / Wednesday, November 24, 2010 /
Proposed Rules
[[Page 72582]]
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FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 327
RIN 3064-AD66
Assessments, Assessment Base and Rates
AGENCY: Federal Deposit Insurance Corporation.
ACTION: Notice of proposed rulemaking and request for comment.
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SUMMARY: The FDIC is proposing to amend its regulations to implement
revisions to the Federal Deposit Insurance Act made by the Dodd-Frank
Wall Street Reform and Consumer Protection Act regarding the definition
of an institution's deposit insurance assessment base; alter the
unsecured debt adjustment in light of the changes to the assessment
base; add an adjustment for long-term debt held by an insured
depository institution where the debt is issued by another insured
depository institution; eliminate the secured liability adjustment;
change the brokered deposit adjustment to conform to the change in the
assessment base and change the way the adjustment will apply to large
institutions; and revise deposit insurance assessment rate schedules,
including base assessment rates, in light of the changes to the
assessment base.
DATES: Comments must be received on or before January 3, 2011.
ADDRESSES: You may submit comments, identified by RIN number, by any of
the following methods:
Agency Web Site: http://www.fdic.gov/regulations/laws/Federal/propose.html. Follow instructions for submitting comments on
the Agency Web Site.
E-mail: [email protected]. Include the RIN number in the
subject line of the message.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW.,
Washington, DC 20429.
Hand Delivery/Courier: Guard station at the rear of the
550 17th Street Building (located on F Street) on business days between
7 a.m. and 5 p.m. Instructions: All submissions received must include
the agency name and RIN for this rulemaking. All comments received will
be posted without change to http://www.fdic.gov/regulations/laws/Federal/propose.html including any personal information provided.
FOR FURTHER INFORMATION CONTACT: Rose Kushmeider, Acting Chief, Banking
and Regulatory Policy Section, Division of Insurance and Research,
(202) 898-3861; Christopher Bellotto, Counsel, Legal Division, (202)
898-3801; and Sheikha Kapoor, Counsel, Legal Division, (202) 898-3960.
SUPPLEMENTARY INFORMATION:
I. Background
Assessment Base
The FDIC charges insured depository institutions (IDIs) an amount
for deposit insurance equal to the deposit insurance assessment base
times a risk-based assessment rate. Under the current system, the
assessment base is domestic deposits minus a few allowable exclusions,
such as pass-through reserve balances. An IDI currently reports its
assessment base on a quarter-end basis; larger institutions (that is,
those with $1 billion or more in assets), all institutions chartered
after December 31, 2006, and other IDIs that so choose, use daily
averaging.
Assessment Rate Adjustments
The FDIC calculates an initial base assessment rate (IBAR) for each
institution based on CAMELS ratings, a number of inputs derived from
data that the institution reports on the Consolidated Reports of
Condition and Income (Call Report) or the Thrift Financial Report
(TFR), and, for large institutions that have long-term debt issuer
ratings, from these ratings.\1\ Under the current system, an
institution's total base assessment rate can vary from the IBAR as the
result of three possible adjustments. An institution's total base
assessment rate may be lowered from its IBAR by an amount determined by
its ratio of long-term unsecured debt to domestic deposits and, for
small institutions, certain amounts of Tier 1 capital to domestic
deposits (the unsecured debt adjustment).\2\ This potential decrease in
initial base assessment rates is limited to 5 basis points.
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\1\ The FDIC is concurrently issuing a Notice of Proposed
Rulemaking and Request for Comment on the Assessment System for
Large Institutions.
\2\ Long-term unsecured debt includes senior unsecured and
subordinated debt.
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An institution's base assessment rate may be raised by an amount
determined by its ratio of secured liabilities to domestic deposits
(the secured liability adjustment). An institution's ratio of secured
liabilities to domestic deposits (if greater than 25 percent) increases
its assessment rate, but the resulting base assessment rate after any
such increase can be no more than 50 percent greater than it was before
the adjustment. The secured liability adjustment is made after any
unsecured debt adjustment.
Finally, an institution's base assessment rate may be raised by an
amount determined by its ratio of brokered deposits to domestic
deposits (the brokered deposit adjustment) for institutions in Risk
Categories II, III or IV. An institution's ratio of brokered deposits
to domestic deposits (if greater than 10 percent) increases its
assessment rate, but any increase is limited to no more than 10 basis
points.
Assessment Rates
The FDIC last amended the assessment rate schedule in 2009.\3\ The
2009 assessments rule established the following initial base assessment
rate schedule:
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\3\ 74 FR 9525.
Table 1--Current Initial Base Assessment Rates
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Risk category
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I *
---------------------------------- II III IV
Minimum Maximum
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Annual Rates (in basis points)..................................... 12 16 22 32 45
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* Initial base assessment rates that are not the minimum or maximum rate vary between these rates.
After applying all possible adjustments, minimum and maximum total
base assessment rates for each risk category are as set out in Table 2
below. The 2009 assessments rule also allowed the FDIC Board to adjust
rates uniformly by up to 3 basis points above or below the total base
assessment rates without notice-and-comment rulemaking,
[[Page 72583]]
provided that no change from one quarter to the next in the total base
assessment rates may exceed 3 basis points.
Table 2--Current Total Base Assessment Rates *
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Risk Category Risk Category Risk Category Risk Category
I II III IV
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Initial base assessment rate.................... 12-16 22 32 45
Unsecured debt adjustment....................... (5)-0 (5)-0 (5)-0 (5)-0
Secured liability adjustment.................... 0-8 0-11 0-16 0-22.5
Brokered deposit adjustment..................... .............. 0-10 0-10 0-10
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Total base assessment rate...................... 7-24 17-43 27-58 40-77.5
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* All amounts for all risk categories are in basis points annually. Total base rates that are not the minimum or
maximum rate vary between these rates.
II. Overview of the Proposed Rule
The Dodd-Frank Wall Street Reform and Consumer Protection Act
(Dodd-Frank Act) requires that the FDIC amend its regulations to
redefine the assessment base used for calculating deposit insurance
assessments. This rulemaking proposes to amend the relevant regulations
needed to implement this requirement. The change in the assessment base
has also prompted the FDIC to reexamine its assessment rate system and
assessment rate schedule. Specifically, the FDIC is proposing to modify
or eliminate the adjustments made to the IBAR for unsecured debt,
secured liabilities, and brokered deposits, to add a new adjustment for
holding unsecured debt issued by another IDI, to revise and lower the
initial base assessment rate schedule in order to collect approximately
the same amount of revenue under the new base as under the old base
calibrated to the second quarter of 2010 and to revise the assessment
rate schedules proposed in the Notice of Proposed Rulemaking on
Assessment Dividends, Assessment Rates and the Designated Reserve Ratio
(the ``October NPR'' or the ``NPR on Dividends, Assessment Rates and
the DRR'').\4\ To the extent possible, the proposed changes attempt to
minimize additional new reporting by building on established concepts
and by using data that are already reported.
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\4\ See: Notice of Proposed Rulemaking and Request for Comment
on Assessment Dividends, Assessment Rates and Designated Reserve
Ratio, 75 FR 66271.
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III. Assessment Base Changes
As stated above, the Dodd-Frank Act requires that the FDIC amend
its regulations to redefine the assessment base used for calculating
deposit insurance assessments. Specifically, the Dodd-Frank Act directs
the FDIC:
To define the term `assessment base' with respect to an insured
depository institution * * * as an amount equal to--
(1) the average consolidated total assets of the insured
depository institution during the assessment period; minus
(2) the sum of--
(A) the average tangible equity of the insured depository
institution during the assessment period, and
(B) in the case of an insured depository institution that is a
custodial bank (as defined by the Corporation, based on factors
including the percentage of total revenues generated by custodial
businesses and the level of assets under custody) or a banker's bank
(as that term is used in * * * (12 U.S.C. 24)), an amount that the
Corporation determines is necessary to establish assessments
consistent with the definition under the * * * Federal Deposit
Insurance Act * * * for a custodial bank or a banker's bank.\5\
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\5\ Public Law 111-203, Sec. 331(b), 124 Stat. 1376, 1538 (to
be codified at 12 U.S.C. 1817(nt)).
To implement this requirement, therefore, the FDIC must establish
the appropriate methodology for calculating ``average consolidated
total assets'' and ``average tangible equity,'' determine the basis for
reporting consolidated total assets and tangible equity, and define
``tangible equity.'' The FDIC has identified three standards that
should be met in determining the assessment base. First, the reported
elements of the new assessment base should be a true reflection of the
entire quarter. Second, the definition of tangible equity should
reflect an institution's ability to provide a real capital buffer to
the Deposit Insurance Fund (DIF) in the event of failure. Third, the
reporting of the elements of the new assessment base should require
minimal changes to the existing reporting requirements. The changes
needed to implement the new assessment base will require the FDIC to
collect some information from IDIs that is not currently collected on
the Call Report or TFR. However, the burden of requiring new data will
be partly offset by allowing some assessment data that are currently
collected to be deleted from the Call Report or TFR.
The Dodd-Frank Act also requires the FDIC to determine whether and
to what extent adjustments to the assessment base are appropriate for
banker's banks and custodial banks in order to establish assessments
consistent with the definition of the ``risk-based assessment system''
under the Federal Deposit Insurance Act. The proposed rule outlines
these adjustments and proposes a definition of ``custodial bank.''
Average Consolidated Total Assets
The FDIC proposes that all IDIs report their average consolidated
total assets using the accounting methodology established for reporting
total assets as applied to Line 9 of Schedule RC-K of the Call Report
(that is, the methodology established by Schedule RC-K regarding when
to use amortized cost, historical cost, or fair value), except that all
institutions must average their balances as of the close of business
for each day during the calendar quarter. Because differences exist in
the requirements for averaging and in the reporting of total assets for
Call Report and TFR filers, the FDIC seeks to standardize the
calculation of total consolidated assets for deposit insurance
assessment purposes while minimizing the number of reporting changes
that result from the change in the assessment base. Since this
accounting methodology for reporting average total assets exists, it
was selected as the proposed methodology for reporting.
The amounts to be reported as daily averages are the sum of the
gross amounts of consolidated total assets for each calendar day during
the quarter divided by the number of calendar days in the quarter. For
days that an office of the reporting institution (or any of its
subsidiaries or branches) is closed (e.g., Saturdays, Sundays, or
holidays), the amounts outstanding from the previous business day would
be used. An office is considered closed if there are no
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transactions posted to the general ledger as of that date. For the
surviving or resulting institution in a merger or consolidation, assets
for all merged or consolidated institutions for the days prior to the
merger or consolidation should be included in the daily average
calculation, regardless of the method used to account for the merger or
consolidation.
Requiring all insured institutions to report ``average consolidated
total assets'' using daily averaging would result in a truer measure of
the assessment base during the entire quarter. Further, this
requirement would be consistent with the actions taken by the FDIC in
2006 when it determined that using quarter-end deposit data as a proxy
for balances over an entire quarter did not accurately reflect an IDI's
typical deposit level. As a result, the FDIC required certain
institutions to report a daily average deposit assessment base.
The Dodd-Frank Act requires the assessment base to consist of
average consolidated total assets. However, in the case of IDIs with
consolidated IDI subsidiaries, consolidating all assets (and tangible
equity, see below) could lead to a double charge for deposit
insurance--once at the IDI level and again at the parent IDI level.
Because of intercompany transactions, a simple subtraction of the
subsidiary IDI's assets and equity from the parent IDI's assets and
equity will not usually result in an accurate statement of the parent
IDI's assets and equity. By calculating the assets and equity of the
parent IDI without consolidating the assets and equity of the
subsidiary IDI, this problem can be avoided. The FDIC is therefore
proposing that parent IDIs of other IDIs report daily average
consolidated total assets without consolidating their IDI subsidiaries
into the calculations. This would be consistent with current assessment
base practice and would ensure that all parent IDIs are assessed only
for their own assessment base and not that of their subsidiary IDIs,
which will be assessed separately.
The proposed rule also covers average consolidated total assets of
non-IDI subsidiaries. For such entities, average consolidated assets
would also be calculated using a daily averaging method. However, the
IDI may choose to use either daily average data for such subsidiaries
calculated for the current quarter or for the prior quarter, but having
chosen one or the other method, reporting could not change from quarter
to quarter. This proposed methodology would conform to the current
requirements for consolidating data from non-IDI subsidiaries, which
allows such data to be up to 93 days old.
Finally, for insured branches of foreign banks, average
consolidated total assets would be defined as total assets of the
branch (including net due from related depository institutions) in
accordance with the schedule of assets and liabilities in the Report of
Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks,
but using the accounting methodology for reporting total assets
established in Schedule RC-K of the Call Report, and calculated using a
daily averaging method as described above.
Defining Tangible Equity
No definition of tangible equity currently exists for IDI reporting
purposes. The FDIC considered developing a new definition for
assessment base purposes. However, in an effort to minimize new
reporting requirements, the FDIC is proposing to use an industry
standard definition that would also provide a real capital buffer to
the DIF in the event of failure. The FDIC, therefore, proposes to use
Tier 1 capital as the definition of tangible equity. Since the Basel
Committee is considering revisions to the definition of Tier 1 capital,
this definition would serve as a measure of tangible equity at least
until the Basel Committee (in Basel III) has completed its revamping of
capital definitions and standards. At that time the FDIC may reconsider
the definition of tangible equity.
Defining tangible equity as Tier 1 capital not only avoids an
increase in regulatory burden that a new definition of capital could
cause, but also provides a clearly understood capital buffer for the
DIF in the event of the institution's failure.
The FDIC also proposes to define the averaging period for tangible
equity to be monthly, except that institutions that reported less than
$1 billion in quarter-end total consolidated assets on their March 31,
2011 Call Report or TFR may report average tangible equity using an
end-of-quarter balance or may at any time opt permanently to report
average tangible equity using a monthly average balance. An institution
that reports average tangible equity using an end-of-quarter balance
and reports average daily consolidated total assets of $1 billion or
more for two consecutive quarters shall permanently report average
tangible equity using monthly averaging starting in the next quarter.
The FDIC proposes that monthly averaging would mean the average of the
three month-end balances within the quarter. For the surviving
institution in a merger or consolidation, Tier 1 capital should be
calculated as if the merger occurred on the first day of the quarter in
which the merger or consolidation actually occurred.
This methodology should not increase regulatory burden for
institutions with assets of $1 billion or more as they generally
compute their regulatory capital ratios no less frequently than
monthly. To minimize regulatory burden for small institutions, the
proposal allows an exception to the averaging requirement. The FDIC
does not foresee a need for any institution to report daily average
balances for tangible equity, since the components of tangible equity
appear to be subject to less fluctuation within a quarter than are
consolidated total assets. Thus, the proposal would require averaging
of capital for institutions that account for the majority of industry
assets, while minimizing additional reporting requirements.
For IDIs with consolidated IDI subsidiaries, the FDIC proposes to
instruct IDIs that consolidate other IDIs for financial reporting
purposes to report average tangible equity (or end-of-quarter tangible
equity, as appropriate) without consolidating their IDI subsidiaries
into the calculations. This conforms to the method for reporting total
consolidated assets above and ensures that all parent IDIs will be
assessed only on their own assessment base and not that of their
subsidiary IDIs.
For IDIs that report average tangible equity using a monthly
averaging method and that have non-IDI subsidiaries, the IDI must use
monthly average data for such subsidiaries. The monthly average data
for non-IDI subsidiaries, however, may be calculated for the current
quarter or for the prior quarter, but having chosen one or the other
method, reporting could not change from quarter to quarter.
For insured branches of foreign banks, tangible equity would be
defined as eligible assets (determined in accordance with Section
347.210 of the FDIC's regulations) less the book value of liabilities
(exclusive of liabilities due to the foreign bank's head office, other
branches, agencies, offices, or wholly owned subsidiaries). This value
would be calculated on a monthly average (or end-of-quarter) basis.
Banker's Bank Adjustment
Banker's banks are defined by 12 U.S.C. 24. These banks or
companies must be owned exclusively by depository institutions or
depository institution holding companies and the bank or company and
all subsidiaries thereof must be engaged exclusively in
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providing services to or for other depository institutions, their
holding companies, and the officers, directors, and employees thereof.
The unique business model of a banker's bank includes performing
agency functions for its member banks. In this capacity, a banker's
bank passes through funds from its member banks either to other banks
in the Federal funds market or to the Federal Reserve as reserve
balances. While the Federal funds that a banker's bank passes through
do not appear on its balance sheet, those funds that a banker's bank
passes through to the Federal Reserve do appear on its balance sheet.
Currently, the corresponding deposit liabilities that result from these
``pass-through'' reserve balances are excluded from the assessment
base. The FDIC is proposing to retain this exception.
In addition to its agency functions, a typical banker's bank
provides liquidity and other services to its member banks acting as a
principal. This activity may result in higher than average amounts of
Federal funds purchased and deposits from other IDIs and financial
institutions on a banker's bank's balance sheet. To offset its
relatively high levels of these short-term liabilities, a banker's bank
often holds a relatively high amount of Federal funds sold and reserve
balances for its own account. The proposed rule would also adjust the
assessment base of a banker's bank to reflect its greater need to
maintain liquidity to service its member banks.
The proposed rule would first require a banker's bank to self-
certify on its Call Report or TFR that it meets the definition of
``banker's bank'' as set forth in 12 U.S.C. 24. The self-certification
would be subject to verification by the FDIC. For an institution that
meets the definition (with the exception noted below) the FDIC would
exclude from its assessment base the daily average amount of reserve
balances ``passed through'' to the Federal Reserve, the daily average
amount of reserve balances held at the Federal Reserve for its own
account, and the daily average amount of its Federal funds sold. The
collective amount of this exclusion, however, could not exceed the sum
of the bank's daily average amount of total deposits of commercial
banks and other depository institutions in the United States and the
daily average amount of its Federal funds purchased. Thus, for example,
if a banker's bank has a total daily average balance of $300 million of
Federal funds sold plus reserve balances (including pass-through
reserve balances), and it has a total daily average balance of $200
million of deposits from commercial banks and other depository
institutions and Federal funds purchased, it can deduct $200 million
from its assessment base. Federal funds purchased and sold on an agency
basis would not be included in these calculations as they are not
reported on the balance sheet of a banker's bank.
The proposed assessment base adjustment applicable to a banker's
bank would only be available to an institution that conducts 50 percent
or more of its business with non-affiliated entities (as defined under
the Bank Holding Company Act or the Home Owners' Loan Act). Providing a
benefit to a banker's bank that primarily serves affiliated companies
would undermine the intent of the proposed benefit by providing a way
for banks to reduce deposit insurance assessments simply by
establishing a subsidiary for that purpose.
