Assessments

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 327

RIN 3064-AB65

Assessments

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Final rule.

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SUMMARY: The Federal Deposit Insurance Corporation (FDIC) is amending

its regulation on assessments in several ways.

First, the FDIC is delaying the regular payment date for the first

quarterly assessment payment that insured institutions must make for

the first semiannual period of each year (first payment). The first

payment has been due on December 30 of the prior year. The FDIC is

changing the regular payment date to the January 2 (or the first

business day thereafter). But at the same time, the FDIC is giving

insured institutions the option of making the first payment on December

30 (or the prior business day). The FDIC's purpose in making this pair

of changes is to relieve certain institutions of the regulatory burden

of having to make an extra assessment payment in 1995, while at the

same time affording flexibility to other institutions to make such a

payment if they should so desire.

Second, the FDIC is giving insured institutions the option of

paying double the amount of any quarterly payment, when the payment is

made on a payment date (regular or alternate, as the case may be) that

comes before the start of the quarter to which the payment pertains--

i.e., on the March, June, September, and December payment dates. The

FDIC is adopting this change in response to a suggestion made by a

commenter. The FDIC believes the change will promote greater

flexibility in the assessment procedures.

Third, the FDIC is replacing the interest rate to be applied to

underpayments and overpayments of assessments with a new, more

sensitive rate derived from the 3-month Treasury bill discount rate.

Rates set under the prior standard have rapidly become obsolete in

volatile interest-rate markets; the new standard is more sensitive to

current market conditions.

Finally, the FDIC is shortening the timetable for announcing a

change in the assessment rate from 45 days to 15 days prior to the

invoice date. This change enables the FDIC to use the most up-to-date

information available for computing assessments, thereby benefiting

both the FDIC and the depository institutions.

EFFECTIVE DATE: This rule is effective September 29, 1995, except the

amendments to Sec. 327.7 are effective October 30, 1995.

FOR FURTHER INFORMATION CONTACT: Allan Long, Assistant Director,

Treasury Branch, Division of Finance (703) 516-5559; Claude A. Rollin,

Senior Counsel,

[[Page 50401]]

Legal Division (202) 898-3985; or Jules Bernard, Counsel, Legal

Division, (202) 898-3731; Federal Deposit Insurance Corporation,

Washington, D. C. 20429.

SUPPLEMENTARY INFORMATION:

A. Background

1. The payment schedule

On December 20, 1994, the FDIC adopted a new quarterly-collection

procedure for collecting deposit insurance assessments. See 59 FR 67153

(December 29, 1994). The quarterly-collection procedure became

effective April 1, 1995: it applies to the second semiannual assessment

period of 1995 (beginning July 1, 1995) and thereafter.

The quarterly-collection procedure calls for the FDIC to collect

assessment payments four times a year, by means of FDIC-originated

direct debits through the Automated Clearing House network. Prior to

the final rule adopted here, each payment to be made for a calendar

quarter was due just prior to the start of that quarter.1 The

payment for the first calendar quarter of a year (first payment)--the

initial payment for the first semiannual period of the year--was due on

the prior December 30. The other regular payment dates followed suit.

The second-quarter payment was due on March 30. The payment for the

third quarter--the initial payment for the second semiannual period of

the year--was due on June 30. And the payment for the fourth quarter

was due on September 30. (In every case, if the scheduled payment date

fell on a holiday or a weekend, the payment was to be made by the

previous business day.)

\1\ Thirty days before each regular payment date, the FDIC

provides to each institution an invoice showing the amount that the

institution must pay. The FDIC prepares the invoice from data that

the institution has reported in its report of condition for the

previous quarter. See 12 CFR 327.3(c) & (d).

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The FDIC published the quarterly-collection procedure as a proposed

rule before adopting it. See 59 FR 29965 (June 10, 1994). The FDIC

received 51 comment letters on the proposal.

Two commenters pointed out that the quarterly-collection procedure

would produce the so-called ``5 in 95'' anomaly. That is, institutions

would pay their full semiannual assessment for the first semiannual

period in 1995 in January, in accordance with the assessment

regulations then in effect. Institutions would also pay both quarterly

payments for the second semiannual period in 1995 (one at the end of

June; the other at the end of September). Then institutions would make

one more payment in 1995: the first payment for 1996. In effect, in

1995 they would pay assessments for 5 quarters.

The two commenters asked the FDIC to move the payment date for the

first payment for 1996 from December 30, 1995, to January, 1996. In

response, the FDIC looked into the issue further.

The FDIC concluded, as a result of its inquiry, that the ``5 in

95'' anomaly would have an adverse effect on relatively few

institutions. The FDIC therefore decided to retain the December payment

date. The FDIC recognized that the December 1995 payment date could

present a one-time problem for some institutions. But the FDIC

concluded that this situation was simply a by-product of the shift from

a semiannual to a quarterly collection procedure, and would not involve

an ``extra'' assessment payment. The FDIC further observed that this

timing issue would adversely affect only institutions that use cash-

basis accounting. Finally, the FDIC pointed out that the commenters'

recommended solution--moving the December payment date to January--

would not cure the problem if adopted only for a single year: the

problem would recur in 1996. Curing the problem would require a

permanent change in the December payment date. When the FDIC adopted

the regulation in final form, the FDIC retained the December 30 payment

date. See 59 FR 67153, 67157 ( December 29, 1994).

Shortly after adopting the quarterly-collection procedure, however,

the FDIC began to receive information suggesting that more institutions

would be adversely affected by the December payment date than was

initially thought. Moreover, the Independent Bankers Association of

America (IBAA) issued a letter to the FDIC requesting the FDIC to

reconsider the issue in light of the December payment date's effect on

cash-basis institutions. The FDIC's Board of Directors viewed the

IBAA's request as a ``petition for the amendment of a regulation''

within the meaning of the FDIC's policy statement ``Development and

Review of FDIC Rules and Regulations,'' 2 FED. DEPOSIT INS. CORP. LAWS,

REGULATIONS, RELATED ACTS 5057 (1984). The FDIC therefore proposed the

rule that is here adopted in final form. 60 FR 40776 (August 10, 1995).

The final rule moves the regular payment date for the first payment

from December 30 of the prior year (or the preceding business day) to

January 2 (or the next business day) of the current year. The final

rule does not change the other regular payment dates.

2. Doubled Payments

Prior to the final rule adopted here, the FDIC's regulations did

not provide a standard method for institutions to pay amounts other

than the regular quarterly payments.

