# FDIC FIL-25-2015: Small Bank Pricing

> Federal · Agency guidance · In force

URL: https://www.frixlaw.com/law-library/statutes/FDIC_FIL15025

## Section

- **Citation:** FDIC FIL-25-2015
- **Heading:** Small Bank Pricing
- **Jurisdiction:** Federal
- **Kind:** Agency guidance
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** FDIC Financial Institution Letters / Small Bank Pricing

## Text

Vol. 80
Monday,
No. 133
July 13, 2015
Part IV
Federal Deposit Insurance Corporation
12 CFR Part 327
Assessments; Proposed Rule
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40838
Federal Register / Vol. 80, No. 133 / Monday, July 13, 2015 / Proposed Rules
1 12 U.S.C. 1817(b). A ‘‘risk-based assessment
system’’ means a system for calculating an insured
depository institution’s assessment based on the
institution’s probability of causing a loss to the DIF
due to the composition and concentration of the
institution’s assets and liabilities, the likely amount
of any such loss, and the revenue needs of the DIF.
See 12 U.S.C. 1817(b)(1)(C).
2 As used in this NPR, the term ‘‘bank’’ is
synonymous with the term ‘‘insured depository
institution’’ as it is used in section 3(c)(2) of the FDI
Act, 12 U.S.C 1813(c)(2).
On January 1, 2007, the FDIC instituted separate
assessment systems for small and large banks. 71 FR
69282 (Nov. 30, 2006). See 12 U.S.C. 1817(b)(1)(D)
(granting the Board the authority to establish
separate risk-based assessment systems for large
and small insured depository institutions).
3 As used in this NPR, the term ‘‘small bank’’ is
synonymous with the term ‘‘small institution’’ as it
is used in 12 CFR 327.8. In general, a ‘‘small bank’’
is one with less than $10 billion in total assets.
4 The common equity tier 1 capital ratio, a new
risk-based capital ratio, was incorporated into the
deposit insurance assessment system effective
January 1, 2015. 79 FR 70427 (November 26, 2014)
in this NPR, the term ‘‘small bank’’ is
synonymous with the term ‘‘small institution’’ as it
is used in 12 CFR 327.8. In general, a ‘‘small bank’’
is one with less than $10 billion in total assets.
4 The common equity tier 1 capital ratio, a new
risk-based capital ratio, was incorporated into the
deposit insurance assessment system effective
January 1, 2015. 79 FR 70427 (November 26, 2014).
Beginning January 1, 2018, a supplementary
leverage ratio will also be used to determine
whether an advanced approaches bank is: (a) well
capitalized, if the bank is subject to the enhanced
supplementary leverage ratio standards under 12
CFR 6.4(c)(1)(iv)(B), 12 CFR 208.43(c)(1)(iv)(B), or
12 CFR 324.403(b)(1)(vi), as each may be amended
from time to time; and (b) adequately capitalized,
if the bank is subject to the advanced approaches
risk-based capital rules under 12 CFR
6.4(c)(2)(iv)(B), 12 CFR 208.43(c)(2)(iv)(B), or 12
CFR 324.403(b)(2)(vi), as each may be amended
from time to time. 79 FR 70427, 70437 (November
26, 2014.) The supplementary leverage ratio is
expected to affect the capital group assignment of
few, if any, small banks.
5 The term ‘‘primary federal regulator’’ is
synonymous with the term ‘‘appropriate federal
banking agency’’ as it is used in section 3(q) of the
FDI Act, 12 U.S.C. 1813(q).
6 A financial institution is assigned a composite
rating based on an evaluation and rating of six
essential components of an institution’s financial
condition and operations. These component factors
address the adequacy of capital (C), the quality of
assets (A), the capability of management (M), the
quality and level of earnings (E), the adequacy of
liquidity (L), and the sensitivity to market risk (S).
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 327
RIN 3064–AE37
Assessments
AGENCY: Federal Deposit Insurance
Corporation (FDIC).
ACTION: Notice of proposed rulemaking
(NPR) and request for comment
of capital (C), the quality of
assets (A), the capability of management (M), the
quality and level of earnings (E), the adequacy of
liquidity (L), and the sensitivity to market risk (S).