Defining Custodial Bank
The Dodd-Frank Act instructed the FDIC to consider whether certain
assets should be deducted from the assessment base of custodial banks.
However, the Act left it to the FDIC to define custodial banks ``based
on factors including the percentage of total revenues generated by
custodial businesses and the level of assets under custody.'' To
identify custodial banks for deposit insurance purposes, the FDIC
focused on the custody and safekeeping accounts reported in the
fiduciary and related assets section of the Call Report and TFR, along
with the revenues associated with these activities. The FDIC determined
that, although fiduciary accounts have an aspect of custodial activity
associated with them, this activity is incidental to the fiduciary
business and represents a small fraction of the income realized from
these accounts. For this reason, the FDIC decided to focus on those
assets held principally in custody and safekeeping accounts.
The FDIC identified 878 IDIs that reported some custody and
safekeeping accounts on their Call Reports or TFRs as of December
2009.\6\ Of this number, only 6 IDIs reported that the income they
derived from these accounts exceeded 50 percent of their total revenue
(interest income plus non-interest income), and only 16 IDIs reported
that the percentage of custody and safekeeping income exceeded 10
percent of their total revenue. When examining the volume of assets
held in custody and safekeeping accounts by each IDI, the FDIC found
that 21 IDIs held more than $50 billion in assets in these accounts.
The top 4 among these institutions held more than $5 trillion dollars
each in these accounts. Given the nature of custody and safekeeping
activity--characterized by economies of scale--the industry is
dominated by large institutions.
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\6\ IDIs with less than $250 million in fiduciary assets in the
preceding year or with gross fiduciary income of less than 10
percent of the preceding year's revenue report their trust
activities only on the December call report or TFR.
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The FDIC proposes that, to be classified as a custodial bank for
deposit insurance assessment purposes, an IDI must have a significant
amount of custody and safekeeping activity. Therefore, the FDIC
proposes to identify custodial banks as those IDIs with previous
calendar year-end custody and safekeeping assets of at least $50
billion or those IDIs that derived more than 50 percent of their
revenue from custody and safekeeping activities over the previous
calendar year. Using this definition, the FDIC estimates that 23 IDIs
would have qualified as custodial banks for deposit insurance purposes
as of December 31, 2009.
Custodial Bank Adjustment
The FDIC believes that an adjustment to the assessment base of a
custodial bank should be made in recognition of the bank's need to hold
liquid assets to facilitate the payments and processing function
associated with its custody and safekeeping accounts. The proposed
deduction, however, would be limited to the daily average amount of
deposits on the custodial bank's balance sheet that can be directly
linked to the servicing of a custody and safekeeping account.
The proposed rule states that the assessment base adjustment for
custodial banks should be the daily average amount of highly liquid,
short-term assets, subject to the limitation that the daily average
value of these assets cannot exceed the daily average value of those
deposits identified by the institution as being held in a custody and
safekeeping account. Highly liquid, short-term assets would be defined
as those assets with a Basel risk weighting of 20 percent or less and
whose stated maturity date is 30 days or less.
IV. Assessment Rate Adjustments
In March 2009, the FDIC issued a final rule incorporating three
adjustments into the risk-based pricing system.\7\ These adjustments,
the unsecured debt adjustment, the secured liability adjustment, and
the brokered deposit adjustment, were added to better account for risk
among insured institutions based on their funding
[[Page 72586]]
sources. In light of the changes to the deposit insurance assessment
base resulting from the Dodd-Frank Act, the FDIC decided to revisit the
rationale and operation of these adjustments.
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\7\ 74 FR 9525.
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Unsecured Debt Adjustment
All other things equal, greater amounts of long-term unsecured debt
can reduce the FDIC's loss in the event of a failure, thus reducing the
risk to the DIF.\8\ Under the current assessment system an IDI's
assessment rate can be reduced through the unsecured debt adjustment,
which is based on the amount of long-term, unsecured liabilities the
IDI issues. The amount of the adjustment equals 40 basis points for
each dollar of long-term unsecured debt, effectively lowering the cost
of issuing an additional dollar of such debt by 40 basis points (unless
the issuing IDI has reached the 5 basis point cap on the adjustment).
The amount of the reduction in the assessment rate due to the
adjustment is equal to the amount of long-term unsecured liabilities
times 40 basis points divided by the amount of domestic deposits. The
cap on the deduction is 5 basis points.
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\8\ Holders of unsecured claims, including subordinated debt,
receive distributions from the receivership estate only if all
secured claims, administrative claims and deposit claims have been
paid in full. Consequently, greater amounts of long-term unsecured
debt provide a cushion that can reduce the cost to the DIF in the
event of failure.
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Unless the unsecured debt adjustment is revised, the cost of
issuing long-term unsecured liabilities will rise (as will the cost of
funding for all other liabilities except, in most cases, domestic
deposits) as there will no longer be a distinction, in terms of the
cost of deposit insurance, among the types of liabilities funding the
new assessment base. The FDIC is concerned that this will reduce the
incentive for IDIs to issue long-term unsecured debt.
The FDIC therefore proposes to revise the unsecured debt adjustment
to ensure that IDIs continue to have the same incentive to issue more
long-term unsecured debt than they otherwise would. The FDIC proposes
that the amount of the unsecured debt adjustment be increased to 40
basis points plus the IBAR for every dollar of long-term unsecured debt
issued so that the relative cost of issuing long-term unsecured debt
will not rise with the implementation of the new assessment base. The
amount of the reduction in the assessment rate due to the adjustment
would thus be equal to the amount of long-term unsecured liabilities
times the sum of 40 basis points and the IBAR divided by the amount of
the new assessment base. In other words, the FDIC proposes to modify
the unsecured debt adjustment according to the following formula:
UDA = (Long-term unsecured liabilities/New assessment base) * (40 basis
points + IBAR)
Thus, if an institution with a $10 billion assessment base issued
$100 million in long-term unsecured liabilities and had an IBAR of 20
basis points, its unsecured debt adjustment would be 0.6 basis points,
which would result in a decrease in the institution's assessment of
$600,000.
The FDIC also proposes that the cap on the unsecured debt
adjustment be changed from the current 5 basis points to the lesser of
5 basis points or 50 percent of the institution's IBAR. This cap would
apply to the new assessment base. This change would not only allow the
maximum dollar amount of the unsecured debt adjustment to increase
because the assessment base is larger, but also would ensure that the
assessment rate after the adjustment is applied does not fall to zero.
The formula for the new cap would be the lesser of the following:
UDA Cap = 5 basis points
or,
UDA Cap = 0.5 * IBAR,
Further, the FDIC proposes altering the definition of what is
included in long-term, unsecured liabilities. Under the current
assessment system, the unsecured debt adjustment includes certain
amounts of Tier 1 capital (Qualified Tier 1 capital) for IDIs with less
than $10 billion in assets. Since the new assessment base excludes Tier
1 capital, defining long-term, unsecured liabilities to include
Qualified Tier 1 capital would have the effect of providing a double
deduction for this capital.\9\ The FDIC therefore proposes to eliminate
Tier 1 capital from the definition of unsecured debt.
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\9\ Capital, including Qualified Tier 1 capital, also enters the
risk-based assessment system through the pricing model.
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Depository Institution Debt Adjustment
Although issuance of unsecured debt by an IDI lessens the potential
loss to the DIF in the event of an IDI's failure, when this debt is
held by other IDIs, the overall risk to the DIF is not reduced. For
this reason, the FDIC is proposing to increase the assessment rate of
an IDI that holds this debt. The FDIC considered reducing the benefit
to IDIs when their long-term unsecured debt is held by other IDIs, but
debt issuers do not track which entities hold their debt. The proposal
would apply a 50 basis point adjustment to every dollar of long-term
unsecured debt held by an IDI when that debt is issued by another
IDI.\10\ This adjustment would be known as the depository institution
debt adjustment (DIDA). Specifically, the adjustment would be
determined according to the following formula:
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\10\ The FDIC recognizes that the amount of assessment revenue
collected using this method will not exactly offset the amount of
assessment revenue foregone by providing a benefit to those IDIs
that issue long-term unsecured debt.
DIDA = (Long-term unsecured debt issued by another IDI/New assessment
base) * 50 basis points
Secured Liability Adjustment
The FDIC proposes to discontinue the secured liability adjustment
with the implementation of the new assessment base. In arguing for the
secured liability adjustment the FDIC stated that, ``[t]he exclusion of
secured liabilities can lead to inequity. An institution with secured
liabilities in place of another's deposits pays a smaller deposit
insurance assessment, even if both pose the same risk of failure and
would cause the same losses to the FDIC in the event of failure.'' With
the change in the assessment base, the relative cost advantage of
funding with secured liabilities (due to assessing domestic deposits,
but not secured liabilities) will disappear, thus eliminating the
differential that led to the adjustment.
Brokered Deposit Adjustment
The brokered deposit adjustment compensates the DIF for the risk an
IDI poses when it relies heavily on brokered deposits for funding. The
brokered deposit adjustment applies to institutions in risk categories
II, III, and IV when their ratio of brokered deposits to domestic
deposits exceeds 10 percent. The present adjustment imposes a 25 basis
point charge multiplied by the ratio of brokered deposits to domestic
deposits for brokered deposits in excess of 10 percent of domestic
deposits and has a cap of 10 basis points.
The FDIC proposes to retain the current adjustment for brokered
deposits, but to scale the adjustment to the new assessment base by the
IDI's ratio of domestic deposits to the new assessment base. The new
formula for brokered deposits would become:
BDA = ((Brokered deposits-(Domestic deposits * 10%))/New assessment
base) * 25 basis points
The FDIC proposes to maintain the cap at 10 basis points. The FDIC
recognizes that, because the assessment base is larger, keeping the cap
rate constant could result in an increase in
[[Page 72587]]
the amount an IDI is assessed since the cap will not be reached as
quickly. However, the FDIC remains concerned that significant reliance
on brokered deposits tends to increase an institution's risk profile,
particularly as its financial condition weakens.
This proposal is being made simultaneously with the proposal to
change the assessment system for large institutions, which proposes to
eliminate risk categories for these institutions. The FDIC, therefore,
is proposing to amend the brokered deposit adjustment to apply to all
large institutions.\11\ For small institutions, the adjustment, as
modified above, would continue to apply only to those in risk
categories II, III, and IV. Small risk category I institutions would
continue to be excluded; brokered deposits remain, however, a factor in
the financial ratios method used to determine the IBAR for small risk
category I institutions experiencing high growth rates.
---------------------------------------------------------------------------
\11\ The definition of brokered deposits for all institutions,
which includes reciprocal deposits, would not change.
---------------------------------------------------------------------------
V. Assessment Rate Schedule
The FDIC believes that the change to a new, expanded assessment
base should not result in a change in the overall amount of assessment
revenue projected to be collected under the Restoration Plan adopted by
the Board on October 19, 2010.\12\ To accomplish this, this NPR
proposes to change the current assessment rate schedule such that the
new proposed assessment rate schedule will result in the collection of
assessment revenue that is approximately revenue neutral.\13\
---------------------------------------------------------------------------
\12\ 75 FR 66293.
\13\ Specifically, the FDIC has attempted to determine a rate
schedule that would have generated approximately the same revenue as
that generated under the current rate schedule in the second quarter
of 2010 under the current assessment base.
---------------------------------------------------------------------------
Because the new assessment base under the Dodd-Frank Act is larger
than the current assessment base, the assessment rates proposed below
are lower than current rates. While the range of proposed initial base
assessment rates is narrower than the current range, the difference in
revenue between the maximum and minimum IBARs would be approximately
the same because of the difference in assessment bases.
The rate schedule proposed below includes a column for institutions
with at least $10 billion in total assets. This new column represents
the assessment rates that would be applied to institutions of this size
pursuant to the changes being proposed in the NPR on the large
institution assessment system, which is being published concurrently
with this proposal. The range of proposed total base assessment rates
is the same for all sizes of institutions (2.5 basis points to 45 basis
points); however, institutions with at least $10 billion in total
assets would not be assigned to risk categories. The rate schedule,
however, does not include the proposed depository institution debt
adjustment.
Base Rate Schedule
Effective April 1, 2011, the FDIC proposes to set initial and total
base assessment rates for IDIs as described in Table 3 below.
Table 3--Proposed Initial and Total Base Assessment Rates *
----------------------------------------------------------------------------------------------------------------
Large and
Risk Category Risk Category Risk Category Risk Category highly
I II III IV complex
institutions
----------------------------------------------------------------------------------------------------------------
Initial base assessment rate.... 5-9 14 23 35 5-35
Unsecured debt adjustment **.... (4.5)-0 (5)-0 (5)-0 (5)-0 (5)-0
Brokered deposit adjustment..... .............. 0-10 0-10 0-10 0-10
-------------------------------------------------------------------------------
Total Base Assessment Rate.. 2.5-9 9-24 18-33 30-45 2.5-45
----------------------------------------------------------------------------------------------------------------
* Total base assessment rates do not include the proposed depository institution debt adjustment.
** The unsecured debt adjustment could not exceed the lesser of 5 basis points or 50 percent of an IDI's initial
base assessment rate; thus for example, an IDI with an IBAR of 5 basis points would have a maximum unsecured
debt adjustment of 2.5 basis points and could not have a total base assessment rate lower than 2.5 basis
points.
Ability To Adjust Rates
The proposed rule would retain the FDIC Board's flexibility to
adopt actual rates that are higher or lower than total base assessment
rates without the necessity of further notice-and-comment rulemaking,
provided that: (1) The Board could not increase or decrease rates from
one quarter to the next by more than 3 basis points; and (2) cumulative
increases and decreases cannot be more than 3 basis points higher or
lower than the total base assessment rates. Retention of this
flexibility would enable the Board to act in a timely manner to fulfill
its mandate to raise the reserve ratio in accordance with the
Restoration Plan, particularly in light of the increased uncertainty
about expected revenue resulting from the change in the assessment
base.
Conforming Changes to the Proposed Future Assessment Rates as Set Forth
in the Notice of Proposed Rulemaking on Assessment Dividends,
Assessment Rates and Designated Reserve Ratio
The October NPR (on dividends, assessment rates and the DRR), which
was issued by the Board in October 2010, proposes rate decreases, in
lieu of dividends, when the reserve ratio meets certain targets. As
stated in that NPR, when the reserve ratio reaches 1.15 percent, the
FDIC believes that it would be appropriate to lower assessment rates so
that the average assessment rate would approximately equal the long-
term moderate, steady assessment rate--approximately 8.5 basis points
(as measured using the current assessment base, which is approximated
by domestic deposits).\14\ As discussed in the October NPR, this
assessment rate represents the weighted average assessment rate that
would have been needed to maintain a positive fund balance throughout
past crises.
---------------------------------------------------------------------------
\14\ Using June 30, 2010 data, 8.5 basis points of the current,
domestic deposit-based assessment base would equal approximately 5.4
basis points of the proposed assessment base.
---------------------------------------------------------------------------
The FDIC proposed in the October NPR a schedule of assessment rates
that would take effect when the fund reserve ratio first meets or
exceeds 1.15 percent. Pursuant to the FDIC's analysis, this schedule
would produce a weighted average assessment rate of the steady
assessment rate identified above of 8.5 basis points (that is, the
long-term rate
[[Page 72588]]
needed to keep the DIF positive). That proposed schedule would take
effect beginning in the next quarter after the reserve ratio reaches
1.15 percent without the necessity of further action by the FDIC's
Board. The rates would remain in effect unless the reserve ratio
equaled or exceeded 2 percent. The FDIC's Board would retain its
current authority to uniformly adjust the total base rate assessment
schedule up or down by up to 3 basis points without further rulemaking.
In light of the current rulemaking, the FDIC under its authority to
set assessments is proposing revisions to those proposed rates
commensurate with the changes in the assessment base. The proposed rate
schedules are intended to be revenue neutral in that they anticipate
collecting approximately the same amount of assessment revenue over the
same period as the rate schedules presented in the October
NPR.15 16
---------------------------------------------------------------------------
\15\ As of June 30, 2010, the proposed assessment rates in
Tables 4, 5 and 6 below applied against the proposed assessment base
would have produced relative diminutions in assessment revenue
almost identical to the revenue estimated to be produced by the
rates in the corresponding Tables 3, 4 and 5 of the October NPR.
\16\ In setting assessment rates, the FDIC's Board of Directors
is required by statute to consider the following factors:
(i) The estimated operating expenses of the Deposit Insurance
Fund.
(ii) The estimated case resolution expenses and income of the
Deposit Insurance Fund.
(iii) The projected effects of the payment of assessments on the
capital and earnings of insured depository institutions.
(iv) The risk factors and other factors taken into account
pursuant to section 7(b)(1) of the Federal Deposit Insurance Act (12
U.S.C Section 1817(b)(1)) under the risk-based assessment system,
including the requirement under section 7(b)(1)(A) of the Federal
Deposit Insurance Act (12 U.S.C 1817(b)(1)(A)) to maintain a risk-
based system.
(v) Other factors the Board of Directors has determined to be
appropriate.
Section 7(b)(2) of the Federal Deposit Insurance Act, 12 U.S.C.
1817(b)(2)(B). The risk factors referred to in factor (iv) include:
(i) The probability that the Deposit Insurance Fund will incur a
loss with respect to the institution, taking into consideration the
risks attributable to--
(I) different categories and concentrations of assets;
(II) different categories and concentrations of liabilities,
both insured and uninsured, contingent and noncontingent; and
(III) any other factors the Corporation determines are relevant
to assessing such probability;
(ii) the likely amount of any such loss; and
(iii) the revenue needs of the Deposit Insurance Fund.
Section 7(b)(1)(C) of the Federal Deposit Insurance Act (12
U.S.C. 1817(b)(1)(C)).
As set forth in a memorandum to the FDIC's Board of Directors
dated October 14, 2010 proposing that the Board adopt a new
Restoration Plan and authorize publication of the NPR on Dividends,
Assessment Rates and the DRR, and in that NPR itself, the Board
considered these factors.
---------------------------------------------------------------------------
Proposed Rate Schedule Once the Reserve Ratio Reaches 1.15 Percent
Once the reserve ratio reaches 1.15 percent, the October NPR
proposed to lower assessment rates so that the average assessment rate
would approximately equal the long-term moderate, steady assessment
rate discussed above. The table presented below supersedes the table
presented in that NPR, and sets forth the following rate schedule that
would be applied to the assessment base proposed above:
Table 4--(Superseding Table 3 of the October NPR) Initial and Total Base Assessment Rates *
[Effective for the quarter beginning immediately after the quarter in which the reserve ratio meets or exceeds
1.15 percent]
----------------------------------------------------------------------------------------------------------------
Large and
Risk Category Risk Category Risk Category Risk Category highly
I II III IV complex
institutions
----------------------------------------------------------------------------------------------------------------
Initial base assessment rate.... 3-7 12 19 30 3-30
Unsecured debt adjustment **.... (3.5)-0 (5)-0 (5)-0 (5)-0 (5)-0
Brokered deposit adjustment..... .............. 0-10 0-10 0-10 0-10
-------------------------------------------------------------------------------
Total Base Assessment Rate.. 1.5-7 7-22 14-29 29-40 1.5-40
----------------------------------------------------------------------------------------------------------------
* Total base assessment rates do not include the proposed depository institution debt adjustment.