The final rule gives each institution the option of paying double

the amount of a quarterly payment, if the payment is made on a payment

date (regular or alternate, as the case may be) that comes prior to the

start of the calendar quarter for which it is due. The final rule

specifies the methodology for making doubled payments.

3. Interest on Underpaid and Overpaid Assessments

The FDIC pays interest on amounts that insured institutions overpay

on their assessments, and charges interest on amounts by which insured

institutions underpay their assessments. The interest rate has been the

same in either case: namely, the United States Treasury Department's

current value of funds rate which is issued under the Treasury Fiscal

Requirements Manual (TFRM rate) and published in the Federal Register.

See 12 CFR 327.7(b).2

\2\ The Treasury Fiscal Requirements Manual is now called the

Treasury Financial Manual.

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The TFRM rate is based on aged data, however, and quickly becomes

obsolete in volatile interest-rate markets. For example, the rate set

for January through June, 1995, was based on the average rate data from

October, 1993, through September, 1994. The practical consequence is

that the TFRM rate for the January-to-June period in 1995 was 3% per

annum, when the actual market rate at that time was over 5% per annum.

The FDIC is replacing the TFRM rate with a rate keyed to the 3-

month Treasury bill discount rate. The new rate takes effect on January

1, 1996.

4. The Assessment-Schedule Notice

Under the FDIC's regulations, the semiannual assessment rate

schedule is announced in advance, along with the amount and basis for

any adjustment to the rate schedule. Prior to the final rule adopted

here, the announcement was to be made 45 days prior to the invoice

date--that is, the date on which the FDIC issues assessment invoice

notices to institutions--for the first quarter of the semiannual period

to which the adjusted assessment schedule applies. 12 CFR

327.9(b)(3)(ii).

The final rule reduces the advance-notice period to 15 days.

[[Page 50402]]

B. The Final Rule

1. Payment Dates for First Payments

a. The Regular Payment Date

The final rule delays the first payment's regular payment date from

December 30 of the prior year to January 2 of the current year (or, if

January 2 is a holiday or weekend, the first business day thereafter).

Every institution will ordinarily make its first payment on that date.

In this regard, the final rule adopts the rule as proposed.

The final rule is designed to protect cash-basis institutions

against the adverse consequences of having to make an extra assessment

payment during 1995. The remedy is necessarily a continuing one.

Accordingly, the FDIC has changed the payment date permanently.

The FDIC believes that the delay in the payment date confers a

financial benefit to institutions, because they may earn additional

interest on the funds they retain for the additional time. The FDIC

does not consider that it is appropriate to give a benefit of this kind

to some institutions but not others, however. Accordingly, the FDIC is

changing the payment date for all institutions, not just for cash-basis

institutions.

The FDIC further believes that most institutions have already

prepared to comply with the direct-debit procedures, and will suffer no

procedural disadvantage from the delayed payment date. The FDIC will

therefore follow the same procedures as before in collecting the first

payment.

b. The Alternate Payment Date

The FDIC recognizes, however, that some institutions may prefer the

existing payment schedule, notwithstanding the fact that they will be

making five payments during 1995. The final rule accommodates these

institutions. The final rule provides that an institution may elect to

pay its first payment for any year on an alternate payment date during

the prior December. The final rule adopts the rule as proposed in this

regard.

The alternate payment date is December 30 of the prior year (or, if

December 30 is a holiday or a weekend, the preceding business day). The

FDIC will collect payments made on that date by electronically debiting

institutions' accounts, just as the FDIC collects other quarterly

assessment payments.

In order to elect the December date, an institution must file a

certification to that effect by the preceding November 1. The election

is effective with respect to the first payment for the upcoming year,

and remains in effect until terminated.

The institution must complete a pre-printed form supplied by the

FDIC to make the certification. The form will be available from the

FDIC's Division of Finance. The institution's chief financial officer,

or an officer designated by the institution's board of directors, must

sign the form. An electing institution must certify that it will pay

its first assessment on the alternate payment date.

An institution may terminate its election of the December date in

the same way as it makes the election: By certifying that it is

terminating the election for an upcoming year. As in the case of the

original election, the institution must use a pre-printed form supplied

by the FDIC to make the certification, and must file the form by

November 1 of the prior year. The institution will then revert to the

regular payment schedule for the upcoming year and for all future

years.

An institution that terminates an election may make a new election

at any time.

The rule as proposed called for institutions to follow these

procedures. The final rule adopts the rule as proposed in this regard.

The FDIC will not pay interest on payments made prior to the

regular payment date. If an institution elects the alternate payment

date, or otherwise pays an assessment before the regular payment date

for that payment, the FDIC will not pay interest on the amount that is

ordinarily to be paid on the regular payment date.

Of course, it is possible for an institution that makes its payment

on the alternate payment date to pay an excess amount. The FDIC will

pay interest on the excess amount, but not on the amount due for the

quarterly payment. Furthermore, the FDIC will only pay such interest to

the same extent as if the institution had made the excess payment on

the regular payment date: That is, interest will not begin to run until

the day after the regular payment date. Conversely, if an institution

elects the alternate payment date, and underpays the amount due, the

FDIC will only charge interest on the amount of the underpayment

beginning on the day after the regular payment date.

The proposed rule said that the FDIC would charge and pay interest

in the manner described here. The final rule adopts the proposed rule

in the regard.

The FDIC believes that it is appropriate to allow the alternate

payment option for two reasons. The FDIC recognizes that institutions

that keep their books on an accrual basis are not materially harmed by

having to pay five quarters' worth of assessments in 1995. (By the same

token, these institutions are not materially harmed by delaying the

payment date from December to January.) Some of these institutions may

prefer to pay some or all of their first semiannual assessments on the

alternate payment date for their own business reasons. The FDIC further

recognizes that institutions may have arranged their affairs in the

expectation that the first payment for 1996 will be due in 1995. The

FDIC is providing the option of paying on the alternate payment date in

order to enable these institutions to avoid unnecessary disruption and

financial disadvantage.

2. Doubled Payments

The proposed rule said that, when an institution elects the

alternate payment date for the first payment, the institution may

further elect to pay either the amount of the first payment or twice

that amount. The final rule retains this point.

One commenter suggested, however, that some institutions may want

to make a doubled payment at the start of the second semiannual

assessment period as well as at the start of the first one. The final

rule accommodates this suggestion.

The final rule says that, whenever an institution makes a payment

on a payment date (regular or alternate, as the case may be) that comes

before the start of the quarter for which the payment is due, the

institution may make a doubled payment. In other words, institutions

may make doubled payments on March 30, June 30, September 30, and

December 30.