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 327
RIN 3064–AE37
Assessments
AGENCY: Federal Deposit Insurance
Corporation (FDIC).
ACTION: Notice of proposed rulemaking
(NPR) and request for comment.
SUMMARY: The FDIC is proposing to
amend 12 CFR part 327 to refine the
deposit insurance assessment system for
small insured depository institutions
that have been federally insured for at
least 5 years (established small banks)
by: revising the financial ratios method
so that it would be based on a statistical
model estimating the probability of
failure over three years; updating the
financial measures used in the financial
ratios method consistent with the
statistical model; and eliminating risk
categories for established small banks
and using the financial ratios method to
determine assessment rates for all such
banks (subject to minimum or maximum
initial assessment rates based upon a
bank’s CAMELS composite rating). The
FDIC does not propose changing the
range of assessment rates that will apply
once the Deposit Insurance Fund (DIF or
fund) reserve ratio reaches 1.15 percent;
thus, under the proposal, as under
current regulations, the range of initial
deposit insurance assessment rates will
fall once the reserve ratio reaches 1.15
percent. The FDIC proposes that a final
rule would go into effect the quarter
after a final rule is adopted; by their
terms, however, the proposed
amendments would not become
operative until the quarter after the DIF
reserve ratio reaches 1.15 percent.
DATES: Comments must be received by
the FDIC no later than September 11,
2015.
ADDRESSES: You may submit comments
on the notice of proposed rulemaking
using any of the following methods:
• Agency Web site: http://www.fdic.
gov/regulations/laws/federal/
r
terms, however, the proposed
amendments would not become
operative until the quarter after the DIF
reserve ratio reaches 1.15 percent.
DATES: Comments must be received by
the FDIC no later than September 11,
2015.
ADDRESSES: You may submit comments
on the notice of proposed rulemaking
using any of the following methods:
• Agency Web site: http://www.fdic.
gov/regulations/laws/federal/. Follow
the instructions for submitting
comments on the agency Web site.
• Email: comments@fdic.gov. Include
RIN 3064–AE37 on 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: Comments may be
hand delivered to the 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.
• Public Inspection: All comments
received, including any personal
information provided, will be posted
generally without change to http://www.
fdic.gov/regulations/laws/federal.
FOR FURTHER INFORMATION CONTACT:
Munsell St.Clair, Chief, Banking and
Regulatory Policy, Division of Insurance
and Research, 202–898–8967; Nefretete
Smith, Senior Attorney, Legal Division,
202–898–6851; Thomas Hearn, Counsel,
Legal Division, 202–898–6967.
SUPPLEMENTARY INFORMATION:
I. Policy Objectives
The Federal Deposit Insurance Act
(FDI Act) requires that the FDIC Board
of Directors (Board) establish a risk-
based deposit insurance assessment
system.1 Pursuant to this requirement,
the FDIC adopted a risk-based deposit
insurance assessment system effective
in 1993 that applied to all banks.2 A
risk-based assessment system reduces
the subsidy that lower-risk banks
provide higher-risk banks and provides
incentives for banks to monitor and
reduce risks that could increase
potential losses to the DIF
d deposit insurance assessment
system.1 Pursuant to this requirement,
the FDIC adopted a risk-based deposit
insurance assessment system effective
in 1993 that applied to all banks.2 A
risk-based assessment system reduces
the subsidy that lower-risk banks
provide higher-risk banks and provides
incentives for banks to monitor and
reduce risks that could increase
potential losses to the DIF. Since 1993,
the FDIC has met its statutory mandate
and has pursued these policy goals by
periodically introducing improvements
in the deposit insurance assessment
system’s ability to differentiate for risk.