** The unsecured debt adjustment could not exceed the lesser of 5 basis points or 50 percent of an IDI's initial
assessment rate; thus, for example, an IDI with an initial base assessment rate of 3 basis points would have a
maximum unsecured debt adjustment of 1.5 basis points and could not have a total base assessment rate lower
than 1.5 basis points.
Proposed Rate Schedule Once the Reserve Ratio Reaches 2.0 Percent
The October NPR also proposed rates that would come into effect
without further action by the FDIC Board when the fund reserve ratio at
the end of the prior quarter meets or exceeds 2 percent, but is less
than 2.5 percent.\17\ Again, the FDIC proposes to supersede that rate
schedule in line with the changes to the assessment base, assessment
rates, and adjustments proposed in this NPR according to the following
table:
---------------------------------------------------------------------------
\17\ The NPR proposes that new institutions would remain subject
to the assessment schedule proposed in Table 5 once the reserve
ratio reaches 1.15 percent.
Table 5--(Superseding Table 4 of the October NPR) Initial and Total Base Assessment Rates *
[Effective for any quarter when the reserve ratio for the prior quarter meets or exceeds 2 percent (but is less
than 2.5 percent)]
----------------------------------------------------------------------------------------------------------------
Large and
Risk Category Risk Category Risk Category Risk Category highly
I II III IV complex
institutions
----------------------------------------------------------------------------------------------------------------
Initial base assessment rate.... 2-6 10 17 28 2-28
Unsecured debt adjustment **.... (3)-0 (5)-0 (5)-0 (5)-0 (5)-0
Brokered deposit adjustment..... .............. 0-10 0-10 0-10 0-10
-------------------------------------------------------------------------------
Total Base Assessment Rate.. 1-6 5-20 12-27 23-38 1-38
----------------------------------------------------------------------------------------------------------------
* Total base assessment rates do not include the proposed depository institution debt adjustment.
[[Page 72589]]
** The unsecured debt adjustment could not exceed the lesser of 5 basis points or 50 percent of an IDI's initial
assessment rate; thus, for example, an IDI with an initial assessment rate of 2 basis points would have a
maximum unsecured debt adjustment of 1 basis point and could not have a total base assessment rate lower than
1 basis point.
Proposed Rate Schedule once the Reserve Ratio Reaches 2.5 Percent
Finally, the October NPR proposed rates that would come into effect
without further action by the FDIC Board when the fund reserve ratio at
the end of the prior quarter meets or exceeds 2.5 percent.\18\ As with
the other proposed rate schedules, the FDIC proposes to supersede that
rate schedule in line with the changes to the assessment base,
assessment rates, and adjustments proposed in this NPR according to the
following table:
---------------------------------------------------------------------------
\18\ See footnote 18 for the assessment rate schedule applicable
to new institutions.
Table 6--(Amending Table 4 of the October NPR) Initial and Total Base Assessment Rates *
[Effective for any quarter when the reserve ratio for the prior quarter meets or exceeds 2.5 percent]
----------------------------------------------------------------------------------------------------------------
Large and
Risk category Risk category Risk category Risk category highly
I II III IV complex
institutions
----------------------------------------------------------------------------------------------------------------
Initial base assessment rate.... 1-5 9 15 25 1-25
Unsecured debt adjustment **.... (2.5)-0 (4.5)-0 (5)-0 (5)-0 (5)-0
Brokered deposit adjustment..... .............. 0-10 0-10 0-10 0-10
-------------------------------------------------------------------------------
Total Base Assessment Rate.. 0.5-5 4.5-19 10-25 20-35 0.5-35
----------------------------------------------------------------------------------------------------------------
* Total base assessment rates do not include the proposed depository institution debt adjustment.
** The unsecured debt adjustment could not exceed the lesser of 5 basis points or 50 percent of an IDI's initial
assessment rate; thus, for example, an IDI with an initial assessment rate of 1 basis point would have a
maximum unsecured debt adjustment of 0.5 basis points and could not have a total base assessment rate lower
than 0.5 basis points.
Capital and Earnings Analysis
The proposed assessment rates in Table 3 change the current
assessment rate schedule such that the new proposed assessment rate
schedule applied against the proposed assessment base would result in
the collection of assessment revenue that is approximately revenue
neutral. Thus, overall, the proposed rates and proposed assessment base
should have no effect on the capital and earnings of the banking
industry, although the proposed rates would affect the earnings and
capital of individual institutions. The great majority of institutions
of all sizes would pay assessments at least 5 percent lower than
currently and would thus have higher earnings and capital. However,
about 36 percent of large institutions (those with greater than $10
billion in assets) would pay assessments at least 5 percent higher than
currently.
The remaining proposed rate schedules would take effect when the
reserve ratio reaches 1.15 percent, 2 percent and 2.5 percent. In the
October NPR, the FDIC analyzed the effect of the rate schedules
contained in that NPR on the capital and earnings of IDIs.\19\ The rate
schedules contained in the current NPR are intended to produce
approximately the same revenue as the rate schedules in the NPR on
dividends, assessment rates and the DRR. Consequently, the analysis of
the effect of the rate schedules on capital and earnings contained in
that NPR is essentially applicable to the current NPR.
---------------------------------------------------------------------------
\19\ As noted in an earlier footnote, in setting assessment
rates, the FDIC's Board of Directors is authorized to set
assessments for IDIs in such amounts as the Board of Directors may
determine to be necessary. 12 U.S.C. 1817(b)(2)(A). In so doing, the
Board must consider certain statutorily defined factors. 12 U.S.C.
1817(b)(2)(B). As reflected in the text, the FDIC has taken into
account all of these statutory factors.
---------------------------------------------------------------------------
In the October NPR, the FDIC stated that it anticipated that when
the reserve ratio exceeds 1.15 percent, and particularly when it
exceeds 2 or 2.5 percent, the industry is likely to be prosperous.
Consequently, the FDIC examined the effect of the proposed lower rates
on the industry at the end of 2006, when the industry was prosperous.
Under that scenario, reducing assessment rates as proposed when the
reserve ratio reaches 1.15 percent would have increased average after-
tax income by 1.25 percent and average capital by 0.14 percent.
Reducing assessment rates as proposed when the reserve ratio reaches
1.15 percent to the proposed rate schedule when the reserve ratio
reaches 2 percent would have increased average after-tax income by 0.62
percent and average capital by 0.07 percent. Similarly, reducing
assessment rates as proposed when the reserve ratio reaches 2 percent
to the proposed rate schedule when the reserve ratio reaches 2.5
percent would have increased average after-tax income by 0.61 percent
and average capital by 0.07 percent.
Effective Date
Except as specifically noted above, the rate schedule and the other
revisions to the assessment rules would take effect for the quarter
beginning April 1, 2011, and would be reflected in the invoices for
assessments due September 30, 2011. The FDIC has considered the
possibility of making the application of the new assessment base, the
revised assessment rates, and the changes to the assessment rate
adjustments retroactive to passage of the Dodd-Frank Act. However, as
this NPR details, implementation of the Act requires that a number of
changes be made to the Call Report and TFR that render such
consideration operationally infeasible. Additionally, retroactively
applying such changes would introduce significant legal complexity and
introduce unacceptable levels of litigation risk. The FDIC is committed
to implementing the Dodd-Frank Act in the most expeditious manner
possible and is contemporaneously pursuing changes to the Call Report
and TFR that would be necessary if this NPR is adopted. The proposed
effective date is contingent upon these changes being made and if there
is a delay in changing the Call Report and TFR that would delay the
effective date of this proposed rulemaking.
VI. Request for Comments
The FDIC seeks comment on every aspect of this proposed rulemaking.
In particular, the FDIC seeks comment on
[[Page 72590]]
the issues set out below. The FDIC asks that commenters include the
reasons for their positions.
1. Please identify any operational issues with the new assessment
base definition that would argue for delaying the proposed rule until
changes can be made to bank reporting systems.
2. The proposed rule uses the accounting definition for total
assets found on Line 9 of Schedule RC-K of the Call Report except that
all institutions must report the average of the balances as of the
close of business for each day during the calendar quarter. Is this
definition the best definition of total assets to use for the
assessment base? If not, how should the valuation of assets be handled?
Is reporting the average of the balances as of the close of business
for each day during the calendar quarter unduly burdensome for all or
some institutions? Should all or some institutions be allowed to report
the average of the balances as of the close of business for one day
each week during the calendar quarter, as currently allowed under
Schedule RC-K?
3. Is the proposed definition of average tangible equity
appropriate? Should some other definition be used? Is reporting the
average of tangible equity as of the end of each month in the calendar
quarterly unduly burdensome? Is the exception to this requirement for
small institutions appropriate?
4. Is the proposed adjustment to the assessment base for banker's
banks appropriate?
5. Is the proposed definition of custodial bank appropriate? Is the
proposed adjustment to the assessment base appropriate?
6. The proposal alters the unsecured debt adjustment, making it
larger for IDIs that present greater risk to the DIF. Is this an
appropriate way to encourage riskier IDIs to alter their funding
structure so that they present less risk to the DIF?
7. Are the modifications to the current unsecured debt adjustment
reasonable in light of the objective of continuing to encourage
institutions to issue this type of debt?
8. Would it be possible to increase the assessment rate to account
for the long-term unsecured debt issued by IDIs that is held by other
IDIs in another way? Is the size of the depository institution debt
adjustment reasonable and appropriate to meet the policy goal?
9. Should the FDIC consider incorporating an adjustment that would
take into consideration the risk posed to the DIF for institutions that
have director and officer liability policies containing regulatory
exclusions?
10. Are the new rates appropriate given the changes to the
assessment base?
11. Is the proposed effective date for the changes to the
assessment system too soon for IDIs to adjust their reporting systems
to the proposed reporting requirements?
VII. Regulatory Analysis and Procedure
A. Solicitation of Comments on Use of Plain Language
Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, 113
Stat. 1338, 1471 (Nov. 12, 1999), requires the Federal banking agencies
to use plain language in all proposed and final rules published after
January 1, 2000. The FDIC invites your comments on how to make this
proposal easier to understand. For example:
Has the FDIC organized the material to suit your needs? If
not, how could this material be better organized?
Are the requirements in the proposed regulation clearly
stated? If not, how could the regulation be more clearly stated?
Does the proposed regulation contain language or jargon
that is not clear? If so, which language requires clarification?
Would a different format (grouping and order of sections,
use of headings, paragraphing) make the regulation easier to
understand? If so, what changes to the format would make the regulation
easier to understand?
What else could the FDIC do to make the regulation easier
to understand?
B. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) requires that each Federal
agency either certify that a proposed rule would not, if adopted in
final form, have a significant economic impact on a substantial number
of small entities or prepare an initial regulatory flexibility analysis
of the rule and publish the analysis for comment.\20\ Certain types of
rules, such as rules of particular applicability relating to rates or
corporate or financial structures, or practices relating to such rates
or structures, are expressly excluded from the definition of ``rule''
for purposes of the RFA.\21\ However, the FDIC is voluntarily
undertaking a regulatory flexibility analysis to aid the public in
commenting on the effect of the proposed rule on small institutions.
---------------------------------------------------------------------------
\20\ See 5 U.S.C. 603, 604, 605.
\21\ See 5 U.S.C. 601.
---------------------------------------------------------------------------
As of June 30, 2010, of the 7,839 insured commercial banks and
savings associations, there were 4,299 small insured depository
institutions as that term is defined for purposes of the RFA (i.e.,
institutions with $175 million or less in total assets). The proposed
rule would adopt the Dodd-Frank definition of assessment base and alter
assessment rates and the adjustments to those rates at the same time
that the new assessment base takes effect. Under this part of the
proposal, 94 percent of small institutions would be subject to lower
assessments. In effect, the proposed rule would decrease small
institution assessments by an average of $7,675 per quarter and would
alter the present distribution of assessments by reducing the
percentage of the assessments borne by small institutions. As of June
30, 2010, small institutions, as that term is defined for purposes of
the RFA, actually accounted for 3.7 percent of total assessments. Also
as of that date, but applying the proposed assessment rates against the
proposed assessment base, small institutions would have accounted for
2.6 percent of the total cost of insurance assessments.
Other parts of the proposed rule would progressively lower
assessment rates when the reserve ratio reaches 1.15 percent, 2 percent
and 2.5 percent. Pursuant to section 605(b) of the RFA, the FDIC
certifies that the proposed rule would not have a significant economic
effect on small entities unless and until the DIF reserve ratio exceeds
specific thresholds of 1.15, 1.5, 2, and 2.5 percent. The reserve ratio
is unlikely to reach these levels for many years. When it does, the
overall effect of the proposed rule will be positive for entities of
all sizes. All entities, including small entities, will receive a net
benefit as a result of lower assessments paid. The rate reductions in
the proposed rule should not alter the distribution of the assessment
burden between small entities and all others. It is difficult to
realistically quantify the benefit at the present time. However, the
initial magnitude of the benefit (when the reserve ratio reaches 1.15
percent) is likely to be less than a 2 percent increase in after-tax
income and less than a 20 basis point increase in capital.
VIII. Paperwork Reduction Act
No collections of information pursuant to the Paperwork Reduction
Act (44 U.S.C. 3501 et seq.) are contained in the proposed rule.
[[Page 72591]]
A. The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families
The FDIC has determined that the proposed rule will not affect
family well-being within the meaning of section 654 of the Treasury and
General Government Appropriations Act, enacted as part of the Omnibus
Consolidated and Emergency Supplemental Appropriations Act of 1999
(Pub. L. 105-277, 112 Stat. 2681).
List of Subjects in 12 CFR Part 327
Bank deposit insurance, Banks, Banking, Savings associations.
For the reasons set forth in the preamble the FDIC proposes to
amend chapter III of title 12 of the Code of Federal Regulations as
follows:
PART 327--ASSESSMENTS
1. The authority citation for part 327 is revised to read as
follows:
Authority: 12 U.S.C. 1441, 1813, 1815, 1817-19, 1821.
2. Amend Sec. 327.4 by revising paragraphs (c) and (f) to read as
follows:
Sec. 327.4 Assessment rates.
* * * * *
(c) Requests for review. An institution that believes any
assessment risk assignment provided by the Corporation pursuant to
paragraph (a) of this section is incorrect and seeks to change it must
submit a written request for review of that risk assignment. An
institution cannot request review through this process of the CAMELS
ratings assigned by its primary Federal regulator or challenge the
appropriateness of any such rating; each Federal regulator has
established procedures for that purpose. An institution may also
request review of a determination by the FDIC to assess the institution
as a large, highly complex, or a small institution (Sec. 327.9(d)(9))
or a determination by the FDIC that the institution is a new
institution (Sec. 327.9(d)(10)). Any request for review must be
submitted within 90 days from the date the assessment risk assignment
being challenged pursuant to paragraph (a) of this section appears on
the institution's quarterly certified statement invoice. The request
shall be submitted to the Corporation's Director of the Division of
Insurance and Research in Washington, DC, and shall include
documentation sufficient to support the change sought by the
institution. If additional information is requested by the Corporation,
such information shall be provided by the institution within 21 days of
the date of the request for additional information. Any institution
submitting a timely request for review will receive written notice from
the Corporation regarding the outcome of its request. Upon completion
of a review, the Director of the Division of Insurance and Research (or
designee) or the Director of the Division of Supervision and Consumer
Protection (or designee) or any successor divisions, as appropriate,
shall promptly notify the institution in writing of his or her
determination of whether a change is warranted. If the institution
requesting review disagrees with that determination, it may appeal to
the FDIC's Assessment Appeals Committee. Notice of the procedures
applicable to appeals will be included with the written determination.
* * * * *
(f) Effective date for changes to risk assignment. Changes to an
insured institution's risk assignment resulting from a supervisory
ratings change become effective as of the date of written notification
to the institution by its primary Federal regulator or state authority
of its supervisory rating (even when the CAMELS component ratings have
not been disclosed to the institution), if the FDIC, after taking into
account other information that could affect the rating, agrees with the
rating. If the FDIC does not agree, the FDIC will notify the
institution of the FDIC's supervisory rating; resulting changes to an
insured institution's risk assignment become effective as of the date
of written notification to the institution by the FDIC.
* * * * *
3. Revise Sec. 327.5 to read as follows:
Sec. 327.5 Assessment base.
(a) Assessment base for all insured depository institutions. Except
as provided in paragraphs (b), (c), and (d) of this section, the
assessment base for an insured depository institution shall equal the
average consolidated total assets of the insured depository institution
during the assessment period minus the average tangible equity of the
insured depository institution during the assessment period.
(1) Average consolidated total assets defined and calculated.
Average consolidated total assets is defined in the schedule of
quarterly averages in the Consolidated Reports of Condition and Income,
using a daily averaging method. The amounts to be reported as daily
averages are the sum of the gross amounts of consolidated total assets
for each calendar day during the quarter divided by the number of
calendar days in the quarter. For days that an office of the reporting
institution (or any of its subsidiaries or branches) is closed (e.g.,
Saturdays, Sundays, or holidays), the amounts outstanding from the
previous business day would be used. An office is considered closed if
there are no transactions posted to the general ledger as of that date.
For institutions that begin operating during the calendar quarter, the
amounts to be reported as daily averages are the sum of the gross
amounts of consolidated total assets for each calendar day the
institution was operating during the quarter divided by the number of
calendar days the institution was operating during the quarter.
(2) Average tangible equity defined and calculated. Tangible equity
is defined in the schedule of regulatory capital as Tier 1 capital. The
definition of Tier 1 capital is to be determined pursuant to the
definition the Report of Condition or Thrift Financial Report (or any
successor reports) instructions as of the assessment period for which
the assessment is being calculated.
(i) Calculation of average tangible equity. Except as provided in
paragraph (a)(2)(ii) of this section, average tangible equity shall be
calculated using monthly averaging. Monthly averaging means the average
of the three month-end balances within the quarter.
(ii) Alternate calculation of average tangible equity. Institutions
that reported less than $1 billion in quarter-end total consolidated
assets on their March 31, 2011 Reports of Condition or Thrift Financial
Reports may report average tangible equity using an end-of-quarter
balance or may at any time opt permanently to report average tangible
equity using a monthly average balance. An institution that reports
average tangible equity using an end-of-quarter balance and reports
average daily consolidated assets of $1 billion or more for two
consecutive quarters shall permanently report average tangible equity
using monthly averaging starting in the next quarter.