The doubled-payment election would remain in effect from year to

year until terminated, but only for the selected payment date. If an

institution wished to make doubled payments for a second payment date,

the institution would file another election with respect to the second

date.

The procedure enables institutions to make doubled payments at the

start of either or both semiannual periods, as they choose. The

procedure further gives an institution with a fiscal year that starts

at the beginning of the second or fourth calendar quarter the option of

making a doubled payment prior to that calendar quarter.

The FDIC recognizes that cash-basis institutions may have fiscal

years that do not coincide with the calendar year. The FDIC is adopting

this option to give such institutions (and others) the flexibility to

schedule their payments as they see fit for their own financial

purposes.

[[Page 50403]]

A doubled payment represents an approximation of the amount due for

two quarterly payments. The approximation is not intended to be exact.

Growing institutions will ordinarily owe an additional amount on the

next quarterly payment date; shrinking institutions will ordinarily

receive a credit.

Doubled payments are not regarded as ``overpayments.'' The FDIC

will not pay interest on the extra amount so paid.

The final rule differs from the proposed rule in that the procedure

for electing the doubled-payment option is split off from the procedure

for electing the alternate payment date. But the two procedures are

substantially alike.

An institution that wishes to pay a doubled amount must file a

certification to that effect prior to the relevant regular payment

date. For the first payment, the certification must be filed by the

preceding November 1 (the same date as that for filing the

certification for the alternate payment date). For the other quarterly

payments, the certification must be filed by the first day of the month

prior to the relevant regular payment date: i.e., February 1, May 1,

August 1, and November 1, respectively. The doubled-payment election is

effective with respect to the payment made on the relevant payment date

and to all payment dates thereafter, until terminated.

The institution must complete a pre-printed form supplied by the

FDIC to make the certification. The form will be available from the

FDIC's Division of Finance. The institution's chief financial officer,

or an officer designated by the institution's board of directors, must

sign the form. An electing institution must certify that it will pay

the doubled amount on the relevant payment date.

An institution may terminate its election of the doubled-payment

option by certifying that it is terminating the election as of a

particular payment date. The institution must use a pre-printed form

supplied by the FDIC to make the certification, and must file the form

by the prior February 1, May 1, August 1, or November 1, as

appropriate. The institution will then pay the regular amount on the

relevant payment date and thereafter.

An institution that terminates the doubled-payment election may

make a new election at any time. The new election is subject to the

same deadline.

3. Interest on Underpaid and Overpaid Assessments

The FDIC is replacing the interest rate that is applied to

underpaid assessments and overpaid assessments. The previous rate was

the TFRM rate (which is now 5.00% per annum), which is compounded

annually. The FDIC is replacing this rate with a more market-sensitive

rate: the coupon equivalent rate set on the 3-month Treasury bill at

the last auction held by the U.S. Treasury Department before the start

of each quarter. Interest will be compounded as of the first day of

each subsequent quarter. Currently, this rate is 5.51% per annum (see

below). The final rule adopts the rule as proposed in this regard.

Interest begins to run on the day after the regular payment date

and continues to run through the day on which the debt is paid. 12 CFR

327.7(a)(3). The final rule changes the regular payment date for the

first payment for 1996 to January 2. Accordingly, interest on any

overpayments or underpayments due on that date will begin to run on

January 3 (even if an institution has elected the alternate payment

date).

The next payment date is March 29 (March 30 being a Saturday). The

FDIC will ordinarily collect or repay the full amount of the January

overpayment or underpayment (plus interest) on that date by adjusting

the payment then due. Accordingly, interest on the January overpayment

or underpayment will run through March 29.

The initial interest rate is the rate for the quarter for which

(but not generally in which) the payment will be made. The payment date

for the first quarter of 1996 is January 2, which falls within that

quarter. But the payment dates for the second, third, and fourth

calendar quarters are March 30, June 30, and September 30, respectively

(and if the regular payment date falls on a weekend or holiday, the

payment date is the preceding business day). Each of these payment

dates falls in the quarter preceding the quarter for which the payment

is due. Nevertheless, the initial interest rates on any underpayments

or overpayments of payments due on these dates are the rates for the

second, third, and fourth quarters, respectively.

The final rule differs slightly from the proposed rule in setting

the interval during which the appropriate interest rate will be

applied. The proposed rule reset the rate at the end of each calendar

quarter, thereby introducing needless complexity, especially when the

payment date came after the end of the calendar quarter. The final rule

uses the quarterly-collection cycle to set the structure for resetting

the rate. The FDIC is making this change in order to simplify and

clarify the interest-rate procedure.

Under the final rule, the initial interest rate on an overpayment

or underpayment applies to the amount in question beginning on the day

after the regular payment date (but not the alternate payment date) and

ending on the next regular payment date (but not the alternate payment

date). The FDIC resets the rate on the day following that next regular

payment date. If any portion of the overpayment or underpayment

(including interest) remains outstanding at that time, the FDIC applies

the new rate to the outstanding amount through the following regular

payment date (or until the overpayment or underpayment is discharged,

whichever comes first).

If the rate had been in effect for the third quarter in 1995, the

FDIC would have computed interest on an overpayment or underpayment of

an amount due for that quarter as follows:

The FDIC would have based the rate on the average rate for the

3-month Treasury bill set at the June 26, 1995, auction (settling on

June 29, 1995). On a bank discount rate basis (360-day year with no

compounding), the auction resulted in a 5.35% average rate. This

converts to a coupon equivalent rate of 5.51% according to the

United States Treasury Department.

June 30 is the payment date. On the following day (July 1) the

FDIC would have begun to apply the 5.51% rate to overpayments or

underpayments collected on June 30. The outstanding amount would

ordinarily be repaid on the next collection day, which falls on

September 29 (September 30 being a Saturday).

A $1 million overpayment collected on June 30 and refunded on

September 29 would have generated 91 days of interest: (91/366) X

.0551 X $1,000,000 = $13,699.73.3

\3\ The third calendar quarter in 1995 falls within the leap-

year cycle that begins on March 1, 1995, and ends on February 29,

1996.

The FDIC is adopting the three-month Treasury rate because it is a

published rate that more closely (but not necessarily exactly)

approximates the market value of funds both for the institution and for

the FDIC. If an institution overpays its assessment, the FDIC will

return to the institution the benefit that the institution would have

been able to obtain by investing the excess amount. Conversely, if an

institution underpays its assessment, the institution will have to

restore to its fund--the Bank Insurance Fund (BIF) or the Savings

Association Insurance Fund (SAIF)--the economic value of the interest

that the fund would otherwise have earned.