The primary purpose of the proposals in
this NPR is to improve the risk-based
deposit insurance assessment system
applicable to small banks to more
accurately reflect risk.3
II. Background
Risk-Based Deposit Insurance
Assessments for Small Banks
Since 2007, assessment rates for small
banks have been determined by placing
each bank into one of four risk
categories, Risk Categories I, II, III, and
IV. These four risk categories are based
on two criteria: capital levels and
supervisory ratings. The three capital
groups—well capitalized, adequately
capitalized, and undercapitalized—are
based on the leverage ratio and three
risk-based capital ratios used for
regulatory capital purposes.4 The three
supervisory groups, termed A, B, and C,
are based upon supervisory evaluations
by the small bank’s primary federal
regulator, state regulator or the FDIC.5
Group A consists of financially sound
institutions with only a few minor
weaknesses (generally, banks with
CAMELS 6 composite ratings of 1 or 2);
Group B consists of institutions that
demonstrate weaknesses that, if not
corrected could result in significant
deterioration of the institution and
increased risk of loss to the DIF
(generally, banks with CAMELS
composite ratings of 3); and Group C
consists of institutions that pose a
substantial probability of loss to the DIF
unless effective corrective action is
taken (generally, banks
roup B consists of institutions that
demonstrate weaknesses that, if not
corrected could result in significant
deterioration of the institution and
increased risk of loss to the DIF
(generally, banks with CAMELS
composite ratings of 3); and Group C
consists of institutions that pose a
substantial probability of loss to the DIF
unless effective corrective action is
taken (generally, banks with CAMELS
composite ratings of 4 or 5). An
institution’s capital and supervisory
group determine its risk category as set
out in Table 1 below.
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40839
Federal Register / Vol. 80, No. 133 / Monday, July 13, 2015 / Proposed Rules
7 New small banks in Risk Category I, however,
are charged the highest initial assessment rate in
effect for that risk category. Subject to exceptions,
a new bank is one that has been federally insured
for less than five years as of the last day of any
quarter for which it is being assessed. 12 CFR
327.8(j).
8 In 2011, the Board revised and approved regular
assessment rate schedules. See 76 FR 10672 (Feb.
25, 2011); 12 CFR 327.10.
9 The weights applied to CAMELS components
are as follows: 25 percent each for Capital and
Management; 20 percent for Asset quality; and 10
percent each for Earnings, Liquidity, and Sensitivity
to market risk. These weights reflect the view of the
FDIC regarding the relative importance of each of
the CAMELS components for differentiating risk
among institutions for deposit insurance purposes.
The FDIC and other bank supervisors do not use
such a system to determine CAMELS composite
ratings.
10 See 71 FR 41910, 41913 (July 24, 2006).
11 Insured branches of foreign banks are deemed
small banks for purposes of the deposit insurance
assessment system.
12 12 U.S.C. 1817(e) (granting the Board the
discretion to suspend or limit dividends).
13 12 U.S.C. 1817(b)(3)(B)
rance purposes.
The FDIC and other bank supervisors do not use
such a system to determine CAMELS composite
ratings.
10 See 71 FR 41910, 41913 (July 24, 2006).
11 Insured branches of foreign banks are deemed
small banks for purposes of the deposit insurance
assessment system.
12 12 U.S.C. 1817(e) (granting the Board the
discretion to suspend or limit dividends).
13 12 U.S.C. 1817(b)(3)(B).
14 Public Law 111–203, 334(d), 124 Stat. 1376,
1539 (12 U.S.C. 1817(note)).
15 Public Law 111–203, 334(e), 124 Stat. 1376,
1539 (12 U.S.C. 1817(note)). The Dodd-Frank Act
also: (1) eliminated the requirement that the FDIC
provide dividends from the fund when the reserve
ratio is between 1.35 percent and 1.5 percent, 12
U.S.C. 1817(e), and (2) continued the FDIC’s
authority to declare dividends when the reserve
ratio at the end of a calendar year is at least 1.5
percent, but granted the FDIC sole discretion in
determining whether to suspend or limit the
declaration of payment or dividends, 12 U.S.C.
1817(e)(2)(A)–(B).
16 See 76 FR 10672.
TABLE 1—DETERMINATION OF RISK CATEGORY
Capital group
Supervisory group
A
CAMELS 1 or 2
B
CAMELS 3
C
CAMELS 4 or 5
Well Capitalized .............................
Risk Category I.
Adequately Capitalized ..................
Risk Category II
Risk Category III.
Under Capitalized ..........................