(3) Consolidated subsidiaries.
(i) Data for reporting from consolidated subsidiaries. Insured
depository institutions may use data that are up to 93 days old for
consolidated subsidiaries when reporting daily average consolidated
total assets. Insured depository institutions may use either daily
average asset values for the consolidated subsidiary for the current
quarter or for the prior quarter (that is, data that are up to 93 days
old), but, once chosen, insured depository institutions cannot change
the reporting method from quarter to quarter. Similarly, insured
depository institutions may use data for
[[Page 72592]]
the current quarter or data that are up to 93 days old for consolidated
subsidiaries when reporting tangible equity values. Once chosen,
however, insured depository institutions cannot change the reporting
method from quarter to quarter.
(ii) Reporting for insured depository institutions with
consolidated insured depository subsidiaries. Insured depository
institutions that consolidate other insured depository institutions for
financial reporting purposes shall report daily average consolidated
total assets and tangible equity without consolidating their insured
depository institution subsidiaries into the calculations. Investments
in insured depository institution subsidiaries should be included in
total assets using the equity method of accounting.
(b) Assessment base for banker's banks. (1) Bankers bank defined. A
banker's bank for purposes of calculating deposit insurance assessments
shall meet the definition of banker's bank set forth in 12 U.S.C. 24.
(2) Self-certification. Institutions that meet the requirements of
paragraph (b)(1) of this section shall so certify each quarter on the
Consolidated Reports of Condition and Income or Thrift Financial Report
to that effect.
(3) Assessment base calculation for banker's banks. A banker's bank
shall pay deposit insurance assessments on its assessment base as
calculated in paragraph (a) of this section provided that it conducts
50 percent or more of its business with entities other than its parent
holding company or entities other than those controlled either directly
or indirectly (under the Bank Holding Company Act or Home Owners' Loan
Act) by its parent holding company, the FDIC will exclude from that
assessment base the daily average reserve balances passed through to
the Federal Reserve, the daily average reserve balances held at the
Federal Reserve for its own account, and the daily average amount of
its Federal funds sold, but in no case shall the amount excluded exceed
the sum of the bank's daily average amount of total deposits of
commercial banks and other depository institutions in the United States
and the daily average amount of its Federal funds purchased.
(c) Assessment base for custodial banks. (1) Custodial bank
defined. A custodial bank for purposes of calculating deposit insurance
assessments shall be an insured depository institution with previous
calendar-year custody and safekeeping assets of at least $50 billion or
an insured depository institution that derived more than 50 percent of
its total revenue from custody and safekeeping activities over the
previous calendar year.
(2) Assessment base calculation for custodial banks. A custodial
bank shall pay deposit insurance assessments on its assessment base as
calculated in paragraph (a) of this section, but the FDIC will exclude
from that assessment base the daily average amount of highly liquid,
short-term assets (i.e., assets with a Basel risk weighting of 20
percent or less and a stated maturity date of 30 days or less), subject
to the limitation that the daily average value of these assets cannot
exceed the daily average value of the deposits identified by the
institution as being held in a custody and safekeeping account.
(d) Assessment base for insured branches of foreign banks. Average
consolidated total assets for an insured branch of a foreign bank is
defined as total assets of the branch (including net due from related
depository institutions) in accordance with the schedule of assets and
liabilities in the Report of Assets and Liabilities of U.S. Branches
and Agencies of Foreign Banks as of the assessment period for which the
assessment is being calculated, but measured using the definition for
reporting total assets in the schedule of quarterly averages in the
Consolidated Reports of Condition and Income, and calculated using a
daily averaging method. Tangible equity for an insured branch of a
foreign bank is eligible assets (determined in accordance with Sec.
347.210 of the FDIC's regulations) less the book value of liabilities
(exclusive of liabilities due to the foreign bank's head office, other
branches, agencies, offices, or wholly owned subsidiaries) calculated
on a monthly or end-of-quarter basis.
(e) Newly insured institutions. A newly insured institution shall
pay an assessment for the assessment period during which it became
insured. The FDIC will prorate the newly insured institution's
assessment amount to reflect the number of days it was insured during
the period.
4. Revise Sec. 327.6 to read as follows:
Sec. 327.6 Mergers and consolidations; other terminations of
insurance.
(a) Final quarterly certified invoice for acquired institution. An
institution that is not the resulting or surviving institution in a
merger or consolidation must file a report of condition for every
assessment period prior to the assessment period in which the merger or
consolidation occurs. The surviving or resulting institution shall be
responsible for ensuring that these reports of condition are filed and
shall be liable for any unpaid assessments on the part of the
institution that is not the resulting or surviving institution.
(b) Assessment for quarter in which the merger or consolidation
occurs. For an assessment period in which a merger or consolidation
occurs, total consolidated assets for the surviving or resulting
institution shall include the total consolidated assets of all insured
depository institutions that are parties to the merger or consolidation
as if the merger or consolidation occurred on the first day of the
quarter. Tier 1 capital shall be reported in the same manner.
(c) Other termination. When the insured status of an institution is
terminated, and the deposit liabilities of such institution are not
assumed by another insured depository institution--
(1) Payment of assessments; quarterly certified statement invoices.
The depository institution whose insured status is terminating shall
continue to file and certify its quarterly certified statement invoice
and pay assessments for the assessment period its deposits are insured.
Such institution shall not be required to certify its quarterly
certified statement invoice and pay further assessments after it has
paid in full its deposit liabilities and the assessment to the
Corporation required to be paid for the assessment period in which its
deposit liabilities are paid in full, and after it, under applicable
law, goes out of business or transfers all or substantially all of its
assets and liabilities to other institutions or otherwise ceases to be
obliged to pay subsequent assessments.
(2) Payment of deposits; certification to Corporation. When the
deposit liabilities of the depository institution have been paid in
full, the depository institution shall certify to the Corporation that
the deposit liabilities have been paid in full and give the date of the
final payment. When the depository institution has unclaimed deposits,
the certification shall further state the amount of the unclaimed
deposits and the disposition made of the funds to be held to meet the
claims. For assessment purposes, the following will be considered as
payment of the unclaimed deposits:
(i) The transfer of cash funds in an amount sufficient to pay the
unclaimed and unpaid deposits to the public official authorized by law
to receive the same; or
(ii) If no law provides for the transfer of funds to a public
official, the transfer of cash funds or compensatory assets to an
insured depository institution in an amount sufficient to pay the
unclaimed and unpaid deposits in consideration for the assumption of
the deposit
[[Page 72593]]
obligations by the insured depository institution.
(3) Notice to depositors. (i) The depository institution whose
insured status is terminating shall give sufficient advance notice of
the intended transfer to the owners of the unclaimed deposits to enable
the depositors to obtain their deposits prior to the transfer. The
notice shall be mailed to each depositor and shall be published in a
local newspaper of general circulation. The notice shall advise the
depositors of the liquidation of the depository institution, request
them to call for and accept payment of their deposits, and state the
disposition to be made of their deposits if they fail to promptly claim
the deposits.
(ii) If the unclaimed and unpaid deposits are disposed of as
provided in paragraph (c)(2)(i) of this section, a certified copy of
the public official's receipt issued for the funds shall be furnished
to the Corporation.
(iii) If the unclaimed and unpaid deposits are disposed of as
provided in paragraph (c)(2)(ii) of this section, an affidavit of the
publication and of the mailing of the notice to the depositors,
together with a copy of the notice and a certified copy of the contract
of assumption, shall be furnished to the Corporation.
(4) Notice to Corporation. The depository institution whose insured
status is terminating shall advise the Corporation of the date on which
it goes out of business or transfers all or substantially all of its
assets and liabilities to other institutions or otherwise ceases to be
obligated to pay subsequent assessments and the method whereby the
termination has been effected.
(d) Resumption of insured status before insurance of deposits
ceases. If a depository institution whose insured status has been
terminated is permitted by the Corporation to continue or resume its
status as an insured depository institution before the insurance of its
deposits has ceased, the institution will be deemed, for assessment
purposes, to continue as an insured depository institution and must
thereafter file and certify its quarterly certified statement invoices
and pay assessments as though its insured status had not been
terminated. The procedure for applying for the continuance or
resumption of insured status is set forth in Sec. 303.248 of this
chapter.
5. Amend Sec. 327.8 by:
A. Removing paragraphs (e) and (f);
B. Redesignating paragraphs (g) through (s) as paragraphs (e)
through (q) respectively;
C. Revising newly redesignated paragraphs (e), (f), (g), (k), (l),
(m), (n), (o), and (p);
D. Adding new paragraphs (r), (s), (t), and (u) to read as follows:
Sec. 327.8 Definitions.
* * * * *
(e) Small institution. An insured depository institution with
assets of less than $10 billion as of December 31, 2006, and an insured
branch of a foreign institution shall be classified as a small
institution. If, after December 31, 2006, an institution classified as
large under paragraph (f) of this section (other than an institution
classified as large for purposes of Sec. 327.9(d)(9)) reports assets
of less than $10 billion in its quarterly reports of condition for four
consecutive quarters, the FDIC will reclassify the institution as small
beginning the following quarter.
(f) Large institution. An institution classified as large for
purposes of Sec. 327.9(d)(9) or an insured depository institution with
assets of $10 billion or more as of December 31, 2006 (other than an
insured branch of a foreign bank or a highly complex institution) shall
be classified as a large institution. If, after December 31, 2006, an
institution classified as small under paragraph (e) of this section
reports assets of $10 billion or more in its quarterly reports of
condition for four consecutive quarters, the FDIC will reclassify the
institution as large beginning the following quarter.
(g) Highly complex institution. A highly complex institution is an
insured depository institution (excluding a credit card bank) with
greater than $50 billion in total assets for at least four consecutive
quarters that is controlled by a parent company with more than $500
billion in total assets for four consecutive quarters, or controlled by
one or more intermediate parent companies that are controlled by a
holding company with more than $500 billion in assets for four
consecutive quarters, or a processing bank or trust company that has
had $10 billion or more in total assets for at least four consecutive
quarters. If, after December 31, 2010, an institution classified as
highly complex falls below $50 billion in total assets in its quarterly
reports of condition for four consecutive quarters, or its parent
company or companies fall below $500 billion in total assets for four
consecutive quarters, or a processing bank or trust company falls below
$10 billion in total assets in its quarterly reports of condition for
four consecutive quarters, the FDIC will reclassify the institution
beginning the following quarter.
* * * * *
(k) Established depository institution. An established insured
depository institution is a bank or savings association that has been
federally insured for at least five years as of the last day of any
quarter for which it is being assessed.
(1) Merger or consolidation involving new and established
institution(s). Subject to paragraphs (k)(2), (3), (4), and (5) of this
section and Sec. 327.9(d)(10)(iii), (iv), when an established
institution merges into or consolidates with a new institution, the
resulting institution is a new institution unless:
(i) The assets of the established institution, as reported in its
report of condition for the quarter ending immediately before the
merger, exceeded the assets of the new institution, as reported in its
report of condition for the quarter ending immediately before the
merger; and
(ii) Substantially all of the management of the established
institution continued as management of the resulting or surviving
institution.
(2) Consolidation involving established institutions. When
established institutions consolidate, the resulting institution is an
established institution.
(3) Grandfather exception. If a new institution merges into an
established institution, and the merger agreement was entered into on
or before July 11, 2006, the resulting institution shall be deemed to
be an established institution for purposes of this part.
(4) Subsidiary exception. Subject to paragraph (k)(5) of this
section, a new institution will be considered established if it is a
wholly owned subsidiary of:
(i) A company that is a bank holding company under the Bank Holding
Company Act of 1956 or a savings and loan holding company under the
Home Owners' Loan Act, and:
(A) At least one eligible depository institution (as defined in 12
CFR 303.2(r)) that is owned by the holding company has been chartered
as a bank or savings association for at least five years as of the date
that the otherwise new institution was established; and
(B) The holding company has a composite rating of at least ``2''
for bank holding companies or an above average or ``A'' rating for
savings and loan holding companies and at least 75 percent of its
insured depository institution assets are assets of eligible depository
institutions, as defined in 12 CFR 303.2(r); or
[[Page 72594]]
(ii) An eligible depository institution, as defined in 12 CFR
303.2(r), that has been chartered as a bank or savings association for
at least five years as of the date that the otherwise new institution
was established.
(5) Effect of credit union conversion. In determining whether an
insured depository institution is new or established, the FDIC will
include any period of time that the institution was a federally insured
credit union.
(l) Risk assignment. For all small institutions and insured
branches of foreign banks, risk assignment includes assignment to Risk
Category I, II, III, or IV, and, within Risk Category I, assignment to
an assessment rate or rates. For all large institutions and highly
complex institutions, risk assignment includes assignment to an
assessment rate or rates.
(m) Unsecured debt. For purposes of the unsecured debt adjustment
as set forth in Sec. 327.9(d)(6) and the depository institution debt
adjustment as set forth in Sec. 327.9(d)(7), unsecured debt shall
include senior unsecured liabilities and subordinated debt.
(n) Senior unsecured liability. For purposes of the unsecured debt
adjustment as set forth in Sec. 327.9(d)(6) and the depository
institution debt adjustment as set forth in Sec. 327.9(d)(7), senior
unsecured liabilities shall be the unsecured portion of other borrowed
money as defined in the quarterly report of condition for the reporting
period as defined in paragraph (b) of this section, but shall not
include any senior unsecured debt that the FDIC has guaranteed under
the Temporary Liquidity Guarantee Program, 12 CFR part 370.
(o) Subordinated debt. For purposes of the unsecured debt
adjustment as set forth in Sec. 327.9(d)(6) and the depository
institution debt adjustment as set forth in Sec. 327.9(d)(7),
subordinated debt shall be as defined in the quarterly report of
condition for the reporting period; however, subordinated debt shall
also include limited-life preferred stock as defined in the quarterly
report of condition for the reporting period.
(p) Long-term unsecured debt. For purposes of the unsecured debt
adjustment as set forth in Sec. 327.9(d)(6) and the depository
institution debt adjustment as set forth in Sec. 327.9(d)(7), long-
term unsecured debt shall be unsecured debt with at least one year
remaining until maturity.
* * * * *
(r) Parent holding company--A parent holding company is a bank
holding company under the Bank Holding Company Act of 1956 or a savings
and loan holding company under the Home Owners' Loan Act.
(s) Processing bank or trust company. A processing bank or trust
company is an institution whose non-lending interest income, fiduciary
revenues, and investment banking fees, combined, exceed 50 percent of
total revenues (and its fiduciary revenues are non-zero), and has had
$10 billion or more in total assets for at least four consecutive
quarters.
(t) Credit card bank. A credit card bank is a bank for which credit
card plus securitized receivables exceed 50 percent of assets plus
securitized receivables.
(u) Control. Control has the same meaning as in section 2 of the
Bank Holding Company Act of 1956, 12 U.S.C. 1841(a)(2).
6. Revise Sec. 327.9 to read as follows:
Sec. 327.9 Assessment risk categories and pricing methods.
(a) Risk Categories. Each small insured depository institution and
each insured branch of a foreign bank shall be assigned to one of the
following four Risk Categories based upon the institution's capital
evaluation and supervisory evaluation as defined in this section.
(1) Risk Category I. Small institutions in Supervisory Group A that
are Well Capitalized;
(2) Risk Category II. Small institutions in Supervisory Group A
that are Adequately Capitalized, and institutions in Supervisory Group
B that are either Well Capitalized or Adequately Capitalized;
(3) Risk Category III. Small institutions in Supervisory Groups A
and B that are Undercapitalized, and institutions in Supervisory Group
C that are Well Capitalized or Adequately Capitalized; and
(4) Risk Category IV. Small institutions in Supervisory Group C
that are Undercapitalized.
(b) Capital evaluations. Each small institution and each insured
branch of a foreign bank will receive one of the following three
capital evaluations on the basis of data reported in the institution's
Consolidated Reports of Condition and Income, Report of Assets and
Liabilities of U.S. Branches and Agencies of Foreign Banks, or Thrift
Financial Report dated as of March 31 for the assessment period
beginning the preceding January 1; dated as of June 30 for the
assessment period beginning the preceding April 1; dated as of
September 30 for the assessment period beginning the preceding July 1;
and dated as of December 31 for the assessment period beginning the
preceding October 1.
(1) Well Capitalized. (i) Except as provided in paragraph
(b)(1)(ii) of this section, a Well Capitalized institution is one that
satisfies each of the following capital ratio standards: Total risk-
based ratio, 10.0 percent or greater; Tier 1 risk-based ratio, 6.0
percent or greater; and Tier 1 leverage ratio, 5.0 percent or greater.
(ii) For purposes of this section, an insured branch of a foreign
bank will be deemed to be Well Capitalized if the insured branch:
(A) Maintains the pledge of assets required under Sec. 347.209 of
this chapter; and
(B) Maintains the eligible assets prescribed under Sec. 347.210 of
this chapter at 108 percent or more of the average book value of the
insured branch's third-party liabilities for the quarter ending on the
report date specified in paragraph (b) of this section.
(2) Adequately Capitalized. (i) Except as provided in paragraph
(b)(2)(ii) of this section, an Adequately Capitalized institution is
one that does not satisfy the standards of Well Capitalized under this
paragraph but satisfies each of the following capital ratio standards:
Total risk-based ratio, 8.0 percent or greater; Tier 1 risk-based
ratio, 4.0 percent or greater; and Tier 1 leverage ratio, 4.0 percent
or greater.
(ii) For purposes of this section, an insured branch of a foreign
bank will be deemed to be Adequately Capitalized if the insured branch:
(A) Maintains the pledge of assets required under Sec. 347.209 of
this chapter; and
(B) Maintains the eligible assets prescribed under Sec. 347.210 of
this chapter at 106 percent or more of the average book value of the
insured branch's third-party liabilities for the quarter ending on the
report date specified in paragraph (b) of this section; and
(C) Does not meet the definition of a Well Capitalized insured
branch of a foreign bank.
(3) Undercapitalized. An undercapitalized institution is one that
does not qualify as either Well Capitalized or Adequately Capitalized
under paragraphs (b)(1) and (b)(2) of this section.