The FDIC will apply the new rate (and the quarterly compounding)

prospectively, not retroactively. The FDIC will apply the new rate to

quarterly payments due for the first quarter of 1996 and thereafter,

and to

[[Page 50404]]

any outstanding amounts owed to or by the FDIC on and after January 1,

1996. For amounts owed to or by the FDIC during intervals prior to

January 1, 1996, the FDIC will continue to apply the then-current TFRM

rate (and the annual compounding) for those intervals.

4. The Assessment-Schedule Notice

The FDIC's assessment regulation specifies that the FDIC must

announce in advance the semiannual assessment rate schedule for BIF

members, together with the amount and basis for any adjustment to the

rate schedule. The FDIC must make the announcement 45 days before the

invoice date for the first payment of the semiannual period. 12 CFR

327.9(b)(3)(ii).

The FDIC is amending this provision by reducing the advance-notice

period to 15 days. The amendment was not proposed for comment, and is

unrelated to the other amendments made by the final rule. The primary

reason for this technical amendment is to enable the FDIC to use more

current financial information to determine the assessment rate schedule

for the upcoming semiannual period.

Under the final rule, the announcement date for the first

semiannual period moves from October 16 to November 15. The

announcement date for the second semiannual period moves from April 15

to May 15.

When the FDIC adopted the 45-day advance notice period, the FDIC's

primary concern was to assure that there would be ample time after the

time the Board established an assessment rate schedule for the staff to

provide and issue assessment invoices to insured institutions. When the

Board issued the proposed and final rules on the BIF assessment

regulation it assumed the invoice preparation process would take up to

45 days.

The FDIC's operating systems have improved, however. The FDIC now

believes that the invoice preparation process can be completed within a

15-day period. Reducing the advance-notice period from 45 days to 15

days would create an opportunity for the FDIC to utilize additional

information as it becomes available during the intervening 30 days.

This information would include, but would not be limited to, the

following:

Updated fund balance information, which is calculated

monthly.

Updated market information, including financial-market

data and economic conditions.

Call Report data that reflect current revisions and

corrections and, therefore, are more complete.

A shortening of the timetable for announcing a change in assessment

rates from 45 days to 15 days would provide the FDIC with additional

information that could be used to determine the appropriate assessment

rates for the upcoming semiannual assessment period. The FDIC could

utilize the relevant information to arrive at a more informed judgment

of the assessment rates necessary to maintain the BIF reserve ratio at

the statutorily mandated Designated Reserve Ratio, and to set the

``adjustment factor'' for changes in the assessment rate schedule.

It must be recognized that the institutions themselves will still

have 45 days' notice from the time the FDIC notifies them of the

assessment rate schedule to the time the payment is due. 12 CFR 327.3.

For example, the announcement notice for the payment due on January 1,

will be provided no later than November 15.

C. Summary of Comments

The FDIC's Board of Directors received comments for a period of 30

days. The Board considered that the shorter comment period was

necessary in order to implement the proposal within the available time-

frame.

The FDIC received 15 comments on the proposed rule: eight from

banks; five from bankers' associations; and two from bank holding

companies.

1. Payment Dates for First Payments

a. The Regular Payment Date

Seven banks, all five bankers' associations, and one holding

company explicitly supported the January payment date.

The remaining bank supported it implicitly. The bank did not

address the January payment date. Instead, the bank called for

equivalent changes to be made to the other payment dates: it said that

the payment dates for the second, third, and fourth calendar quarters

should each be moved to the start of those quarters. The FDIC believes

that a change of this kind raises questions of its own that would need

to be the subject of public comment. Accordingly, the FDIC is not

adopting the suggestion at this time, but is taking the issue under

advisement.

The other holding company did not expressly comment on this matter.

The holding company did not object to the January payment date. The

holding company merely noted that it would probably elect the alternate

payment date for its subsidiaries.

b. The Alternate Payment Date

Five banks, all five bankers' associations, and one bank holding

company explicitly supported the proposal to allow institutions to make

their first payments on the alternate payment date.

The bank holding company observed that it would have to file a

certification for each of its insured institutions. The holding company

did not ask the FDIC to alter the proposal on this point, and the FDIC

has not done so. Nevertheless, the FDIC will take under advisement the

issue of allowing bank holding companies to file the necessary

certifications on behalf of their banking subsidiaries.

One bankers' association remarked that the term ``prepayment''--

which was used in the proposed rule--might lead to adverse tax

consequences, and suggested labeling the earlier payment as an

``alternate payment.'' The FDIC has adopted this suggestion.

One bank objected to the alternate payment date. The bank said it

could not see why any financial institution would avail itself of the

option. The bank further declared that banks would be required to

choose the option, and the FDIC would be required to keep track of the

choices, as well as contend with two payment schedules. The bank

declared that the option would thereby create unnecessary work for both

regulators and regulated institutions--and could even lead to the

alternate payment date eventually becoming required once more. The FDIC

does not consider, however, that the alternate payment date creates

excessive work either for itself or for insured institutions. The FDIC

further believes that many institutions may well take advantage of the

alternate payment date, and that the benefits of this option far

outweigh its costs.

Two banks and one holding company did not address this issue.

One bank and one bank holding company said the election should

remain in effect until revoked. The rule as proposed so provided; the

final rule does so as well.

2. Doubled Payments

Four banks, three bankers' associations, and one bank holding

company expressly supported the doubled-payment option.

One bankers' association asked the FDIC to make the doubled-payment

option available to institutions that make their first quarterly

payment on the regular January payment date, and not merely to those

that elect the alternate December payment date. The FDIC has considered

this matter and has concluded that few or no institutions would want to

make a doubled payment after the beginning of a calendar quarter.

[[Page 50405]]

Accordingly, the FDIC believes that it is sufficient to offer the

doubled-payment option for the December payment date.

The same bankers' association suggested that the FDIC should offer

the doubled-payment option for payments due in the second semiannual

period too. The FDIC has adopted and expanded upon this suggestion, by

making the doubled-payment option available on all payment dates

(including the alternate payment date) that occur before the start of

the quarter to which the payment applies.

The other commenters did not focus on the doubled-payment issue.

3. Interest on Underpaid and Overpaid Assessments

None of the commenters objected to the FDIC's proposal to cease

using the TFRM rate.