Risk Category III
Risk Category IV
To further differentiate risk within
Risk Category I (which includes most
small banks), the FDIC uses the
financial ratios method, which
combines supervisory CAMELS
component ratings with current
financial ratios to determine a small
Risk Category I bank’s initial assessment
rate.7
Within Risk Category I, those
institutions that pose the least risk are
charged a minimum initial assessment
rate and those that pose the greatest risk
are charged an initial assessment rate
that is four basis points higher than the
minimum. All other banks within Risk
Category I are charged a rate that varies
between these rates
a small
Risk Category I bank’s initial assessment
rate.7
Within Risk Category I, those
institutions that pose the least risk are
charged a minimum initial assessment
rate and those that pose the greatest risk
are charged an initial assessment rate
that is four basis points higher than the
minimum. All other banks within Risk
Category I are charged a rate that varies
between these rates. In contrast, all
banks in Risk Category II are charged the
same initial assessment rate, which is
higher than the maximum initial rate for
Risk Category I. A single, higher, initial
assessment rate applies to each bank in
Risk Category III and another, higher,
rate to each bank in Risk Category IV.8
The financial ratios method
determines the assessment rates in Risk
Category I using a combination of
weighted CAMELS component ratings
and the following financial ratios:
• Tier 1 Leverage Ratio;
• Net Income before Taxes/Risk-
Weighted Assets;
• Nonperforming Assets/Gross
Assets;
• Net Loan Charge-Offs/Gross Assets;
• Loans Past Due 30–89 days/Gross
Assets;
• Adjusted Brokered Deposit Ratio;
and
• Weighted Average CAMELS
Composite Rating.9
To determine a Risk Category I bank’s
initial assessment rate, the weighted
CAMELS components and financial
ratios are multiplied by statistically
derived pricing multipliers, the
products are summed, and the sum is
added to a uniform amount that applies
to all Risk Category I banks. If, however,
the rate is below the minimum initial
assessment rate for Risk Category I, the
bank will pay the minimum initial
assessment rate; if the rate derived is
above the maximum initial assessment
rate for Risk Category I, then the bank
will pay the maximum initial rate for
the risk category.
The financial ratios used to determine
rates come from a statistical model that
predicts the probability that a Risk
Category I institution will be
downgraded from a composite CAMELS
rating of 1 or 2 to a rating of 3 or worse
within one year
te derived is
above the maximum initial assessment
rate for Risk Category I, then the bank
will pay the maximum initial rate for
the risk category.
The financial ratios used to determine
rates come from a statistical model that
predicts the probability that a Risk
Category I institution will be
downgraded from a composite CAMELS
rating of 1 or 2 to a rating of 3 or worse
within one year. The probability of a
CAMELS downgrade is intended as a
proxy for the bank’s probability of
failure. When the model was developed
in 2006, the FDIC decided not to
attempt to determine a bank’s
probability of failure because of the lack
of bank failures in the years between the
end of the bank and thrift crisis in the
early 1990s and 2006.10
The financial ratios method does not
apply to new small banks or to insured
branches of foreign banks (insured
branches).11 The manner in which
assessment rates for these institutions is
determined is described further below.