(c) Supervisory evaluations. Each small institution and each
insured branch of a foreign bank will be assigned to one of three
Supervisory Groups based on the Corporation's consideration of
supervisory evaluations provided by the institution's primary Federal
regulator. The supervisory
[[Page 72595]]
evaluations include the results of examination findings by the primary
Federal regulator, as well as other information that the primary
Federal regulator determines to be relevant. In addition, the
Corporation will take into consideration such other information (such
as state examination findings, as appropriate) as it determines to be
relevant to the institution's financial condition and the risk posed to
the Deposit Insurance Fund. The three Supervisory Groups are:
(1) Supervisory Group ``A.'' This Supervisory Group consists of
financially sound institutions with only a few minor weaknesses;
(2) Supervisory Group ``B.'' This Supervisory Group consists of
institutions that demonstrate weaknesses which, if not corrected, could
result in significant deterioration of the institution and increased
risk of loss to the Deposit Insurance Fund; and
(3) Supervisory Group ``C.'' This Supervisory Group consists of
institutions that pose a substantial probability of loss to the Deposit
Insurance Fund unless effective corrective action is taken.
(d) Determining Assessment Rates for Insured Depository
Institutions. A small insured depository institution in Risk Category I
shall have its initial base assessment rate determined using the
financial ratios method set forth in paragraph (d)(1) of this section.
An insured branch of a foreign bank in Risk Category I shall have its
assessment rate determined using the weighted average ROCA component
rating method set forth in paragraph (d)(2) of this section. A large
insured depository institution shall have its initial base assessment
rate determined using the large institution method set forth in
paragraph (d)(3) of this section. A highly complex insured depository
institution shall have its initial base assessment rate determined
using the highly complex institution method set forth at paragraph
(d)(4) of this section.
(1) Financial ratios method. (i) Under the financial ratios method
for small Risk Category I institutions, each of six financial ratios
and a weighted average of CAMELS component ratings will be multiplied
by a corresponding pricing multiplier. The sum of these products will
be added to a uniform amount. The resulting sum shall equal the
institution's initial base assessment rate; provided, however, that no
institution's initial base assessment rate shall be less than the
minimum initial base assessment rate in effect for Risk Category I
institutions for that quarter nor greater than the maximum initial base
assessment rate in effect for Risk Category I institutions for that
quarter. An institution's initial base assessment rate, subject to
adjustment pursuant to paragraphs (d)(6), (7), and (8) of this section,
as appropriate (resulting in the institution's total base assessment
rate, which in no case can be lower than 50 percent of the
institution's initial base assessment rate), and adjusted for the
actual assessment rates set by the Board under Sec. 327.10(f), will
equal an institution's assessment rate. The six financial ratios are:
Tier 1 Leverage Ratio; Loans past due 30-89 days/gross assets;
Nonperforming assets/gross assets; Net loan charge-offs/gross assets;
Net income before taxes/risk-weighted assets; and the Adjusted brokered
deposit ratio. The ratios are defined in Table A.1 of Appendix A to
this subpart. The ratios will be determined for an assessment period
based upon information contained in an institution's report of
condition filed as of the last day of the assessment period as set out
in Sec. 327.9(b). The weighted average of CAMELS component ratings is
created by multiplying each component by the following percentages and
adding the products: Capital adequacy--25%, Asset quality--20%,
Management--25%, Earnings--10%, Liquidity--10%, and Sensitivity to
market risk--10%. The following table sets forth the initial values of
the pricing multipliers:
------------------------------------------------------------------------
Risk measures * Pricing multipliers **
------------------------------------------------------------------------
Tier 1 Leverage Ratio......................... (0.056)
Loans Past Due 30-89 Days/Gross Assets........ 0.575
Nonperforming Assets/Gross Assets............. 1.074
Net Loan Charge-Offs/Gross Assets............. 1.210
Net Income before Taxes/Risk-Weighted Assets.. (0.764)
Adjusted brokered deposit ratio............... 0.065
Weighted Average CAMELS Component Rating...... 1.095
------------------------------------------------------------------------
* Ratios are expressed as percentages.
** Multipliers are rounded to three decimal places.
(ii) The six financial ratios and the weighted average CAMELS
component rating will be multiplied by the respective pricing
multiplier, and the products will be summed. To this result will be
added the uniform amount. The resulting sum shall equal the
institution's initial base assessment rate; provided, however, that no
institution's initial base assessment rate shall be less than the
minimum initial base assessment rate in effect for Risk Category I
institutions for that quarter nor greater than the maximum initial base
assessment rate in effect for Risk Category I institutions for that
quarter.
(iii) Uniform amount and pricing multipliers. Except as adjusted
for the actual assessment rates set by the Board under Sec. 327.10(f),
the uniform amount shall be:
(A) 4.861 whenever the assessment rate schedule set forth in Sec.
327.10(a) is in effect;
(B) 2.861 whenever the assessment rate schedule set forth in Sec.
327.10(b) is in effect;
(C) 1.861 whenever the assessment rate schedule set forth in Sec.
327.10(c) is in effect; or
(D) 0.861 whenever the assessment rate schedule set forth in Sec.
327.10(d) is in effect.
(iv) Implementation of CAMELS rating changes--(A) Changes between
risk categories. If, during a quarter, a CAMELS composite rating change
occurs that results in an institution whose Risk Category I assessment
rate is determined using the financial ratios method moving from Risk
Category I to Risk Category II, III or IV, the institution's initial
base assessment rate for the portion of the quarter that it was in Risk
Category I shall be determined using the supervisory ratings in effect
before the change and the financial ratios as of the end of the
quarter, subject to adjustment pursuant to paragraphs (d)(6), (7), and
(8) of this section, as appropriate, and adjusted for the actual
assessment rates set by the Board under Sec. 327.10(f). For the
portion of the quarter that the institution was not in Risk Category I,
the institution's initial base assessment rate, which shall be subject
to adjustment pursuant to
[[Page 72596]]
paragraphs (d)(6), (7), and (8), shall be determined under the
assessment schedule for the appropriate Risk Category. If, during a
quarter, a CAMELS composite rating change occurs that results in an
institution moving from Risk Category II, III or IV to Risk Category I,
and its initial base assessment rate will be determined using the
financial ratios method, then that method shall apply for the portion
of the quarter that it was in Risk Category I, subject to adjustment
pursuant to paragraphs (d)(6), (7) and (8) of this section, as
appropriate, and adjusted for the actual assessment rates set by the
Board under Sec. 327.10(f). For the portion of the quarter that the
institution was not in Risk Category I, the institution's initial base
assessment rate, which shall be subject to adjustment pursuant to
paragraphs (d)(6), (7), and (8) of this section shall be determined
under the assessment schedule for the appropriate Risk Category.
(B) Changes within Risk Category I. If, during a quarter, an
institution's CAMELS component ratings change in a way that will change
the institution's initial base assessment rate within Risk Category I,
the initial base assessment rate for the period before the change shall
be determined under the financial ratios method using the CAMELS
component ratings in effect before the change, subject to adjustment
pursuant to paragraphs (d)(6), (7), and (8) of this section, as
appropriate. Beginning on the date of the CAMELS component ratings
change, the initial base assessment rate for the remainder of the
quarter shall be determined using the CAMELS component ratings in
effect after the change, again subject to adjustment pursuant to
paragraphs (d)(6), (7), and (8) of this section, as appropriate.
(2) Assessment rate for insured branches of foreign banks--(i)
Insured branches of foreign banks in Risk Category I. Insured branches
of foreign banks in Risk Category I shall be assessed using the
weighted average ROCA component rating.
(ii) Weighted average ROCA component rating. The weighted average
ROCA component rating shall equal the sum of the products that result
from multiplying ROCA component ratings by the following percentages:
Risk Management--35%, Operational Controls--25%, Compliance--25%, and
Asset Quality--15%. The weighted average ROCA rating will be multiplied
by 5.076 (which shall be the pricing multiplier). To this result will
be added a uniform amount. The resulting sum--the initial base
assessment rate--will equal an institution's total base assessment
rate; provided, however, that no institution's total base assessment
rate will be less than the minimum total base assessment rate in effect
for Risk Category I institutions for that quarter nor greater than the
maximum total base assessment rate in effect for Risk Category I
institutions for that quarter.
(iii) Uniform amount. Except as adjusted for the actual assessment
rates set by the Board under Sec. 327.10(f), the uniform amount for
all insured branches of foreign banks shall be:
(A) -3.127 whenever the assessment rate schedule set forth in Sec.
327.10(a) is in effect;
(B) -5.127 whenever the assessment rate schedule set forth in Sec.
327.10(b) is in effect;
(C) -6.127 whenever the assessment rate schedule set forth in Sec.
327.10(c) is in effect; or
(D) -7.127 whenever the assessment rate schedule set forth in Sec.
327.10(d) is in effect.
(iv) No insured branch of a foreign bank in any risk category shall
be subject to the adjustments in paragraphs (d)(5), (d)(6), or (d)(8)
of this section.
(v) Implementation of changes between Risk Categories for insured
branches of foreign banks. If, during a quarter, a ROCA rating change
occurs that results in an insured branch of a foreign bank moving from
Risk Category I to Risk Category II, III or IV, the institution's
initial base assessment rate for the portion of the quarter that it was
in Risk Category I shall be determined using the weighted average ROCA
component rating. For the portion of the quarter that the institution
was not in Risk Category I, the institution's initial base assessment
rate shall be determined under the assessment schedule for the
appropriate Risk Category. If, during a quarter, a ROCA rating change
occurs that results in an insured branch of a foreign bank moving from
Risk Category II, III or IV to Risk Category I, the institution's
assessment rate for the portion of the quarter that it was in Risk
Category I shall equal the rate determined as provided using the
weighted average ROCA component rating. For the portion of the quarter
that the institution was not in Risk Category I, the institution's
initial base assessment rate shall be determined under the assessment
schedule for the appropriate Risk Category.
(vi) Implementation of changes within Risk Category I for insured
branches of foreign banks. If, during a quarter, an insured branch of a
foreign bank remains in Risk Category I, but a ROCA component rating
changes that will affect the institution's initial base assessment
rate, separate assessment rates for the portion(s) of the quarter
before and after the change(s) shall be determined under this paragraph
(d)(2) of this section.
(3) Assessment scorecard for large institutions (other than highly
complex institutions). (i) All large institutions other than highly
complex institutions shall have their quarterly assessments determined
using the scorecard for large institutions.
Scorecard for Large Institutions
------------------------------------------------------------------------
Weights within Component
Scorecard measures component weights
(percent) (percent)
------------------------------------------------------------------------
P--Performance Score
P.1--Weighted Average CAMELS Rating..... 100 30
P.2--Ability to Withstand Asset-Related .............. 50
Stress:................................
Tier 1 Leverage Ratio............... 10
Concentration Measure............... 35
Core Earnings/Average Quarter-End 20
Total Assets.......................
Credit Quality Measure.............. 35
P.3--Ability to Withstand Funding- .............. 20
Related Stress.........................
Core Deposits/Total Liabilities..... 60
Balance Sheet Liquidity Ratio....... 40
L--Loss Severity Score:
L.1--Loss Severity...................... .............. 100
Potential Losses/Total Domestic 75
Deposits (loss severity measure)...
[[Page 72597]]
Noncore Funding/Total Liabilities... 25
------------------------------------------------------------------------
(ii) The large institution scorecard produces two scores:
performance and loss severity.
(A) Performance score. The performance score for large institutions
is the weighted average of three inputs: weighted average CAMELS rating
(30%); ability to withstand asset-related stress measures (50%); and
ability to withstand funding-related stress measures (20%).
(B) Weighted average CAMELS score. (1) To derive the weighted
average CAMELS score, a weighted average of an institution's CAMELS
component ratings is calculated using the following weights:
------------------------------------------------------------------------
CAMELS Component Weight (percent)
------------------------------------------------------------------------
C 25
A 20
M 25
E 10
L 10
S 10
------------------------------------------------------------------------
(2) A weighted average CAMELS rating is converted to a score that
ranges from 25 to 100. A weighted average rating of 1 equals a score of
25 and a weighted average of 3.5 or greater equals a score of 100.
Weighted average CAMELS ratings between 1 and 3.5 are assigned a score
between 25 and 100 according to the following equation:
S = 25 + [(20/3) * (C2 -1)],
Where:
S = the weighted average CAMELS score and
C = the weighted average CAMELS rating.
(C) Ability to withstand asset-related stress. (1) The ability to
withstand asset-related stress component contains four measures: Tier 1
leverage ratio; Concentration measure (the higher of the higher-risk
assets to Tier 1 capital and reserves or growth-adjusted portfolio
concentrations measures); Core earnings to average quarter-end total
assets; and Credit quality measure (the higher of the criticized and
classified assets to Tier 1 capital and reserves or underperforming
assets to Tier 1 capital and reserves). Appendices A and C define these
measures in detail and give the source of the data used to determine
them.
(2) The concentration measure score is the higher of the scores of
the two measures that make up the concentration measure score (higher-
risk assets to Tier 1 capital and reserves measure or growth-adjusted
portfolio concentrations measure). The credit quality measure score is
the higher of the criticized and classified items ratio score or the
underperforming assets ratio score. Each asset related stress measure
is assigned the following cutoff values and weights to derive a score
for an institution's ability to withstand asset-related stress:
Cutoff Values and Weights for Ability to Withstand Asset-Related Stress Measures
----------------------------------------------------------------------------------------------------------------
Cutoff values
Scorecard measures -------------------------------------------------- Weight (percent)
Minimum Maximum
----------------------------------------------------------------------------------------------------------------
Tier 1 Leverage Ratio................ 6 13 10
----------------------------------------------------------------------------------------------------------------
Concentration Measure:............... ....................... ....................... 35
Higher-Risk Assets to Tier 1 0 135
capital and Reserves; or........
Growth-Adjusted Portfolio 3 57
Concentrations..................
----------------------------------------------------------------------------------------------------------------
Core Earnings/Average Quarter-End 0 2 20
Total Assets........................
Credit Quality Measure:............ ....................... ....................... 35
Criticized and Classified Items/ 8 100
Tier 1 capital and Reserves; or.
Underperforming Assets/Tier 1 2 37 .......................
capital and Reserves............
----------------------------------------------------------------------------------------------------------------
(3) For each of the risk measures within the ability to withstand
asset-related stress portion of the scorecard, a value reflecting lower
risk than the cutoff value that results in a score of 0 will also
receive a score of 0, where 0 equals the lowest risk for that measure.
A value reflecting higher risk than the cutoff value that results in a
score of 100 will also receive a score of 100, where 100 equals the
highest risk for that measure. A risk measure value between the minimum
and maximum cutoff values is converted linearly to a score between 0
and 100 as shown in Appendix B to this subpart. Each score is
multiplied by a respective weight and the resulting weighted score for
each measure is summed to arrive at an ability to withstand asset-
related stress score, which ranges from 0 to 100.
(D) Ability to withstand funding-related stress. The ability to
withstand funding-related stress component contains two risk measures:
a core deposits to liabilities ratio, and a balance sheet liquidity
ratio. Appendix A to this subpart describes these ratios in detail and
gives the source of the data used to determine them. Appendix B to this
subpart describes in detail how each of these measures is converted to
a score. The ability to withstand funding-related stress component
score is the weighted average of the two measure scores. Each measure
is assigned the following cutoff values and weights to derive a score
for an institution's ability to withstand funding-related stress:
[[Page 72598]]
Cutoff Values and Weights for Ability to Withstand Funding-Related Stress Measures
----------------------------------------------------------------------------------------------------------------
Cutoff values
Scorecard measures -------------------------------- Weight
Minimum Maximum (percent)
----------------------------------------------------------------------------------------------------------------
Core Deposits/Total Liabilities................................. 3 79 60
Balance Sheet Liquidity Ratio................................... 7 188 40
----------------------------------------------------------------------------------------------------------------
(E) Calculation of performance score. The weighted average CAMELS
score, the ability to withstand asset-related stress score, and the
ability to withstand funding-related stress score are multiplied by
their weights and the results are summed to arrive at the performance
score. The performance score cannot exceed 100.
(iii) Loss severity score. The loss severity score is based on two
measures: The loss severity measure and noncore funding to total
liabilities ratio. Appendices A and D to this subpart describe these
measures in detail and Appendix B to this subpart describes how each of
these measures is converted to a score between 0 and 100. The loss
severity score is the weighted average of these two scores. Each
measure is assigned the following cutoff values and weights to derive a
score for an institution's loss severity score:
Cutoff Values and Weights for Loss Severity Score Measures
----------------------------------------------------------------------------------------------------------------
Cutoff values
Scorecard measures -------------------------------- Weight
Minimum Maximum (percent)
----------------------------------------------------------------------------------------------------------------
Potential Losses/Total Domestic Deposits (loss severity measure) 0 29 75
Noncore Funding/Total Liabilities............................... 21 97 25
----------------------------------------------------------------------------------------------------------------
(iv) Total score. The performance and loss severity scores are
combined to produce a total score. The loss severity score is converted
into a loss severity factor that ranges from 0.8 (score of 5 or lower)
to 1.2 (score of 85 or higher). Scores that fall at or below the
minimum cutoff of 5 receive a loss severity measure of 0.8 and scores
that fall at or above the maximum cutoff of 85 receive a loss severity
score of 1.2. The following linear interpolation converts loss severity
scores between the cutoffs into a loss severity factor: (Loss Severity
Factor = 0.8 + [0.005 * (Loss Severity Score - 5)]. The performance
score is multiplied by the loss severity factor to produce a total
score (total score = performance score * loss severity factor). The
total score cannot be less than 30 or more than 90. The total score is
subject to adjustment, up or down, by a maximum of 15 points, as set
forth in paragraph (d)(5) of this section. The resulting total score
cannot be less than 30 or more than 90.
(v) Initial base assessment rate. A large institution with a total
score of 30 pays the minimum initial base assessment rate and an
institution with a total score of 90 pays the maximum initial base
assessment rate. For total scores between 30 and 90, initial base
assessment rates rise at an increasing rate as the total score
increases, calculated according to the following formula:
[GRAPHIC] [TIFF OMITTED] TP24NO10.335
where Rate is the initial base assessment rate (expressed in basis
points), Maximum Rate is the maximum initial base assessment rate
then in effect (expressed in basis points), and Minimum Rate is the
minimum initial base assessment rate then in effect (expressed in
basis points). Initial base assessment rates are subject to
adjustment pursuant to paragraphs (d)(5), (d)(6), (d)(7), and (d)(8)
of this section, resulting in the institution's total base
assessment rate, which in no case can be lower than 50 percent of
the institution's initial base assessment rate.
(4) Assessment scorecard for highly complex institutions--(i) All
highly complex institutions shall have their quarterly assessments
determined using the scorecard for highly complex institutions.
Scorecard for Highly Complex Institutions
------------------------------------------------------------------------
Weights within Component
Scorecard measures component weights
(percent) (percent)
------------------------------------------------------------------------
P--Performance Score:
P.1--Weighted Average CAMELS Rating..... 100 30
P.2--Ability to Withstand Asset-Related .............. 50
Stress:
Tier 1 Leverage Ratio............... 10
Concentration Measure............... 35
Core Earnings/Average Quarter-End 20
Total Assets.......................