Five banks, two bankers' associations, and one bank holding company

supported the FDIC's proposal to use the coupon equivalent rate on the

3-month Treasury bill.

Two banks, two bankers' associations, and one bank holding company

did not address this point.

One banker's association said that an appropriate interest rate

should meet three criteria:

--The rate should have a neutral impact on business decisions;

--The rate should be reasonably stable; and

--The rate should be publicly available.

The FDIC considers that the rate adopted in this final rule--

namely, the coupon equivalent rate set on the 3-month Treasury bill at

the last auction held by the U.S. Treasury Department before the start

of each quarter--meets these criteria.

The bankers' association called upon the FDIC to use the Federal

Funds rate averaged over the quarter of the overpayments and

underpayments; one bank also called on the FDIC to adopt the Federal

Funds rate. The bank said that the Federal Funds rate was the rate it

would have received on the funds but for the overcharge. The bankers'

association likewise said that the Federal Funds rate represents the

true alternative cost of funds to insured institutions. The FDIC

considers, however, that it is more appropriate to use the rate set at

the Treasury auction because the FDIC invests its funds with the

Treasury Department, and not in the Federal Funds market.

The bankers' association pointed out that any mechanism for

selecting a rate that is based on a single date can be subject to

volatility. The bankers' association suggested that, as an alternative,

the FDIC should consider using an average of the rates set in the last

four weekly Treasury auctions prior to the start of a quarter. The

bankers' association said the one-month average would produce a more

stable, yet still current, market rate. The FDIC considers, however,

that it is more appropriate to use the rate generated in the most

recent Treasury auction because that rate more closely represents the

rate in effect at the time the FDIC collects the overpayment or

underpayment.

4. The Assessment-Schedule Notice

The FDIC did not ask for comments on this amendment.

D. Effect on the Insurance Funds

1. Payment Dates for First Payments

a. The Regular Payment Date

The shift in the payment date for first payments is not expected to

have any substantial adverse impact on the insurance funds.

In the case of the BIF, the maximum amount of the interest foregone

as a result of delaying the collection is not expected to exceed

$600,000. The actual amount of the foregone interest is likely to be

considerably less, as many BIF members can be expected to take

advantage of the alternate payment date. Accordingly, the FDIC

considers that the BIF will not suffer any material harm by the loss of

this revenue.

In the case of the SAIF, the foregone interest is not expected to

exceed $108,000. Here again, the actual amount is likely to be

considerably less. While this sum is not insubstantial, the FDIC

believes that its loss will not materially harm the SAIF under current

conditions, and will not impede the SAIF's progress toward

recapitalization.

b. The Alternate Payment Date

The alternate payment date would benefit the funds. The funds would

receive payments from institutions that elect this option several days

before the funds would otherwise do so. The funds would therefore have

the use of the money, without being obliged to pay interest.

2. Doubled Payments

The doubled-payment option, like the alternate payment date, would

benefit the funds. The funds would receive payments in advance, and

would not be required to pay interest on them.

3. Interest on Underpaid and Overpaid Assessments

The change from the TFRM rate to the new rate is not expected to

have any material adverse impact on either the BIF or the SAIF. The net

yearly amount routinely subject to the interest rate--that is, the net

of the amounts that institutions routinely overpay, minus the amounts

they routinely underpay--is approximately $2,000,000 per year in the

aggregate for both funds.

This amount represents a net overpayment. It is outstanding for 60

days on average; accordingly, at the TFRM rate, the FDIC has ordinarily

paid out a net annual amount of approximately $16,000 in interest.

Under the new rate, the FDIC will pay out approximately $18,000

yearly--for a net change to the funds of just $2,000.

4. The Assessment-Schedule Notice

The change in the assessment-schedule notice would not affect the

funds.

E. Assessment of the Reporting or Record-Keeping Requirements

1. Payment Dates for First Payments

a. The Regular Payment Date

The final rule delays the payment date for the first payment of

each year, without changing the procedures that institutions must

follow in order to make that payment. The FDIC considers that, in this

regard, the final rule's reporting or record-keeping requirements will

be minimal.

b. The Alternate Payment Date

The FDIC further believes that the burden of the one-time filing to

elect the alternate payment date will be so small as to be immaterial.

The final rule does not require the institution to retain the

certification form, or to file a new certification each year, or to

keep any other new records.

2. Doubled Payments

In the same vein, the FDIC believes that the burden of the one-time

filing to elect the doubled-payment option will be so small as to be

immaterial. The final rule does not require the institution to retain

the certification form, or to file a new certification each year, or to

keep any other new records.

3. Interest on Underpaid and Overpaid Assessments

The changes in the interest rate will have no effect on the

reporting or record-keeping requirements of insured institutions.

4. The Assessment-Schedule Notice

The change in the assessment-schedule notice would not affect the

reporting or record-keeping requirements of insured institutions.

[[Page 50406]]

F. Effect on Competition

The regulation is not expected to have any effect on competition

among insured depository institutions.

G. Relationship of the Regulation to Other Government Regulations

The regulation is not expected to have any impact on other

government regulations.

H. Cost-Benefit Analysis

1. Payment Dates for First Payments

a. The Regular Payment Date

The FDIC believes that the January payment date will not impose any

new costs on institutions. On the contrary, it will benefit them by

allowing them to retain the use of their funds for an extra interval.

The final rule will provide a special benefit to cash-basis

institutions by eliminating an expense they will otherwise have

sustained in 1995.

b. The Alternate Payment Date

The alternate payment date will provide significant benefits. The

FDIC believes that institutions will elect the alternate payment date

only if doing so is advantageous to them. On the other hand, the only

costs incurred by electing institutions are the costs of signing and

submitting the certification. The FDIC considers that those costs are

not likely to be material.

2. Doubled Payments

In the same vein, institutions will elect the doubled-payment

option only if doing so will provide a significant benefit to them. The

only costs incurred by electing institutions are the costs of signing

and submitting the certification, which are not likely to be material.

3. Interest on Underpaid and Overpaid Assessments

The change from the TFRM rate to the new rate will likewise impose

minimal costs on institutions. The net amount at issue will not be

material in the aggregate. For any particular institution, the net

effect of the change will be impossible to predict, because the

relationship between the TFRM rate and the new rate varies from one

interval to another.

Accordingly, the FDIC believes that the benefits of the final rule

will likely outweigh any costs it might impose.