Assessment Rates Under Current Rules
The Dodd-Frank Wall Street Reform
and Consumer Protection Act (the
Dodd-Frank Act), enacted in July 2010,
revised the statutory authorities
governing the FDIC’s management of the
DIF. The Dodd-Frank Act granted the
FDIC authority to manage the fund in a
manner that would help maintain a
positive fund balance during a banking
crisis and promote moderate, steady
assessment rates throughout economic
credit cycles.12
Among other things, the Dodd-Frank
Act: (1) raised the minimum designated
reserve ratio (DRR), which the FDIC
must set each year, to 1.35 percent (from
the former minimum of 1.15 percent)
and removed the upper limit on the
DRR (which was formerly capped at 1.5
percent); 13 (2) required that the fund
reserve ratio reach 1.35 percent by
September 30, 2020 (rather than 1.15
percent by the end of 2016, as formerly
required); 14 and (3) required that, in
setting assessments, the FDIC ‘‘offset the
effect of [requiring that the reserve ratio
reach 1.35 percent by September 30,
202
d removed the upper limit on the
DRR (which was formerly capped at 1.5
percent); 13 (2) required that the fund
reserve ratio reach 1.35 percent by
September 30, 2020 (rather than 1.15
percent by the end of 2016, as formerly
required); 14 and (3) required that, in
setting assessments, the FDIC ‘‘offset the
effect of [requiring that the reserve ratio
reach 1.35 percent by September 30,
2020 rather than 1.15 percent by the end
of 2016] on insured depository
institutions with total consolidated
assets of less than $10,000,000,000.’’ 15
In 2011, the FDIC adopted a schedule
of assessment rates designed to ensure
that the reserve ratio reaches 1.15
percent by September 30, 2020.16 In the
near future, the FDIC plans to propose
a rule to implement the Dodd-Frank Act
requirement that the cost of raising the
reserve ratio from 1.15 percent to 1.35
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40840
Federal Register / Vol. 80, No. 133 / Monday, July 13, 2015 / Proposed Rules
17 A bank’s total base assessment rate can vary
from its initial base assessment rate as the result of
three possible adjustments. Two of these
adjustments—the unsecured debt adjustment and
the depository institution debt adjustment (DIDA)—
apply to all banks (except that the unsecured debt
adjustment does not apply to new banks or insured
branches). The unsecured debt adjustment lowers a
bank’s assessment rate based on the bank’s ratio of
long-term unsecured debt to the bank’s assessment
base. The DIDA increases a bank’s assessment rate
when it holds long-term, unsecured debt issued by
another insured depository institution. The third
possible adjustment—the brokered deposit
adjustment—applies only to small banks in Risk
Category II, III and IV (and to large and highly
complex institutions that are not well capitalized or
that are not CAMELS composite 1 or 2-rated)
essment
base. The DIDA increases a bank’s assessment rate
when it holds long-term, unsecured debt issued by
another insured depository institution. The third
possible adjustment—the brokered deposit
adjustment—applies only to small banks in Risk
Category II, III and IV (and to large and highly
complex institutions that are not well capitalized or
that are not CAMELS composite 1 or 2-rated). It
does not apply to insured branches. The brokered
deposit adjustment increases a bank’s assessment
when it holds significant amounts of brokered
deposits. 12 CFR 327.9 (d).
18 The historical analysis and long-term fund
management plan are described at 76 FR at 10675
and 75 FR 66272, 66272–281 (Oct. 27, 2010).
19 See 76 FR at 10717–720.
20 For new banks, however, the rates will remain
in effect even if the reserve ratio equals or exceeds
2 percent (or 2.5 percent).
21 The reserve ratio for the immediately prior
assessment period must also be less than 2 percent.
percent be paid by banks with $10
billion or more in assets.
The current initial assessment rates
for small and large banks are set forth
in Table 2 below.
TABLE 2—INITIAL BASE ASSESSMENT RATES
[In basis points per annum]
Risk category
I*
II
III
IV
Large &
highly
complex
institutions**
Minimum
Maximum
Annual Rates (in basis points) .................
5
9
14
23
35
5–35
* Initial base rates that are not the minimum or maximum will vary between these rates.
** See § 327.8(f) and § 327.8(g) for the definition of large and highly complex institutions.
An institution’s total assessment rate
may vary from the initial assessment
rate as the result of possible
adjustments.17 After applying all
possible adjustments, minimum and
maximum total assessment rates for
each risk category are set forth in Table
3 below
aximum will vary between these rates.
** See § 327.8(f) and § 327.8(g) for the definition of large and highly complex institutions.
An institution’s total assessment rate
may vary from the initial assessment
rate as the result of possible
adjustments.17 After applying all
possible adjustments, minimum and
maximum total assessment rates for
each risk category are set forth in Table
3 below.
TABLE 3—TOTAL BASE ASSESSMENT RATES*
[In basis points per annum]
Risk
category
I
Risk
category
II
Risk
category
III
Risk
category
IV
Large &
highly
complex
institutions **
Initial Assessment Rate .......................................................
5–9
14
23
35
5–35
Unsecured Debt Adjustment *** ...........................................
¥4.5 to 0
¥5 to 0
¥5 to 0
¥5 to 0
¥5 to 0
Brokered Deposit Adjustment ..............................................
N/A
0 to 10
0 to 10
0 to 10
0 to 10
Total Assessment Rate ........................................................