Credit Quality Measure and Market 35
Risk Measure.......................
P.3--Ability to Withstand Funding- .............. 20
Related Stress.........................
[[Page 72599]]
Core Deposits/Total Liabilities..... 50
Balance Sheet Liquidity Ratio....... 30
Average Short-Term Funding/Average 20 ..............
Total Assets.......................
L--Loss Severity Score:
L.1--Loss Severity...................... .............. 100
Potential Losses/Total Domestic 75
Deposits (loss severity measure)...
Noncore Funding/Total Liabilities... 25
------------------------------------------------------------------------
(ii) The scorecard for highly complex institutions contains the
performance components and the loss severity components of the large
bank scorecard and employs the same methodology. The assessment process
set forth in paragraph (d)(3) of this section for the large bank
scorecard applies to highly complex institutions, modified as follows.
(A) The scorecard for highly-complex institutions contains two
additional measures:
(1) A concentration measure based on three risk measures--higher-
risk assets, top 20 counterparty exposure, and the largest counterparty
exposure, all divided by Tier 1 capital and reserves, and
(2) A credit quality measure and market risk measure in the ability
to withstand asset-related stress; and an additional component--average
short-term funding to average total assets ratio--in the ability to
withstand funding-related stress.
(B) Performance score for highly complex institutions. A
performance score for highly complex institutions is the weighted
average of three inputs: Weighted average CAMELS rating (30%); ability
to withstand asset-related stress score (50%); and ability to withstand
funding-related stress score (20%). To calculate the performance score
for highly complex institutions, the weighted average CAMELS score, the
ability to withstand asset-related stress score, and the ability to
withstand funding-related stress score are multiplied by their weights
and the results are summed to arrive at the performance score. The
resulting score cannot exceed 100.
(C) Ability to withstand asset-related stress. (1) The scorecard
for highly complex institutions substitutes the growth-adjusted
concentration measure with the top 20 counterparty exposure and the
largest counterparty exposure, adds one additional factor to the
ability to withstand asset-related stress component--the market risk
measure--and one additional factor to the ability to withstand funding-
related stress component--the average short-term funding to average
total assets ratio. The cutoff values and weights for ability to
withstand asset-related stress measures are set forth below.
Cutoff Values and Weights for Ability To Withstand Asset-Related Stress Measures
----------------------------------------------------------------------------------------------------------------
Cutoff values
Scorecard measures ---------------------------------- Sub-component Weight
Minimum Maximum weight
----------------------------------------------------------------------------------------------------------------
Tier 1 Leverage Ratio.......... 6 13 ............... 10%.
Concentration Measure: ............... ............... ............... 35%.
Higher Risk Assets/Tier 1 0 135
Capital and Reserves;.
Top 20 Counterparty 0 125
Exposure/Tier 1 Capital
and Reserves; or
Largest Counterparty 0 20
Exposure/Tier 1 Capital
and Reserves.
Core Earnings/Average Quarter- 0 2 20%.
End Total Assets.
Credit Quality Measure *:...... ............... ............... ............... 35%* (1-Trading Asset
Ratio).
Criticized and Classified 8 100 ............... ............................
Items to Tier 1 Capital
and Reserves; or
Underperforming Assets/Tier 2 37
1 Capital and Reserves.
Market Risk Measure*:.......... ............... ............... ............... 35%* Trading Asset Ratio.
Trading Revenue Volatility/ 0 2 60%
Tier 1 Capital.
Market Risk Capital/Tier 1 0 10 20%
Capital.
Level 3 Trading Assets/Tier 0 35 20%
1 Capital.
----------------------------------------------------------------------------------------------------------------
* Combined, the credit quality measure and the market risk measure will be assigned a 35 percent weight. The
relative weight between the two measures will depend on the ratio of average trading assets to sum of average
securities, loans and trading assets (trading asset ratio).
(2) Appendix A to subpart A of this part describes these measures
in detail and gives the source of the data used to calculate the
measures.
(D) Ability to withstand funding related stress. (1) The scorecard
for highly complex institutions adds one additional factor to the
ability to withstand funding-related stress component--the average
short-term funding to average total assets ratio. The cutoff values and
weights for ability to withstand funding-related stress measures for
highly complex institutions are set forth below.
[[Page 72600]]
Cutoff Values and Weights for Ability To Withstand Funding-Related Stress Measures
----------------------------------------------------------------------------------------------------------------
Cutoff values
Scorecard measures -------------------------------- Weight
Minimum Maximum (percent)
----------------------------------------------------------------------------------------------------------------
Core Deposits/Total Liabilities................................. 3 79 50
Balance Sheet Liquidity Ratio................................... 7 188 30
Average Short-term Funding/Average Total Assets................. 0 20 20
----------------------------------------------------------------------------------------------------------------
(2) Appendix A to subpart A of this part describes these measures
in detail and gives the source of the data used to calculate the
measures.
(iii) Loss severity score for highly complex institutions. The loss
severity score for highly complex institutions is calculated as
provided for the loss severity score for large institutions in
paragraph (d)(3)(ii) (of this section).
(iv) The performance score and the loss severity score are combined
in the same manner to calculate the total score as for large
institutions as set forth in paragraph (d)(3) of this section.
(v) The initial base assessment rate for highly complex
institutions is calculated from the total score in the same manner as
for large institutions as set forth in paragraph (d)(3) of this
section. Initial base assessment rates are subject to adjustment
pursuant to paragraphs (d)(5), (d)(6), (d)(7), and (d)(8) of this
section, resulting in the institution's total base assessment rate,
which in no case can be lower than 50 percent of the institution's
initial base assessment rate.
(5) Adjustment to total score for large institutions and highly
complex institutions. The total score for large institutions and highly
complex institutions is subject to adjustment, up or down, by a maximum
of 15 points, based upon significant risk factors that are not
adequately captured in the appropriate scorecard. In making such
adjustments, the FDIC may consider such information as financial
performance and condition information and other market or supervisory
information.
(i) Prior notice of adjustments--(A) Prior notice of upward
adjustment. Prior to making any upward adjustment to an institution's
total score because of considerations of additional risk information,
the FDIC will formally notify the institution and its primary Federal
regulator and provide an opportunity to respond. This notification will
include the reasons for the adjustment(s) and when the adjustment(s)
will take effect.
(B) Prior notice of downward adjustment. Prior to making any
downward adjustment to an institution's total score because of
considerations of additional risk information, the FDIC will formally
notify the institution's primary Federal regulator and provide an
opportunity to respond.
(ii) Determination whether to adjust upward; effective period of
adjustment. After considering an institution's and the primary Federal
regulator's responses to the notice, the FDIC will determine whether
the adjustment to an institution's total score is warranted, taking
into account any revisions to scorecard measures, as well as any
actions taken by the institution to address the FDIC's concerns
described in the notice. The FDIC will evaluate the need for the
adjustment each subsequent assessment period. Except as provided in
paragraph (d)(5)(iv) of this section, the amount of adjustment cannot
exceed the proposed adjustment amount contained in the initial notice
unless additional notice is provided so that the primary Federal
regulator and the institution may respond.
(iii) Determination whether to adjust downward; effective period of
adjustment. After considering the primary Federal regulator's responses
to the notice, the FDIC will determine whether the adjustment to total
score is warranted, taking into account any revisions to scorecard
measures, as well as any actions taken by the institution to address
the FDIC's concerns described in the notice. Any downward adjustment in
an institution's total score will remain in effect for subsequent
assessment periods until the FDIC determines that an adjustment is no
longer warranted. Downward adjustments will be made without
notification to the institution. However, the FDIC will provide advance
notice to an institution and its primary Federal regulator and give
them an opportunity to respond before removing a downward adjustment.
(iv) Adjustment without notice. Notwithstanding the notice
provisions set forth above, the FDIC may change an institution's total
score without advance notice under this paragraph, if the institution's
supervisory ratings or the scorecard measures deteriorate.
(6) Unsecured debt adjustment to initial base assessment rate for
all institutions. All institutions, except new institutions as provided
under paragraph (d)(10)(i)(C) of this section and insured branches of
foreign banks as provided under paragraph (d)(2)(iii) of this section,
are subject to an adjustment of assessment rates for unsecured debt.
Any unsecured debt adjustment shall be made after any adjustment under
paragraph (d)(5) of this section.
(i) Application of unsecured debt adjustment. The unsecured debt
adjustment shall be determined as the sum of the initial base
assessment rate plus 40 basis points; that sum shall be multiplied by
the ratio of an insured depository institution's long-term unsecured
debt to its assessment base. The amount of the reduction in the
assessment rate due to the adjustment is equal to the dollar amount of
the adjustment divided by the amount of the assessment base.
(ii) Limitation. No unsecured debt adjustment that provides a
benefit for any institution shall exceed the lesser of 5 basis points
or 50 percent of the institution's initial base assessment rate.
(iii) Applicable quarterly reports of condition. Unsecured debt
adjustment ratios for any given quarter shall be calculated from
quarterly reports of condition (Call Reports and Thrift Financial
Reports, or any successor reports, as appropriate) filed by each
institution as of the last day of the quarter.
(7) Depository institution debt adjustment to initial base
assessment rate for all institutions. All institutions shall be subject
to an adjustment of assessment rates for unsecured debt held that is
issued by another depository institution. Any such depository
institution debt adjustment shall be made after any adjustment under
paragraphs (d)(5) and (d)(6) of this section.
(i) Application of depository institution debt adjustment. The
depository institution debt adjustment shall equal 50 basis points
multiplied by the ratio of the long-term unsecured debt an institution
holds that was issued by another insured depository institution to its
assessment base.
[[Page 72601]]
(ii) Applicable quarterly reports of condition. Depository
institution debt adjustment ratios for any given quarter shall be
calculated from quarterly reports of condition (Call Reports and Thrift
Financial Reports, or any successor reports, as appropriate) filed by
each institution as of the last day of the quarter.
(8) Brokered deposit adjustment. All small institutions in Risk
Categories II, III, and IV, all large institutions, and all highly
complex institutions shall be subject to an assessment rate adjustment
for brokered deposits. Any such brokered deposit adjustment shall be
made after any adjustment under paragraphs (d)(5), (d)(6), and (d)(7)
of this section. The brokered deposit adjustment includes all brokered
deposits as defined in Section 29 of the Federal Deposit Insurance Act
(12 U.S.C. 1831f), and 12 CFR 337.6, including reciprocal deposits as
defined in Sec. 327.8(p), and brokered deposits that consist of
balances swept into an insured institution by another institution. The
adjustment under this paragraph is limited to those institutions whose
ratio of brokered deposits to domestic deposits is greater than 10
percent; asset growth rates do not affect the adjustment. Insured
branches of foreign banks are not subject to the brokered deposit
adjustment as provided in paragraph (d)(2)(iii) of this section.
(i) Application of brokered deposit adjustment. The brokered
deposit adjustment shall be determined by multiplying 25 basis points
by the ratio of the difference between an insured depository
institution's brokered deposits and 10 percent of its domestic deposits
to its assessment base.
(ii) Limitation. The maximum brokered deposit adjustment will be 10
basis points; the minimum brokered deposit adjustment will be 0.
(iii) Applicable quarterly reports of condition. Brokered deposit
ratios for any given quarter shall be calculated from the quarterly
reports of condition (Call Reports and Thrift Financial Reports, or any
successor reports, as appropriate) filed by each institution as of the
last day of the quarter.
(9) Request to be treated as a large institution--(i) Procedure.
Any institution with assets of between $5 billion and $10 billion may
request that the FDIC determine its assessment rate as a large
institution. The FDIC will consider such a request provided that it has
sufficient information to do so. Any such request must be made to the
FDIC's Division of Insurance and Research. Any approved change will
become effective within one year from the date of the request. If an
institution whose request has been granted subsequently reports assets
of less than $5 billion in its report of condition for four consecutive
quarters, the FDIC will consider such institution to be a small
institution subject to the financial ratios method.
(ii) Time limit on subsequent request for alternate method. An
institution whose request to be assessed as a large institution is
granted by the FDIC shall not be eligible to request that it be
assessed as a small institution for a period of three years from the
first quarter in which its approved request to be assessed as a large
institution became effective. Any request to be assessed as a small
institution must be made to the FDIC's Division of Insurance and
Research.
(iii) An institution that disagrees with the FDIC's determination
that it is a large, highly complex, or small institution may request
review of that determination pursuant to Sec. 327.4(c).
(10) New and established institutions and exceptions--(i) New small
institutions. A new small Risk Category I institution shall be assessed
the Risk Category I maximum initial base assessment rate for the
relevant assessment period. No new small institution in any risk
category shall be subject to the unsecured debt adjustment as
determined under paragraph (d)(6) of this section. All new small
institutions in any Risk Category shall be subject to the depository
institution debt adjustment as determined under paragraph (d)(7) of
this section. All new small institutions in Risk Categories II, III,
and IV shall be subject to the brokered deposit adjustment as
determined under paragraph (d)(8) of this section.
(ii) New large institutions and new highly complex institutions.
All new large institutions and all new highly complex institutions
shall be assessed under the appropriate method provided at paragraph
(d)(3) or (d)(4) and subject to the adjustments provided at paragraphs
(d)(5), (d)(7), and (d)(8). No new highly complex or large institutions
are entitled to adjustment under paragraph (d)(6). If a large or highly
complex institution has not yet received CAMELS ratings, it will be
given a weighted CAMELS rating of 2 for assessment purposes until
actual CAMELS ratings are assigned.
(iii) CAMELS ratings for the surviving institution in a merger or
consolidation. When an established institution merges with or
consolidates into a new institution, if the FDIC determines the
resulting institution to be an established institution under Sec.
327.8(k)(1), its CAMELS ratings for assessment purposes will be based
upon the established institution's ratings prior to the merger or
consolidation until new ratings become available.
(iv) Rate applicable to institutions subject to subsidiary or
credit union exception. A small Risk Category I institution that is
established under Sec. 327.8(k)(4) and (5), but does not have CAMELS
component ratings, shall be assessed at 2 basis points above the
minimum initial base assessment rate applicable to Risk Category I
institutions until it receives CAMELS component ratings. Thereafter,
the assessment rate will be determined by annualizing, where
appropriate, financial ratios obtained from all quarterly reports of
condition that have been filed, until the institution files four
quarterly reports of condition If a large or highly complex institution
is considered established under Sec. 327.8(k)(4) and (5), but does not
have CAMELS component ratings, it will be given a weighted CAMELS
rating of 2 for assessment purposes until actual CAMELS ratings are
assigned.
(v) Request for review. An institution that disagrees with the
FDIC's determination that it is a new institution may request review of
that determination pursuant to Sec. 327.4(c).
(11) Assessment rates for bridge depository institutions and
conservatorships. Institutions that are bridge depository institutions
under 12 U.S.C. 1821(n) and institutions for which the Corporation has
been appointed or serves as conservator shall, in all cases, be
assessed at the Risk Category I minimum initial base assessment rate,
which shall not be subject to adjustment under paragraphs (d)(5), (6),
(7) or (8) of this section.
7. Revise Sec. 327.10 to read as follows:
Sec. 327.10 Assessment rate schedules.
(a) Assessment rate schedules if, after September 30, 2010, the
reserve ratio of the DIF has not reached 1.15 percent. (1)
Applicability. The assessment rate schedules in paragraph (a) of this
section will cease to be applicable when the reserve ratio of the DIF
first reaches 1.15 percent after September 30, 2010.
(2) Initial Base Assessment Rate Schedule. After September 30,
2010, if the reserve ratio of the DIF has not reached 1.15 percent, the
initial base assessment rate for an insured depository institution
shall be the rate prescribed in the following schedule:
[[Page 72602]]
Initial Base Assessment Rate Schedule if, After September 30, 2010, the Reserve Ratio of the DIF Has Not Reached
1.15 Percent
----------------------------------------------------------------------------------------------------------------
Large and
Risk Category Risk Category Risk Category Risk Category highly
I II III IV complex
institutions
----------------------------------------------------------------------------------------------------------------
Initial base assessment rate.... 5-9 14 23 35 5-35
----------------------------------------------------------------------------------------------------------------
* All amounts for all risk categories are in basis points annually. Initial base rates that are not the minimum
or maximum rate will vary between these rates.
(i) Risk Category I Initial Base Assessment Rate Schedule. The
annual initial base assessment rates for all institutions in Risk
Category I shall range from 5 to 9 basis points.
(ii) Risk Category II, III, and IV Initial Base Assessment Rate
Schedule. The annual initial base assessment rates for Risk Categories
II, III, and IV shall be 14, 23, and 35 basis points, respectively.
(iii) All institutions in any one risk category, other than Risk
Category I, will be charged the same initial base assessment rate,
subject to adjustment as appropriate.
(iv) Large and Highly Complex Institutions Initial Base Assessment
Rate Schedule. The annual initial base assessment rates for all large
and highly complex institutions shall range from 5 to 35 basis points.
(3) Total Base Assessment Rate Schedule After Adjustments. After
September 30, 2010, if the reserve ratio of the DIF has not reached
1.15 percent, the total base assessment rates after adjustments for an
insured depository institution shall be the rate prescribed in the
following schedule.
Total Base Assessment Rate Schedule (After Adjustments)* if, After September 30, 2010, the Reserve Ratio of the
DIF Has Not Reached 1.15 Percent **
----------------------------------------------------------------------------------------------------------------
Large and
Risk Category Risk Category Risk Category Risk Category highly
I II III IV complex
institutions
----------------------------------------------------------------------------------------------------------------
Initial base assessment rate.... 5-9 14 23 35 5-35
Unsecured debt adjustment....... (4.5)-0 (5)-0 (5)-0 (5)-0 (5)-0
Brokered deposit adjustment..... .............. 0-10 0-10 0-10 0-10
----------------------------------------------------------------------------------------------------------------
Total base assessment rate.. 2.5-9 9-24 18-33 30-45 2.5-45
----------------------------------------------------------------------------------------------------------------
* All amounts for all risk categories are in basis points annually. Total base rates that are not the minimum or
maximum rate will vary between these rates.
** Total base assessment rates do not include the depository institution debt adjustment.
(i) Risk Category I Total Base Assessment Rate Schedule. The annual
total base assessment rates for all institutions in Risk Category I
shall range from 2.5 to 9 basis points.
(ii) Risk Category II Total Base Assessment Rate Schedule. The
annual total base assessment rates for Risk Category II shall range
from 9 to 24 basis points.
(iii) Risk Category III Total Base Assessment Rate Schedule. The
annual total base assessment rates for Risk Category III shall range
from 18 to 33 basis points.