4. The Assessment-Schedule Notice

The change in the assessment-schedule notice does not impose any

direct costs on insured institutions. Indirectly, the change is

expected to provide a benefit to them, by reducing the likelihood of

errors in the assessment process.

I. Other Approaches Considered

1. Retaining the Status Quo

a. The Payment Schedule

The FDIC considered retaining the current schedule without change.

As noted above, however, the FDIC recognizes that it was responsible

for establishing the original December 1995 payment date. The FDIC

further recognizes that cash-basis institutions--ones that keep their

financial records and make their financial reports on a cash basis--

might be adversely affected if they were required to make a payment on

that date. The FDIC believes that, if it can mitigate harm of this kind

by modifying its regulations, it should make every effort to do so.

b. Interest on Underpaid and Overpaid Assessments

The FDIC also considered retaining the TFRM rate without change.

The FDIC believed, however, that the rigidities and delays inherent in

the TFRM rate militate against retaining this interest-rate standard.

2. Alternative Proposal

a. The Payment Schedule

The FDIC considered retaining the current payment schedule, while

giving cash-basis institutions the option of electing to defer their

first payment until January.

This alternative proposal focused narrowly on the one-time

disadvantage that cash-basis institutions will suffer in 1995, and

aimed at protecting those institutions against that disadvantage.

Accordingly, the alternative proposal did not offer the deferred-

payment option to non-cash-basis institutions, and did not offer the

option to any institutions after 1995.

Under the alternative proposal, institutions that exercised the

option by November 1, 1995, would have made their first payment for

1996 on the first business day following January 1, 1996, and would

have continued thereafter to make the first payment on the first

business day of the year. Institutions that failed to exercise the

option by November 1, 1995, would have had to make all their payments

according to the regular payment schedule.

After an institution had made the election, the institution could

have terminated the election--thereby reverting to the regular payment

schedule--by so certifying to the FDIC in writing. For the termination

to be effective for a given year, the institution would have had to

provide the certification to that effect to the FDIC no later than

November 1 of the prior year. The termination would have been

permanent. The FDIC would not have charged interest on the delayed

payments.

The FDIC has chosen to issue the final rule, rather than the

alternative proposal, for two reasons. The approach set forth in the

final rule is more evenhanded: all institutions will have the benefit

of the later payment date, and all will have an equal opportunity to

earn additional interest on their funds. The final rule also provides

greater flexibility to all institutions to plan the timing of their

expenses.

b. Interest on Underpaid and Overpaid Assessments

The FDIC also considered replacing the single TFRM rate with a pair

of rates: namely, the composite yield at market of the BIF and SAIF

portfolios, respectively. These rates would have been determined

retrospectively, because they are generated by looking at the interest

that the portfolios actually earned. For the second quarter of 1995,

the rates would have been 5.70% for the BIF and 5.61% for the SAIF.

The FDIC would have adopted the ``composite yield at market'' rate

on the theory that such a rate would represent the FDIC's actual

benefits (or costs) from the overcollection (or undercollection) of

assessments. If an institution overpaid its assessment, the FDIC would

have returned to the institution the full benefit that the FDIC had

received from the overpayment. Conversely, if an institution underpaid

its assessment, the institution would have restored to its fund the

economic value of the interest the fund will otherwise have earned,

making the fund whole.

The FDIC has adopted the new rate, rather than the ``composite

yield at market'' rate, for two reasons. First, the new rate is based

on a published rate, not on proprietary information, and is easier for

people in the private sector to determine. Second, the new rate is

intended to approximate the market value of the funds--that is, the

interest that an institution earned or may have earned by investing the

funds--rather than the vagaries of the investment portfolios of the BIF

and the SAIF.

J. Effective Dates

1. Payment Dates for First Payments

a. The Regular Payment Date

The FDIC is making the change in the payment date for the first

payment effective upon publication in the Federal Register. The Board

of Directors

[[Page 50407]]

has determined that the new payment schedule ``relieves a restriction''

within the meaning of 5 U.S.C. 553(d)(1), because it delays the date on

which the FDIC regularly collects the first payments, and thereby

allows institutions to retain their funds for an extra interval. The

Board of Directors has further determined that there is ``good cause''

to make this aspect of the final rule effective upon adoption because

institutions should have as much time as possible to adjust to the new

collection schedule and to decide whether to take advantage of the

election options provided by the final rule.

The FDIC is making this revision to the payment schedule effective

at once, rather than delaying the effective date for 30 days, see 5

U.S.C. 553(d).

b. The Alternate Payment Date

The Board of Directors has likewise determined that there is ``good

cause'' to make the final rule effective upon adoption with respect to

the availability of the alternate payment date because institutions

should have as much time as possible to decide whether to take

advantage of this option.

The FDIC is also making this revision to the payment schedule

effective at once, rather than delaying the effective date for 30 days,

see 5 U.S.C. 553(d).

2. Doubled Payments

The Board of Directors has determined that the doubled-payment

option ``relieves a restriction'' within the meaning of 5 U.S.C.

553(d)(1), because it gives institutions additional flexibility to

arrange their financial affairs. In addition, the Board of Directors

has determined that there is ``good cause'' to make the final rule

effective upon adoption with respect to the doubled-payment option

because institutions should have as much time as possible to decide

whether to take advantage of this option.

The FDIC is making this revision to the payment schedule effective

at once, rather than delaying the effective date for 30 days, see 5

U.S.C. 553(d).

3. Interest on Underpaid and Overpaid Assessments

The FDIC is making the revision of the interest rate effective 30

days after publication of the final rule in the Federal Register, in

accordance with 5 U.S.C. 553(d).

4. The Assessment-Schedule Notice

The FDIC considers that the decision to establish an advance-notice

period--and, accordingly, the decision to shorten the period--is a rule

of ``agency * * * practice'' within the meaning of the Administrative

Procedure Act (5 U.S.C. 553), and that notice and comment are therefore

not required. The advance-notice period is not required by statute. The

FDIC has adopted the advance-notice period sua sponte, reflecting ``the

FDIC's intent promptly to make public the basis for any Board decision

to adjust the rate schedule.'' See 60 FR 42680, 42740.

The FDIC designed the original advance-notice period with its own

internal constraints in mind, and those constraints have changed.

Accordingly, the Board of Directors has determined that there is good

cause to shorten the advance-notice period without the notice and

public participation that are ordinarily required by the Administrative

Procedure Act.

Furthermore, the Board of Directors has determined that good cause

exists for waiving the customary 30-day delayed effective date. The

FDIC has only recently made the determination that the BIF has

recapitalized. The Board considers that it is particularly important

that the revenue to be generated in the current assessment cycle will

accurately reflect the current status of the BIF and the assessment

bases of the institutions.