2.5 to 9
9 to 24
18 to 33
30 to 45
2.5 to 45
* Total base assessment rates do not include the DIDA.
** See § 327.8(f) and (g) for the definition of large and highly complex institutions.
*** The unsecured debt adjustment cannot exceed the lesser of 5 basis points or 50 percent of an insured depository institution’s initial base
assessment rate. The unsecured debt adjustment does not apply to new banks or insured branches
to 45
2.5 to 45
* Total base assessment rates do not include the DIDA.
** See § 327.8(f) and (g) for the definition of large and highly complex institutions.
*** The unsecured debt adjustment cannot exceed the lesser of 5 basis points or 50 percent of an insured depository institution’s initial base
assessment rate. The unsecured debt adjustment does not apply to new banks or insured branches.
Before adopting the current
assessment rate schedules, the FDIC
undertook a historical analysis to
determine how high the reserve ratio
would have to have been to have
maintained both a positive balance and
stable assessment rates from 1950
through 2010.18 The analysis shows that
the fund reserve ratio would have
needed to be approximately 2 percent or
more before the onset of the 1980s and
2008 crises to maintain both a positive
fund balance and stable assessment
rates, assuming, in lieu of dividends,
that the long-term industry average
nominal assessment rate would have
been reduced by 25 percent when the
reserve ratio reached 2 percent, and by
50 percent when the reserve ratio
reached 2.5 percent.
In 2011, consistent with the FDIC’s
historical analysis and the FDIC’s long-
term fund management plan adopted as
a result of the historical analysis, the
Board adopted lower, moderate
assessment rates that will go into effect
when the DIF reserve ratio reaches 1.15
percent.19 Pursuant to the FDIC’s
authority to set assessments, the initial
base and total base assessment rates set
forth in Table 4 below will take effect
beginning the assessment period after
the fund reserve ratio first meets or
exceeds 1.15 percent, without the
necessity of further action by the Board.
The rates will remain in effect unless
and until the reserve ratio meets or
exceeds 2 percent.20
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essment period after
the fund reserve ratio first meets or
exceeds 1.15 percent, without the
necessity of further action by the Board.
The rates will remain in effect unless
and until the reserve ratio meets or
exceeds 2 percent.20
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40841
Federal Register / Vol. 80, No. 133 / Monday, July 13, 2015 / Proposed Rules
22 New small banks will remain subject to the
assessment schedule in Table 5 when the reserve
ratio reaches 2 percent and 2.5 percent.
TABLE 4—INITIAL AND TOTAL BASE ASSESSMENT RATES *
[In basis points per annum]
[Once the reserve ratio reaches 1.15 percent] 21
Risk
category
I
Risk
category
II
Risk
category
III
Risk
category
IV
Large &
highly
complex
institutions **
Initial Base Assessment Rate ..............................................
3–7
12
19
30
3–30
Unsecured Debt Adjustment *** ...........................................
¥3.5 to 0
¥5 to 0
¥5 to 0
¥5 to 0
¥5 to 0
Brokered Deposit Adjustment ..............................................
N/A
0 to 10
0 to 10
0 to 10
0 to 10
Total Base Assessment Rate ..............................................
1.5 to 7
7 to 22
14 to 29
25 to 40
1.5 to 40
* Total base assessment rates do not include the DIDA.
** See § 327.8(f) and (g) for the definition of large and highly complex institutions.
** The unsecured debt adjustment cannot exceed the lesser of 5 basis points or 50 percent of an insured depository institution’s initial base as-
sessment rate; thus, for example, an insured depository institution with an initial base assessment rate of 3 basis points will have a maximum un-
secured debt adjustment of 1.5 basis points and cannot have a total base assessment rate lower than 1.5 basis points. The unsecured debt ad-
justment does not apply to new banks or insured branches
of an insured depository institution’s initial base as-
sessment rate; thus, for example, an insured depository institution with an initial base assessment rate of 3 basis points will have a maximum un-
secured debt adjustment of 1.5 basis points and cannot have a total base assessment rate lower than 1.5 basis points. The unsecured debt ad-
justment does not apply to new banks or insured branches.