(iv) Risk Category IV Total Base Assessment Rate Schedule. The
annual total base assessment rates for Risk Category IV shall range
from 30 to 45 basis points.
(v) Large and Highly Complex Institutions Total Base Assessment
Rate Schedule. The annual total base assessment rates for all large and
highly complex institutions shall range from 2.5 to 45 basis points.
(b) Assessment rate schedules once the reserve ratio of the DIF
first reaches 1.15 percent after September 30, 2010, and the reserve
ratio for the immediately prior assessment period is less than 2
percent.
(1) Initial Base Assessment Rate Schedule. After September 30,
2010, once the reserve ratio of the DIF first reaches 1.15 percent, and
the reserve ratio for the immediately prior assessment period is less
than 2 percent, the initial base assessment rate for an insured
depository institution shall be the rate prescribed in the following
schedule:
Initial Base Assessment Rate Schedule Once the Reserve Ratio of the DIF Reaches 1.15 Percent After September 30,
2010, and the Reserve Ratio for the Immediately Prior Assessment Period is Less Than 2 Percent
----------------------------------------------------------------------------------------------------------------
Large and
Risk Category Risk Category Risk Category Risk Category highly
I II III IV complex
institutions
----------------------------------------------------------------------------------------------------------------
Initial base assessment rate.... 3-7 12 19 30 3-30
----------------------------------------------------------------------------------------------------------------
* All amounts for all risk categories are in basis points annually. Initial base rates that are not the minimum
or maximum rate will vary between these rates.
[[Page 72603]]
(i) Risk Category I Initial Base Assessment Rate Schedule. The
annual initial base assessment rates for all institutions in Risk
Category I shall range from 3 to 7 basis points.
(ii) Risk Category II, III, and IV Initial Base Assessment Rate
Schedule. The annual initial base assessment rates for Risk Categories
II, III, and IV shall be 12, 19, and 30 basis points, respectively.
(iii) All institutions in any one risk category, other than Risk
Category I, will be charged the same initial base assessment rate,
subject to adjustment as appropriate.
(iv) Large and Highly Complex Institutions Initial Base Assessment
Rate Schedule. The annual initial base assessment rates for all large
and highly complex institutions shall range from 3 to 30 basis points.
(2) Total Base Assessment Rate Schedule After Adjustments. After
September 30, 2010, once the reserve ratio of the DIF first reaches
1.15 percent, and the reserve ratio for the immediately prior
assessment period is less than 2 percent, the total base assessment
rates after adjustments for an insured depository institution shall be
the rate prescribed in the following schedule.
*Total Base Assessment Rate Schedule (after Adjustments)* Once the Reserve Ratio of the DIF reaches 1.15 Percent
After September 30, 2010, and the Reserve Ratio for the Immediately Prior Assessment Period is Less Than 2
Percent **
----------------------------------------------------------------------------------------------------------------
Large and
Risk Category Risk Category Risk Category Risk Category highly
I II III IV complex
institutions
----------------------------------------------------------------------------------------------------------------
Initial base assessment rate.... 3-7 12 19 30 3-30
Unsecured debt adjustment....... (3.5)-0 (5)-0 (5)-0 (5)-0 (5)-0
Brokered deposit adjustment..... .............. 0-10 0-10 0-10 0-10
Total base assessment rate.. 1.5-7 7-22 14-29 29-40 1.5-40
----------------------------------------------------------------------------------------------------------------
* All amounts for all risk categories are in basis points annually. Total base rates that are not the minimum or
maximum rate will vary between these rates.
** Total base assessment rates do not include the depository institution debt adjustment.
(i) Risk Category I Total Base Assessment Rate Schedule. The annual
total base assessment rates for institutions in Risk Category I shall
range from 1.5 to 7 basis points.
(ii) Risk Category II Total Base Assessment Rate Schedule. The
annual total base assessment rates for Risk Category II shall range
from 7 to 22 basis points.
(iii) Risk Category III Total Base Assessment Rate Schedule. The
annual total base assessment rates for Risk Category III shall range
from 14 to 29 basis points.
(iv) Risk Category IV Total Base Assessment Rate Schedule. The
annual total base assessment rates for Risk Category IV shall range
from 29 to 40 basis points.
(v) Large and Highly Complex Institutions Total Base Assessment
Rate Schedule. The annual total base assessment rates for all large and
highly complex institutions shall range from 1.5 to 40 basis points.
(c) Assessment rate schedules if the reserve ratio of the DIF for
the prior assessment period is equal to or greater than 2 percent and
less than 2.5 percent. (1) Initial Base Assessment Rate Schedule. If
the reserve ratio of the DIF for the prior assessment period is equal
to or greater than 2 percent and less than 2.5 percent, the initial
base assessment rate for an insured depository institution, except as
provided in paragraph (e) of this section, shall be the rate prescribed
in the following schedule:
Initial Base Assessment Rate Schedule if Reserve Ratio for Prior Assessment Period is Equal to or Greater Than 2
Percent But Less Than 2.5 Percent
----------------------------------------------------------------------------------------------------------------
Large and
Risk Category Risk Category Risk Category Risk Category highly
I II III IV complex
institutions
----------------------------------------------------------------------------------------------------------------
Initial base assessment rate.... 2-6 10 17 28 2-28
----------------------------------------------------------------------------------------------------------------
* All amounts for all risk categories are in basis points annually. Initial base rates that are not the minimum
or maximum rate will vary between these rates.
(i) Risk Category I Initial Base Assessment Rate Schedule. The
annual initial base assessment rates for all institutions in Risk
Category I shall range from 2 to 6 basis points.
(ii) Risk Category II, III, and IV Initial Base Assessment Rate
Schedule. The annual initial base assessment rates for Risk Categories
II, III, and IV shall be 10, 17, and 28 basis points, respectively.
(iii) All institutions in any one risk category, other than Risk
Category I, will be charged the same initial base assessment rate,
subject to adjustment as appropriate.
(iv) Large and Highly Complex Institutions Initial Base Assessment
Rate Schedule. The annual initial base assessment rates for all large
and highly complex institutions shall range from 2 to 28 basis points.
(2) Total Base Assessment Rate Schedule after Adjustments. If the
reserve ratio of the DIF for the prior assessment period is equal to or
greater than 2 percent and less than 2.5 percent, the total base
assessment rates after adjustments for an insured depository
institution, except as provided in paragraph (e) of this section, shall
be the rate prescribed in the following schedule.
[[Page 72604]]
Total Base Assessment Rate Schedule (after Adjustments)* if Reserve Ratio for Prior Assessment Period Is Equal
to or Greater Than 2 Percent But Less Than 2.5 Percent**
----------------------------------------------------------------------------------------------------------------
Large and
Risk Category Risk Category Risk Category Risk Category highly
I II III IV complex
institutions
----------------------------------------------------------------------------------------------------------------
Initial base assessment rate.... 2-6 10 17 28 2-38
Unsecured debt adjustment....... (3)-0 (5)-0 (5)-0 (5)-0 (5)-0
Brokered deposit adjustment..... .............. 0-10 0-10 0-10 0-10
-------------------------------------------------------------------------------
Total base assessment rate.. 1-6 5-20 12-27 23-38 1-38
----------------------------------------------------------------------------------------------------------------
* All amounts for all risk categories are in basis points annually. Total base rates that are not the minimum or
maximum rate will vary between these rates.
** Total base assessment rates do not include the depository institution debt adjustment.
(i) Risk Category I Total Base Assessment Rate Schedule. The annual
total base assessment rates for institutions in Risk Category I shall
range from 1 to 6 basis points.
(ii) Risk Category II Total Base Assessment Rate Schedule. The
annual total base assessment rates for Risk Category II shall range
from 5 to 20 basis points.
(iii) Risk Category III Total Base Assessment Rate Schedule. The
annual total base assessment rates for Risk Category III shall range
from 12 to 27 basis points.
(iv) Risk Category IV Total Base Assessment Rate Schedule. The
annual total base assessment rates for Risk Category IV shall range
from 23 to 38 basis points.
(v) Large and Highly Complex Institutions Total Base Assessment
Rate Schedule. The annual total base assessment rates for all large and
highly complex institutions shall range from 1 to 38 basis points.
(d) Assessment rate schedules if the reserve ratio of the DIF for
the prior assessment period is greater than 2.5 percent.
(1) Initial Base Assessment Rate Schedule. If the reserve ratio of
the DIF for the prior assessment period is greater than 2.5 percent,
the initial base assessment rate for an insured depository institution,
except as provided in paragraph (e) of this section, shall be the rate
prescribed in the following schedule:
Initial Base Assessment Rate Schedule if Reserve Ratio for Prior Assessment Period Is Greater Than or Equal to
2.5 Percent
----------------------------------------------------------------------------------------------------------------
Large and
Risk Category Risk Category Risk Category Risk Category highly
I II III IV complex
institutions
----------------------------------------------------------------------------------------------------------------
Initial base assessment rate.... 1-5 9 15 25 1-25
----------------------------------------------------------------------------------------------------------------
* All amounts for all risk categories are in basis points annually. Initial base rates that are not the minimum
or maximum rate will vary between these rates.
(i) Risk Category I Initial Base Assessment Rate Schedule. The
annual initial base assessment rates for all institutions in Risk
Category I shall range from 1 to 5 basis points.
(ii) Risk Category II, III, and IV Initial Base Assessment Rate
Schedule. The annual initial base assessment rates for Risk Categories
II, III, and IV shall be 9, 15, and 25 basis points, respectively.
(iii) All institutions in any one risk category, other than Risk
Category I, will be charged the same initial base assessment rate,
subject to adjustment as appropriate.
(iv) Large and Highly Complex Institutions Initial Base Assessment
Rate Schedule. The annual initial base assessment rates for all large
and highly complex institutions shall range from 1 to 25 basis points.
(2) Total Base Assessment Rate Schedule after Adjustments. If the
reserve ratio of the DIF for the prior assessment period is greater
than 2.5 percent, the total base assessment rates after adjustments for
an insured depository institution, except as provided in paragraph (e)
of this section, shall be the rate prescribed in the following
schedule.
Total Base Assessment Rate Schedule (after Adjustments)* if Reserve Ratio for Prior Assessment Period Is Greater
Than or Equal to 2.5 Percent **
----------------------------------------------------------------------------------------------------------------
Large and
Risk Category Risk Category Risk Category Risk Category highly
I II III IV complex
institutions
----------------------------------------------------------------------------------------------------------------
Initial base assessment rate.... 1-5 9 15 25 1-25
Unsecured debt adjustment....... (2.5)-0 (4.5)-0 (5)-0 (5)-0 (5)-0
Brokered deposit adjustment..... .............. 0-10 0-10 0-10 0-10
-------------------------------------------------------------------------------
Total base assessment rate.. 0.5-5 4.5-19 10-25 20-35 0.5-35
----------------------------------------------------------------------------------------------------------------
* All amounts for all risk categories are in basis points annually. Total base rates that are not the minimum or
maximum rate will vary between these rates.
[[Page 72605]]
** Total base assessment rates do not include the depository institution debt adjustment.
(i) Risk Category I Total Base Assessment Rate Schedule. The annual
total base assessment rates for institutions in Risk Category I shall
range from 0.5 to 5 basis points.
(ii) Risk Category II Total Base Assessment Rate Schedule. The
annual total base assessment rates for Risk Category II shall range
from 4.5 to 19 basis points.
(iii) Risk Category III Total Base Assessment Rate Schedule. The
annual total base assessment rates for Risk Category III shall range
from 10 to 25 basis points.
(iv) Risk Category IV Total Base Assessment Rate Schedule. The
annual total base assessment rates for Risk Category IV shall range
from 20 to 35 basis points.
(v) Large and Highly Complex Institutions Total Base Assessment
Rate Schedule. The annual total base assessment rates for all large and
highly complex institutions shall range from 0.5 to 35 basis points.
(e) Assessment Rate Schedules for New Institutions. New depository
institutions, as defined in 327.8(j), shall be subject to the
assessment rate schedules as follows:
(1) Prior to the reserve ratio of the DIF first reaching 1.15
percent after September 30, 2010. After September 30, 2010, if the
reserve ratio of the DIF has not reached 1.15 percent, new institutions
shall be subject to the initial and total base assessment rate
schedules provided for in paragraph (a) of this section.
(2) Assessment rate schedules once the DIF reserve ratio first
reaches 1.15 percent after September 30, 2010. After September 30,
2010, once the reserve ratio of the DIF first reaches 1.15 percent, new
institutions shall be subject to the initial and total base assessment
rate schedules provided for in paragraph (b) of this section, even if
the reserve ratio equals or exceeds 2 percent or 2.5 percent.
(f) Total Base Assessment Rate Schedule adjustments and
procedures--(1) Board Rate Adjustments. The Board may increase or
decrease the total base assessment rate schedule in paragraphs (a)
through (d) of this section up to a maximum increase of 3 basis points
or a fraction thereof or a maximum decrease of 3 basis points or a
fraction thereof (after aggregating increases and decreases), as the
Board deems necessary. Any such adjustment shall apply uniformly to
each rate in the total base assessment rate schedule. In no case may
such Board rate adjustments result in a total base assessment rate that
is mathematically less than zero or in a total base assessment rate
schedule that, at any time, is more than 3 basis points above or below
the total base assessment schedule for the Deposit Insurance Fund in
effect pursuant to paragraph (b) of this section, nor may any one such
Board adjustment constitute an increase or decrease of more than 3
basis points.
(2) Amount of revenue. In setting assessment rates, the Board shall
take into consideration the following:
(i) Estimated operating expenses of the Deposit Insurance Fund;
(ii) Case resolution expenditures and income of the Deposit
Insurance Fund;
(iii) The projected effects of assessments on the capital and
earnings of the institutions paying assessments to the Deposit
Insurance Fund;
(iv) The risk factors and other factors taken into account pursuant
to 12 USC 1817(b)(1); and
(v) Any other factors the Board may deem appropriate.
(3) Adjustment procedure. Any adjustment adopted by the Board
pursuant to this paragraph will be adopted by rulemaking, except that
the Corporation may set assessment rates as necessary to manage the
reserve ratio, within set parameters not exceeding cumulatively 3 basis
points, pursuant to paragraph (c)(1) of this section, without further
rulemaking.
(4) Announcement. The Board shall announce the assessment schedules
and the amount and basis for any adjustment thereto not later than 30
days before the quarterly certified statement invoice date specified in
Sec. 327.3(b) of this part for the first assessment period for which
the adjustment shall be effective. Once set, rates will remain in
effect until changed by the Board.
8. Appendix A to Subpart A is revised to read as follows:
Appendix A to Subpart A of Part 327--Description of Scorecard Measures
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Tier 1 Leverage Ratio.................................. Tier 1 capital for Prompt Corrective Action (PCA)
divided by adjusted average assets based on the
definition for prompt corrective action.
Concentration Measure for Large IDIs (excluding Highly Concentration score for large institutions takes the
Complex Institutions). higher score of the following two:
(1) Higher-Risk Assets/Tier 1 Capital and Reserves. Sum of construction and land development (C&D) loans
(funded and unfunded), leveraged loans (funded and
unfunded), nontraditional mortgages, and subprime
consumer loans divided by Tier 1 capital and reserves.
See Appendix C to this part for the detailed
description of the ratio.
(2) Growth-Adjusted Portfolio Concentrations....... The measure is calculated in following steps:
(i) Concentration levels (as a ratio to Tier 1 capital
and reserves) are calculated for each broad portfolio
category (C&D, other commercial real estate loans,
first lien residential mortgages (including non-agency
mortgage-backed securities), and junior lien
residential mortgages, commercial and industrial
loans, credit card, and other consumer loans).
(ii) Three-year merger-adjusted portfolio growth rates
are then scaled to a growth factor of 1 to 1.2 where a
3-year cumulated growth rate of 20 percent or less
equals a factor of 1 and a growth rate of 80 percent
or greater equals a factor of 1.2. If three years of
data are not available, a growth factor of 1 will be
assigned.
(iii) Risk weights are assigned to each category based
on historical loss rates.
(iv) Concentration levels are multiplied by risk
weights and squared to produce a risk-adjusted
concentration ratio for each portfolio.
(v) The risk-adjusted concentration ratio for each
portfolio is multiplied by the growth factor and
resulting values are summed.
[[Page 72606]]
See Appendix C to this part for the detail description
of the measure.
Concentration Measure for Highly Complex Institutions.. Concentration score for highly complex institutions
takes the highest score of the following three:
(1) Higher-Risk Assets/Tier 1 Capital and Reserves. Sum of C&D loans (funded and unfunded), leveraged loans
(funded and unfunded), nontraditional mortgages, and
subprime consumer loans divided by Tier 1 capital and
reserves. See Appendix C to this part for the detailed
description of the ratio.
(2) Top 20 Counterparty Exposure/Tier 1 Capital and Sum of the total exposure amount to the largest 20
Reserves. counterparties by exposure amount divided by Tier 1
capital and reserves. Counterparty exposure is equal
to the sum of Exposure at Default (EAD) associated
with derivatives trading and Securities Financing
Transactions (SFTs) and the gross lending exposure
(including all unfunded commitments) for each
counterparty or borrower at the consolidated entity
level.\1\ EAD for derivatives trading and SFTs is to
be calculated as defined in Basel II or as updated in
future Basel Accords. EAD and lending exposure is to
be reported at the consolidated level across all legal
entities for that counterparty.
(3) Largest Counterparty Exposure/Tier 1 Capital Sum of the exposure amount to the largest counterparty
and Reserves. by exposure amount divided by Tier 1 capital and
reserves. Counterparty exposure is equal to the sum of
Exposure at Default (EAD) associated with derivatives
trading and Securities Financing Transactions (SFTs)
and the gross lending exposure (including all unfunded
commitments) for each counterparty or borrower at the
consolidated entity level. EAD for derivatives trading
and SFTs is to be calculated as defined in Basel II or
as updated in future Basel Accords. EAD and lending
exposure is to be reported at the consolidated level
across all legal entities for that counterparty.
Core Earnings/Average Quarter-End Total Assets......... Core earnings are defined as quarterly net income less
extraordinary items and realized gains and losses on
available-for-sale (AFS) and held-to-maturity (HTM)
securities, adjusted for mergers. The ratio takes a
four-quarter sum of merger-adjusted core earnings and
divides it by an average of five quarter-end total
assets (most recent and four prior quarters). If four
quarters of data on core earnings are not available,
data for quarters that are available will be added and
annualized. If five quarters of data on total assets
are not available, data for quarters that are
available will be averaged.