The FDIC is therefore making this revision to the payment schedule

effective at once, rather than delaying the effective date for 30 days,

see 5 U.S.C. 553(d).

K. Paperwork Reduction Act

The proposed rule would have provided that, if an institution

selected the alternate payment date, the institution could then select

the doubled-payment option as well. Because the two elections were

linked, the FDIC developed a single form for them: the form for

electing the alternate payment date also asked institutions to specify

the amount they would pay.

The FDIC was concerned that, by asking for this additional piece of

information, the FDIC was engaging in the ``collection of information''

within the meaning of the Paperwork Reduction Act of 1980 (44 U.S.C.

3501 et seq.). Accordingly, the FDIC asked the Office of Management and

Budget (OMB) to review the proposal and submitted the proposed form to

OMB for approval. OMB has approved the collection of information and

the form.

The final rule does away with the need for OMB's review and

approval, however. The final differs from the proposed rule by

separating the procedure for selecting the alternate payment date from

the procedure for selecting the doubled-payment option. Each procedure

has its own form. Each form contains the appropriate certification and

specifies the initial payment with respect to which the institution is

making the election.

An institution that signs a form does no more than identify itself.

Self-identification in this manner does not constitute ``information''

within the meaning of the Paperwork Reduction Act.

L. Regulatory Flexibility Act

The Board hereby certifies that the final rule will not have a

significant economic impact on a substantial number of small entities

within the meaning of the Regulatory Flexibility Act (5 U.S.C. 601 et

seq.) The final rule mitigates a cost incurred by certain smaller

entities--namely, cash-basis depository institutions--that arises from

the one-time shift from the semiannual assessment process to the new

quarterly assessment schedule. The final rule further confers a benefit

on all institutions (including smaller institutions) by allowing them

to earn interest on their funds for an additional interval.

To the extent that an institution might incur a cost in connection

with preparing and submitting the paperwork necessary to make the

election, the FDIC believes that the cost will be minimal, and will be

far outweighed by the resulting benefit. In any case, each

institution's decision to make the election is purely voluntary: The

final rule does not compel an institution to accept any cost of this

kind.

List of Subjects in 12 CFR Part 327

Bank deposit insurance, Banks, Banking, Freedom of information,

Reporting and recordkeeping requirements, Savings associations.

For the reasons stated in the preamble, the Board of Directors of

the FDIC is amending 12 CFR Part 327 as follows:

PART 327--ASSESSMENTS

1. The authority citation for part 327 continues to read as

follows:

Authority: 12 U.S.C. 1441, 1441b, 1817-1819.

2. Section 327.3 is amended by revising paragraphs (c)(2), (d)(2),

(e), and (f) and by adding paragraphs (c)(3) and (j) to read as

follows:

Sec. 327.3 Payment of semiannual assessments.

* * * * *

(c) * * *

(2) Payment date and manner. Except as provided in paragraphs

(c)(3) and (j)

[[Page 50408]]

of this section, the Corporation will cause the amount stated in the

applicable invoice to be directly debited on the appropriate regular

payment date from the deposit account designated by the insured

depository institution for that purpose, as follows:

(i) In the case of the first quarterly payment for a semiannual

period that begins on January 1, the regular payment date is January 2;

and

(ii) In the case of the first quarterly payment for a semiannual

period that begins on July 1, the regular payment date is the preceding

June 30.

(3) Alternate payment date.--(i) Election. An insured depository

institution may elect to pay the first quarterly payment for a

semiannual period that begins on January 1 of a current year on the

alternate payment date. The alternate payment date is December 30 of

the prior year.

(ii) Certification. (A) In order to elect the alternate payment

date with respect to a current semiannual period, an institution must

so certify in writing in advance. In order for the election to be

effective with respect to the current semiannual period, the

Corporation must receive the certification no later than the prior

November 1.

(B) The certification shall be made on a pre-printed form provided

by the Corporation. The form shall be signed by the institution's chief

financial officer or such other officer as the institution's board of

directors may designate for that purpose. The form shall be sent to the

attention of the Chief of the Assessment Operations Section of the

Corporation's Division of Finance. An institution may obtain the form

from the Corporation's Division of Finance.

(C) The election of the alternate payment date shall be effective

with respect to the semiannual period specified in the certification

and thereafter, until terminated.

(iii) Termination. (A) An insured depository institution may

terminate its election of the alternate payment date, and thereby

revert to the regular payment date, by so certifying in writing to the

Corporation in advance. In order for the termination to be effective

for a current semiannual period, the Corporation must receive the

termination certification no later than the prior November 1.

(B) The termination certification shall be made on a pre-printed

form provided by the Corporation. The form shall be signed by the

institution's chief financial officer or such other officer as the

institution's board of directors may designate for that purpose. The

form shall be sent to the attention of the Chief of the Assessment

Operations Section of the Corporation's Division of Finance. An

institution may obtain the form from the Corporation's Division of

Finance.

(C) The termination shall be permanent, except that an institution

that has terminated an election may make a new election under paragraph

(c)(3)(i) of this section.

(iv) Manner of payment. Except as provided in paragraph (j) of this

section, if an insured depository institution elects the alternate

payment date, the Corporation will cause the amount stated in the

applicable invoice to be directly debited on the alternate payment date

from the deposit account designated by the insured depository

institution for that purpose.

(d) Second-quarterly payment. * * *

(2) Except as provided in paragraph (j) of this section, the

Corporation will cause the amount stated in the applicable invoice to

be directly debited on the appropriate regular payment date from the

deposit account designated by the insured depository institution for

that purpose, as follows:

(i) In the case of the second quarterly payment for a semiannual

period that begins on January 1, the regular payment date is March 30;

and

(ii) In the case of the second quarterly payment for a semiannual

period that begins on July 1, the regular payment date is September 30.

(e) Necessary action, sufficient funding by institution. Each

insured depository institution shall take all actions necessary to

allow the Corporation to debit assessments from the insured depository

institution's designated deposit account. Each insured depository

institution shall, prior to each payment date indicated in paragraphs

(c)(2), (c)(3)(i), and (d)(2) of this section, ensure that funds in an

amount at least equal to the invoiced amount (or twice the invoiced

amount if the insured depository institution has elected the doubled-

payment option pursuant to paragraph (j) of this section) are available

in the designated account for direct debit by the Corporation. Failure

to take any such action or to provide such funding of the account shall

be deemed to constitute nonpayment of the assessment.