In lieu of dividends, and pursuant to
the FDIC’s authority to set assessments
and consistent with the FDIC’s long-
term fund management plan, the initial
base and total base assessment rates set
forth in Table 5 below will come into
effect without further action by the
Board when the fund reserve ratio at the
end of the prior assessment period
meets or exceeds 2 percent, but is less
than 2.5 percent.22
TABLE 5—INITIAL AND TOTAL BASE ASSESSMENT RATES*
[In basis points per annum]
[If the reserve ratio for the prior assessment period is equal to or greater than 2 percent and less than 2.5 percent]
Risk
category
I
Risk
category
II
Risk
category
III
Risk
category
IV
Large &
highly
complex
institutions **
Initial Base Assessment Rate ..............................................
2–6
10
17
28
2–28
Unsecured Debt Adjustment *** ...........................................
¥3 to 0
¥5 to 0
¥5 to 0
¥5 to 0
¥5 to 0
Brokered Deposit Adjustment ..............................................
N/A
0 to 10
0 to 10
0 to 10
0 to 10
Total Base Assessment Rate ..............................................
1 to 6
5 to 20
12 to 27
23 to 38
1 to 38
* Total base assessment rates do not include the DIDA.
** See § 327.8(f) and (g) for the definition of large and highly complex institutions
o 0
¥5 to 0
¥5 to 0
Brokered Deposit Adjustment ..............................................
N/A
0 to 10
0 to 10
0 to 10
0 to 10
Total Base Assessment Rate ..............................................
1 to 6
5 to 20
12 to 27
23 to 38
1 to 38
* Total base assessment rates do not include the DIDA.
** See § 327.8(f) and (g) for the definition of large and highly complex institutions.
*** The unsecured debt adjustment cannot exceed the lesser of 5 basis points or 50 percent of an insured depository institution’s initial base
assessment rate; thus, for example, an insured depository institution with an initial base assessment rate of 2 basis points will have a maximum
unsecured debt adjustment of 1 basis point and cannot have a total base assessment rate lower than 1 basis point. The unsecured debt adjust-
ment does not apply to insured branches.
The initial base and total base
assessment rates set forth in Table 6
below will come into effect, again,
without further action by the Board
when the fund reserve ratio at the end
of the prior assessment period meets or
exceeds 2.5 percent.
TABLE 6—INITIAL AND TOTAL BASE ASSESSMENT RATES*
[In basis points per annum]
[If the reserve ratio for the prior assessment period is equal to or greater than 2.5 percent]
Risk
category
I
Risk
category
II
Risk
category
III
Risk
category
IV
Large &
highly
complex
institutions **
Initial Base Assessment Rate ..............................................
1—5
9
15
25
1–25
Unsecured Debt Adjustment *** ...........................................
¥2.5 to 0
¥4.5 to 0
¥5 to 0
¥5 to 0
¥5 to 0
Brokered Deposit Adjustment ..............................................
N/A
0 to 10
0 to 10
0 to 10
0 to 10
Total Base Assessment Rate ..............................................
0.5 to 5
4.5 to 19
10 to 25
20 to 35
0.5 to 35
* Total base assessment rates do not include the DIDA.
** See § 327.8(f) and (g) for the definition of large and highly complex institutions
5 to 0
¥5 to 0
Brokered Deposit Adjustment ..............................................
N/A
0 to 10
0 to 10
0 to 10
0 to 10
Total Base Assessment Rate ..............................................
0.5 to 5
4.5 to 19
10 to 25
20 to 35
0.5 to 35
* Total base assessment rates do not include the DIDA.
** See § 327.8(f) and (g) for the definition of large and highly complex institutions.
*** The unsecured debt adjustment cannot exceed the lesser of 5 basis points or 50 percent of an insured depository institution’s initial base
assessment rate; thus, for example, an insured depository institution with an initial base assessment rate of 1 basis point will have a maximum
unsecured debt adjustment of 0.5 basis points and cannot have a total base assessment rate lower than 0.5 basis points. The unsecured debt
adjustment does not apply to insured branches.
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40842
Federal Register / Vol. 80, No. 133 / Monday, July 13, 2015 / Proposed Rules
23 See 12 CFR 327.10(f); 76 FR at 10684.
24 Subject to exceptions, an established insured
depository institution is one that has been federally
insured for at least five years as of the last day of
any quarter for which it is being assessed. 12 CFR
327.8(k).