Credit Quality Measure:................................ Asset quality score takes a higher score of the
following two:
(1) Criticized and Classified Items/Tier 1 Capital Sum of criticized and classified items divided by the
and Reserves. sum of Tier 1 capital and reserves. Criticized and
classified items include items with an internal grade
of ``Special Mention'' or worse and include retail
items under Uniform Retail Classification Guidelines,
securities that are internally rated the regulatory
equivalent of ``Special Mention'' or worse, and marked-
to-market counterparty positions that are internally
rated the regulatory equivalent of ``Special Mention''
or worse, less credit valuation adjustments.
Criticized and classified items exclude loans and
securities in trading books, and the maximum amount
recoverable from the U.S. government, its agencies, or
government-sponsored agencies, under guarantee or
insurance provisions.
(2) Underperforming Assets/Tier 1 Capital and Sum of loans that are 30-89 days past due, loans that
Reserves. are 90 days or more past due, nonaccrual loans,
restructured loans (including restructured 1-4 family
loans), and ORE, excluding the maximum amount
recoverable from the U.S. government, its agencies, or
government-sponsored agencies, under guarantee or
insurance provisions, divided by a sum of Tier 1
capital and reserves.
Core Deposits/Total Liabilities........................ Sum of demand deposits, NOW accounts, MMDA, other
savings deposits, CDs under $250,000 less insured
brokered deposits under $250,000 divided by total
liabilities.
Balance Sheet Liquidity Ratio.......................... Sum of cash and balances due from depository
institutions, Federal funds sold and securities
purchased under agreements to resell, and agency
securities (excludes agency mortgage-backed securities
but includes securities issued by the US Treasury, US
government agencies, and US government-sponsored
enterprises) divided by the sum of Federal funds
purchased and repurchase agreements, other borrowings
(including FHLB) with a remaining maturity of one year
or less, 7.5 percent of insured domestic deposits, and
15 percent of uninsured domestic and foreign deposits.
Potential Losses/Total Domestic Deposits (Loss Severity Potential losses to the DIF in the event of failure
Measure). divided by total domestic deposits. Appendix D
describes the calculation of the loss severity measure
in detail.
[[Page 72607]]
Noncore Funding/Total Liabilities...................... Noncore liabilities divided by total liabilities.
Noncore liabilities generally consist of total time
deposits of $250,000 or more, other borrowed money
(all maturities), foreign office deposits, securities
sold under agreements to repurchase, Federal funds
purchased, and insured brokered deposits issued in
denominations of less than $250,000.
Market Risk Measure for Highly Complex Institutions.... This measure is a weighted average of three risk
measures:
(1) Trading Revenue Volatility/Tier 1 Capital...... Trailing 4-quarter standard deviation of quarterly
trading revenue (merger-adjusted) divided by Tier 1
capital.
(2) Market Risk Capital/Tier 1 Capital............. Market risk capital divided by Tier 1 capital. Market
risk capital equals market-risk equivalent assets
divided by 12.5.
(3) Level 3 Trading Assets/Tier 1 Capital.......... Level 3 trading assets divided by Tier 1 capital.
Average Short-term Funding/Average Total Assets........ Quarterly average of Federal funds purchased and
repurchase agreements divided by the quarterly average
of total assets as reported on Schedule RC-K of call
reports.
----------------------------------------------------------------------------------------------------------------
\1\ EAD and SFTs are defined and described in the compilation issued by the Basel Committee on Banking
Supervision in its June 2006 document, ``International covergence of Capital Measurement and Capital
Standards.'' The definitions are described in detail in Annex 4 of the document. Any updates to the Basel II
capital treatment of counterparty credit risk would be implemented as they are adopted.
9. Appendix B to Subpart A is revised to read as follows:
Appendix B to Subpart A of Part 327--Conversion of Scorecard Measures
into Score
1. Weighted Average CAMELS Rating
Weighted average CAMELS ratings between 1 and 3.5 are assigned a
score between 25 and 100 according to the following equation:
S = 25 + [(20/3) * (C2 - 1)],
Where:
S = the weighted average CAMELS score; and
C = the weighted average CAMELS rating.
2. Other Scorecard Measures
For certain scorecard measures, a lower ratio implies lower risk
and a higher ratio implies higher risk. These measures include:
Concentration measure;
Credit quality measure;
Market risk measure;
Average short-term funding to average total assets
ratio;
Potential losses to total domestic deposits ratio (loss
severity measure); and,
Noncore funding to total liabilities ratio.
For those measures, a value between the minimum and maximum
cutoff values is converted linearly to a score between 0 and 100,
according to the following formula:
S = (V - Min) * 100/(Max - Min),
where S is score (rounded to three decimal points), V is the value
of the measure, Min is the minimum cutoff value and Max is the
maximum cutoff value.
For other scorecard measures, a lower value represents higher
risk and a higher value represents lower risk. These measures
include:
Tier 1 leverage ratio;
Core earnings to average quarter-end total assets
ratio;
Core deposits to total liabilities ratio; and,
Balance sheet liquidity ratio.
For those measures, a value between the minimum and maximum
cutoff values is converted linearly to a score between 0 and 100,
according to the following formula:
S = (Max - V) * 100/(Max - Min),
where S is score (rounded to three decimal points), V is the value
of the measure, Max is the maximum cutoff value and Min is the
minimum cutoff value.
10. Appendix C to Subpart A is revised to read as follows:
Appendix C to Subpart A to Part 327--Concentration Measures
The concentration measure score for large institutions is the
higher of the two concentration scores: A higher-risk assets to Tier
1 capital and reserves ratio and a growth-adjusted portfolio
concentration measure. The concentration measure score for highly
complex institutions takes a higher of the three concentration
scores: A higher-risk assets to Tier 1 capital and reserve ratio, a
Top 20 counterparty exposure to Tier 1 capital and reserves ratio, a
largest counterparty to Tier 1 capital and reserves ratio. The
higher-risk assets to Tier 1 capital and reserve ratio and the
growth-adjusted portfolio concentration measure are described below.
A. Higher-Risk Assets/Tier 1 Capital and Reserves
The higher-risk assets to Tier 1 capital and reserves ratio is
the sum of the concentrations in each of four risk areas described
below and is calculated as:
[GRAPHIC] [TIFF OMITTED] TP24NO10.336
Where:
H is institution i's higher-risk concentration measure and
k is a risk area.\1\
The four risk areas (k) are defined as:
Construction and land development loans (funded and
unfunded);
Leveraged loans (funded and unfunded);
Nontraditional mortgage loans; and
Subprime consumer loans.2 3
---------------------------------------------------------------------------
\1\ The high-risk concentration measure is rounded to two
decimal points.
\2\ All loan concentrations should include purchased credit
impaired loans.
\3\ Each loan concentration category should exclude the maximum
amount of loans recoverable from the U.S. government, its agencies,
or government-sponsored agencies, under guarantee or insurance
provisions.
---------------------------------------------------------------------------
The risk areas are defined according to the interagency guidance
for a given product with specific modifications made to minimize
reporting discrepancies. The definitions for each risk area are as
follows:
1. Construction and Land Development Loans: Construction and
development loans include construction and land development loans
outstanding and unfunded commitments.
2. Leveraged Loans: Leveraged loans include all commercial
loans--funded and unfunded and securities (e.g., high yield bonds
meeting any of the criteria below), excluding those securities
classified as trading book, that meet any one of the following
conditions:
Loans or securities where proceeds are used for buyout,
acquisition, and recapitalization;
Loans or securities with a balance sheet leverage ratio
(total liabilities/total assets) higher than 50 percent or where a
transaction resulted in an increase in the leverage ratio of more
than 75 percent. Loans or securities where borrower's operating
leverage ratio ((total debt/trailing twelve month EBITDA (earnings
before interest, taxes, depreciation, and amortization) or senior
debt/trailing twelve month EBITDA)) are above 4.0X EBITDA or 3.0X
EBITDA, respectively. For
[[Page 72608]]
purposes of this calculation, the only permitted EBITDA adjustments
are those adjustments specifically permitted for that borrower in
its credit agreement; or
Loans or securities that are designated as highly
leveraged transactions (HLT) by syndication agent.\4\
\4\ http://www.fdic.gov/news/news/press/2001/pr2801.html.
---------------------------------------------------------------------------
For purposes of the concentration measure, leveraged loans
include all loans and/or securitizations that may not have been
considered leveraged at the time of origination, but subsequent to
origination, meet the characteristics of a leveraged loan. Leveraged
loans include all securitizations where greater than 50 percent of
the assets backing the securitization meet one or more of the
preceding criteria of leveraged loans (e.g., CLOs), with the
exception of those securities classified as trading book.
3. Nontraditional Mortgage Loans: Nontraditional mortgage loans
includes all residential loan products that allow the borrower to
defer repayment of principal or interest and includes all interest-
only products, teaser rate mortgages, and negative amortizing
mortgages, with the exception of home equity lines of credit
(HELOCs) or reverse mortgages.\5\
---------------------------------------------------------------------------
\5\ http://www.fdic.gov/regulations/laws/federal/2006/06noticeFINAL.html.
---------------------------------------------------------------------------
For purposes of the concentration measure, nontraditional
mortgage loans include securitizations where greater than 50 percent
of the assets backing the securitization meet one or more of the
preceding criteria for nontraditional mortgage loans, with the
exception of those securities classified as trading book.
4. Subprime Consumer Loans: Subprime loans include loans made to
borrowers that display one or more of the following credit risk
characteristics (excluding subprime loans that are previously
included as nontraditional mortgage loans):
Two or more 30-day delinquencies in the last 12 months,
or one or more 60-day delinquencies in the last 24 months;
Judgment, foreclosure, repossession, or charge-off in
the prior 24 months;
Bankruptcy in the last 5 years;
Credit bureau risk score (FICO) of 660 or below
(depending on the product/collateral), or other bureau or
proprietary scores with an equivalent default probability
likelihood; and/or
Debt service-to-income ratio of 50 percent or greater,
or otherwise limited ability to cover family living expenses after
deducting total monthly debt-service requirements from monthly
income.\6\
\6\ http://www.fdic.gov/news/news/press/2001/pr0901a.html.
---------------------------------------------------------------------------
For purposes of the concentration measure, subprime loans include
loans that were not considered subprime at origination, but meet the
characteristics of subprime subsequent to origination. Subprime
loans also include securitizations where more than 50 percent of
assets backing the securitization meet one or more of the preceding
criteria for subprime loans, excluding those securities classified
as trading book.
B. Growth-adjusted portfolio concentration measure
The growth-adjusted concentration measure is the sum of the
values of concentrations in each of the seven portfolios, each of
the values being first adjusted for risk weights and growth. To
obtain the value for each of the seven portfolios, the product of
the risk weight and the concentration ratio is first squared and
then multiplied by the growth factor. The measure is calculated as:
[GRAPHIC] [TIFF OMITTED] TP24NO10.337
Where:
N is institution i's growth-adjusted portfolio concentration
measure; \7\
---------------------------------------------------------------------------
\7\ The growth-adjusted portfolio concentration measure is
rounded to two decimal points.
---------------------------------------------------------------------------
k is a portfolio;
g is a growth factor for institution i's portfolio k; and,
w is a risk weight for portfolio k.
The seven portfolios (k) are defined based on the Call Report/
TFR data and they are:
First-lien residential mortgages and non-agency
residential mortgage-backed securities;
Closed-end junior liens and home equity lines of credit
(HELOCs);
Construction and land development loans;
Other commercial real estate loans;
Commercial and industrial loans;
Credit card loans; and
Other consumer loans.8 9
---------------------------------------------------------------------------
\8\ All loan concentrations should include the fair value of
purchased credit impaired loans.
\9\ Each loan concentration category should exclude the maximum
amount of loans recoverable from the U.S. government, its agencies,
or government-sponsored agencies, under guarantee or insurance
provisions.
---------------------------------------------------------------------------
The growth factor, g, is based on a three-year merger-adjusted
growth rate for a given portfolio; g ranges from 1 to 1.2 where a 20
percent growth rate equals a factor of 1 and an 80 percent growth
rate equals a factor of 1.2.10 11 For growth rates less
than 20 percent, g is 1; for growth rates greater than 80 percent, g
is 1.2. For growth rates between 20 percent and 80 percent, the
growth factor is calculated as:
---------------------------------------------------------------------------
\10\ The cut-off values of 0.2 and 0.8 correspond to about 45th
percentile and 80th percentile among the large institutions,
respectively, based on the data from 2000 to 2009.
\11\ The growth factor is rounded to two decimal points.
[GRAPHIC] [TIFF OMITTED] TP24NO10.338
where
[GRAPHIC] [TIFF OMITTED] TP24NO10.339
V is the portfolio amount as reported on the Call Report/TFR and
t is the quarter for which the assessment is being determined.
The risk weight for each portfolio reflects relative peak loss
rates for banks at the 90th percentile during the 1990-2009
period.\12\ These loss rates were converted into equivalent risk
weights as shown in Table C.1.
---------------------------------------------------------------------------
\12\ The risk weights are based on loss rates for each portfolio
relative to the loss rate for C&I loans, which is given a risk
weight of 1. The peak loss rates were derived as follows. The loss
rate for each loan category for each bank with over $5 billion in
total assets was calculated for each of the last twenty calendar
years (1990-2009). The highest value of the 90th percentile of each
loan category over the twenty year period was selected as the peak
loss rate.
Table C.1--90th percentile Annual Loss Rates for 1990-2009 Period and
Corresponding Risk Weights
------------------------------------------------------------------------
Loss rates
Portfolio (90th Risk
percentile) weights
------------------------------------------------------------------------
First-Lien Mortgages............................. 2.3 0.5
Second/Junior Lien Mortgages..................... 4.6 0.9
Commercial and Industrial (C&I) Loans............ 5.0 1.0
Construction and Development (C&D) Loans......... 15.0 3.0
Commercial Real Estate Loans, excluding C&D...... 4.3 0.9
Credit Card Loans................................ 11.8 2.4
Other Consumer Loans............................. 5.9 1.2
------------------------------------------------------------------------
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[[Page 72609]]
11. Appendix D to Subpart A is added to read as follows:
Appendix D to Subpart A of Part 327--Description of the Loss
Severity Measure
The loss severity measure applies a standardized set of
assumptions to an institution's balance sheet for a given quarter to
measure possible losses to the FDIC in the event of an institution's
failure. To determine an institution's loss severity rate, the FDIC
first uses assumptions about uninsured deposit and other unsecured
liability runoff and growth in insured deposits to adjust the size
and composition of the institution's liabilities. Assets are then
reduced to match any reduction in liabilities.\1\ The institution's
asset values are then further reduced so that the Tier 1 leverage
ratio reaches 2 percent.\2\ Asset adjustments are made pro rata to
asset categories to preserve the institution's asset composition.
Assumptions regarding loss rates at failure for a given asset
category and the extent of secured liabilities are then applied to
estimated assets and liabilities at failure to determine whether the
institution has enough unencumbered assets to cover domestic
deposits. Any projected shortfall is divided by current domestic
deposits to obtain an end-of-period loss severity ratio. The loss
severity measure is an average loss severity ratio for the three
most recent quarters.
---------------------------------------------------------------------------
\1\ In most cases, the model would yield reductions in
liabilities and assets prior to failure. Exceptions may occur for
institutions primarily funded through insured deposits, which the
model assumes to grow prior to failure.
\2\ Of course, in reality, runoff and capital declines occur
more or less simultaneously as an institution approaches failure.
The loss severity measure assumptions simplify this process for ease
of modeling.
---------------------------------------------------------------------------
Runoff and Capital Adjustment Assumptions
Table D.1 contains run-off assumptions.
Table D.1--Runoff Rate Assumptions
------------------------------------------------------------------------
Runoff rate*
Liability type (percent)
------------------------------------------------------------------------
Insured Deposits........................................ -32.0
Uninsured Deposits...................................... 28.6
Foreign Deposits........................................ 80.0
Federal Funds Purchased................................. 40.0
Repurchase Agreements................................... 25.0
Trading Liabilities..................................... 50.0
Unsecured Borrowings <= 1 Year.......................... 75.0
Unsecured Borrowing > 1 Year............................ 0.0
Secured Borrowings <= 1 Year............................ 25.0
Secured Borrowings > 1 Year............................. 0.0
Subordinated Debt and Limited Liability Preferred Stock. 15.0
Other Liabilities....................................... 0.0
------------------------------------------------------------------------
* A negative rate implies growth.
Given the resulting total liabilities after runoff, assets are
then reduced pro rata to preserve the relative amount of assets in
each of the following asset categories and to achieve a Tier 1
leverage ratio of 2 percent:
Cash and Interest Bearing Balances;
Trading Account Assets;
Federal Funds Sold and Repurchase Agreements;
Treasury and Agency Securities;
Municipal Securities;
Other Securities;
Construction and Development Loans;
Nonresidential Real Estate Loans;
Multifamily Real Estate Loans;
1-4 Family Closed-End First Liens;
1-4 Family Closed-End Junior Liens;
Revolving Home Equity Loans; and
Agricultural Real Estate Loans.
Recovery Value of Assets at Failure
Table D.2 shows loss rates applied to each of the asset
categories as adjusted above.
Table D.2--Asset Loss Rate Assumptions
------------------------------------------------------------------------
Loss rate
Asset category (percent)
------------------------------------------------------------------------
Cash and Interest Bearing Balances...................... 0.0
Trading Account Assets.................................. 0.0
Federal Funds Sold and Repurchase Agreements............ 0.0
Treasury and Agency Securities.......................... 0.0
Municipal Securities.................................... 10.0
Other Securities........................................ 15.0
Construction and Development Loans...................... 38.2
Nonresidential Real Estate Loans........................ 17.6
Multifamily Real Estate Loans........................... 10.8
1-4 Family Closed-End First Liens....................... 19.4
1-4 Family Closed-End Junior Liens...................... 41.0
Revolving Home Equity Loans............................. 41.0
Agricultural Real Estate Loans.......................... 19.7
Agricultural Loans...................................... 11.8
Commercial and Industrial Loans......................... 21.5
Credit Card Loans....................................... 18.3
Other Consumer Loans.................................... 18.3
All Other Loans......................................... 51.0
Other Assets............................................ 75.0
------------------------------------------------------------------------
Secured Liabilities at Failure
Federal home loan bank advances, secured Federal funds
purchased, foreign deposits and repurchase agreements are assumed to
be fully secured.
Loss Severity Ratio Calculation
The FDIC's loss given failure (LGD) is calculated as:
[GRAPHIC] [TIFF OMITTED] TP24NO10.340
An end-of-quarter loss severity ratio is LGD divided by total
domestic deposits at quarter-end and the loss severity measure for
the scorecard is an average of end-of-period loss severity ratio for
three most recent quarters.
By order of the Board of Directors.
Dated at Washington, DC, this 9th day of November 2010.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2010-29137 Filed 11-19-10; 4:15 pm]
BILLING CODE 6714-01-P