(f) Business days. If a payment date specified in paragraph

(c)(2)(i) falls on a date that is not a business day, the applicable

date shall be the following business day. If a payment date specified

in paragraph (c)(1), (c)(2)(ii), (c)(3)(i), or (d)(2) of this section

falls on a date that is not a business day, the applicable date shall

be the previous business day.

* * * * *

(j) Doubled-payment option.--(1) Election. In the case of a

quarterly payment to be made on March 30, on June 30, on September 30,

or on the alternate payment date, an insured depository institution may

elect to pay twice the amount of such quarterly payment.

(2) Certification. (i) In order to elect the doubled-payment option

with respect to a selected payment date, an institution must so certify

in writing to the Corporation in advance. In order for the election to

be effective, the Corporation must receive the certification by the

following dates: in the case of a quarterly payment to be made on March

30, June 30, or September 30, the Corporation must receive the

certification no later than the prior February 1, May 1, or August 1,

respectively; in the case of a quarterly payment to be made on the

alternate payment date, the Corporation must receive the certification

by the prior November 1.

(ii) The certification shall be made on a pre-printed form provided

by the Corporation. The form shall be signed by the institution's chief

financial officer or such other officer as the institution's board of

directors may designate for that purpose. The form shall be sent to the

attention of the Chief of the Assessment Operations Section of the

Corporation's Division of Finance. An institution may obtain the form

from the Corporation's Division of Finance.

(iii) The election shall be effective with respect to the selected

quarterly payment for the year specified in the certification and with

respect to subsequent quarterly payments made on the selected payment

date in subsequent years, until the election is terminated.

(3) Termination. (i) An insured depository institution may

terminate its election of the doubled-payment option for a selected

payment date by so certifying in writing to the Corporation in advance.

In order for the termination to be effective, the Corporation must

receive the termination certification by the following dates: In the

case of a quarterly payment to be made on March 30, June 30, or

September 30, the Corporation must receive the termination

certification no later than the prior February 1, May 1, or August 1,

respectively; in the case of a quarterly payment to be made on the

alternate payment date, the Corporation must receive the termination

certification by the prior November 1.

(ii) The termination certification shall be made on a pre-printed

form provided by the Corporation. The form shall be signed by the

institution's chief financial officer or such other officer as

[[Page 50409]]

the institution's board of directors may designate for that purpose.

The form shall be sent to the attention of the Chief of the Assessment

Operations Section of the Corporation's Division of Finance. An

institution may obtain the form from the Corporation's Division of

Finance.

(iii) The termination shall be permanent, except that an

institution that has terminated its election of the doubled-payment

option for a selected payment date may make a new election.

(4) Manner of payment. If an insured depository institution elects

the doubled-payment option for a selected payment date, the Corporation

will cause an amount equal to twice the amount stated in the applicable

invoice to be directly debited on the selected payment date from the

deposit account designated by the insured depository institution for

that purpose.

3. Section 327.7 is amended by revising paragraphs (a)(2), (a)(3),

and (b) and adding paragraph (c) to read as follows:

Sec. 327.7 Payment of interest on assessment underpayments and

overpayments.

(a) * * *

(2) Payment by Corporation. (i) The Corporation will pay interest

on any overpayment by the institution of its assessment.

(ii) When an institution elects the alternate payment date pursuant

to Sec. 327.3(c)(3), or otherwise pays an amount due on a regular

payment date before that date, the payment of the invoiced amount prior

to the regular payment date shall not be regarded as an overpayment of

an assessment.

(iii) When an institution elects the doubled-payment option

pursuant to Sec. 327.3(j), the payment of any amount in excess of the

invoiced amount shall not be regarded as an overpayment of an

assessment.

(3) Accrual of interest. (i) Interest on an amount owed to or by

the Corporation for the underpayment or overpayment of an assessment

shall accrue interest at the relevant interest rate.

(ii) Interest on an amount specified in paragraph (a)(3)(i) of this

section shall begin to accrue on the day following the regular payment

date, as provided for in Sec. 327.3(c)(2) and (d)(2), for the amount so

overpaid or underpaid, provided, however, that interest shall not begin

to accrue on any overpayment until the day following the date such

overpayment was received by the Corporation. Interest shall continue to

accrue through the date on which the overpayment or underpayment

(together with any interest thereon) is discharged.

(iii) The relevant interest rate shall be redetermined for each

quarterly assessment interval. A quarterly assessment interval begins

on the day following a regular payment date, as specified in

Sec. 327.3(c)(2) and (d)(2), and ends on the immediately following

regular payment date.

(b) Rates after the first payment date in 1996. (1) On and after

January 3, 1996, the relevant interest rate for a quarterly assessment

interval that includes the month of January, April, July, and October,

respectively, is the coupon equivalent yield of the average discount

rate set on the 3-month Treasury bill at the last auction held by the

United States Treasury Department during the preceding December, March,

June, and September, respectively.

(2) The relevant interest rate for a quarterly assessment interval

will apply to any amounts overpaid or underpaid on the payment date

(whether regular or alternate) immediately prior to the beginning of

the quarterly assessment interval. The relevant interest rate will also

apply to any amounts owed for previous overpayments or underpayments

(including any interest thereon) that remain outstanding, after any

adjustments to such overpayments or underpayments have been made

thereon, at the end of the regular payment date immediately prior to

the beginning of the quarterly assessment interval.

(c) Rates prior to the first payment date in 1996. Through January

3, 1996--

(1) The interest rate will be the United States Treasury

Department's current value of funds rate which is issued under the

Treasury Fiscal Requirements Manual (TFRM rate) and published in the

Federal Register;

(2) The interest will be calculated based on the rate issued under

the TFRM for each applicable period and compounded annually;

(3) For the initial year, the rate will be applied to the gross

amount of the underpayment or overpayment; and

(4) For each additional year or portion thereof, the rate will be

applied to the net amount of the underpayment or overpayment after that

amount has been reduced by the assessment credit, if any, for the year.

4. Section 327.9 is amended by removing the number ``45'' in

paragraph (b)(3)(ii) and adding in lieu thereof the number ``15''.

By order of the Board of Directors.

Dated at Washington, D.C. this 26th day of September, 1995.

Federal Deposit Insurance Corporation.

Jerry L. Langley,

Executive Secretary.

[FR Doc. 95-24245 Filed 9-28-95; 8:45 am]

BILLING CODE 6714-01-P