25 As under current rules, the brokered deposit
adjustment would continue to apply only to
established small banks that are less than well
capitalized or that have a CAMELS composite rating
of 3, 4 or 5.
With respect to each of the four
assessment rate schedules (Tables 3, 4,
5 and 6), the Board has the authority to
adopt rates without further notice and
comment rulemaking that are higher or
lower than the total assessment rates
(also known as the total base assessment
rates) shown in the tables, provided
that: (1) The Board cannot increase or
decrease rates from one quarter to the
next by more than two basis points; and
ssessment rate schedules (Tables 3, 4,
5 and 6), the Board has the authority to
adopt rates without further notice and
comment rulemaking that are higher or
lower than the total assessment rates
(also known as the total base assessment
rates) shown in the tables, provided
that: (1) The Board cannot increase or
decrease rates from one quarter to the
next by more than two basis points; and
(2) cumulative increases and decreases
cannot be more than two basis points
higher or lower than the total base
assessment rates.23
III. Justification for Proposal
While the current deposit insurance
assessment system effectively reflects
the risk posed by small banks, it can be
improved by incorporating newer data
from the recent financial crisis and
revising the methodology to directly
estimate the probability of failure three
years ahead. These improvements will
allow the FDIC to more effectively price
risk. The proposed improvements to the
small bank risk-based assessment
system will further the goals of reducing
cross-subsidization of high-risk
institutions by low risk institutions and
help ensure that banks that take on
greater risks will pay more for deposit
insurance.
IV. Description of the Proposed Rule
Summary of the Proposed Rule
The FDIC proposes to improve the
assessment system applicable to
established small banks 24 (that is, small
banks other than new small banks and
insured branches of foreign banks) by:
high-risk
institutions by low risk institutions and
help ensure that banks that take on
greater risks will pay more for deposit
insurance.
IV. Description of the Proposed Rule
Summary of the Proposed Rule
The FDIC proposes to improve the
assessment system applicable to
established small banks 24 (that is, small
banks other than new small banks and
insured branches of foreign banks) by:
(1) Revising the financial ratios method
so that it is based on a statistical model
estimating the probability of failure over
three years; (2) updating the financial
measures used in the financial ratios
method consistent with the statistical
model; and (3) eliminating risk
categories for all established small
banks and using the financial ratios
method to determine assessment rates
for all such banks. CAMELS composite
ratings, however, would be used to
place a maximum on the assessment
rates that CAMELS composite 1- and 2-
rated banks could be charged and
minimums on the assessment rates that
CAMELS composite 3-, 4- and 5-rated
banks could be charged.
Over 500 banks have failed since the
end of 2007. These failures, together
with the hundreds of failures during the
banking crisis of the late 1980s and
early 1990s, have generated a robust set
of data on bank failures. The FDIC need
no longer rely on a model that estimates
a proxy for failure—the probability that
a bank with a CAMELS composite rating
of 1 or 2 will be downgraded to a
CAMELS composite rating of 3, 4, or 5
within 12 months; rather, the FDIC can
base small bank deposit insurance
assessments on a statistical model that
estimates a bank’s probability of failure
directly.
In addition to estimating probability
of failure directly, the proposal
improves the small bank deposit
insurance assessment system in other
ways. First, it allows the assessment
system to better capture risk when the
risk is assumed, rather than when the
risk has already resulted in losses
rance
assessments on a statistical model that
estimates a bank’s probability of failure
directly.
In addition to estimating probability
of failure directly, the proposal
improves the small bank deposit
insurance assessment system in other
ways. First, it allows the assessment
system to better capture risk when the
risk is assumed, rather than when the
risk has already resulted in losses. The
statistical model on which the proposed
deposit insurance assessment system for
small banks is based estimates the
probability of failure within three years,
balancing the need to capture risk when
it is assumed with the need for accurate
failure predictions. (The longer the
prediction period, the less accurate a
model’s predictions will tend to be; so,
for example, the FDIC cannot create a
model that predicts failure ten years in
the future with sufficient accuracy.) The
risk-based assessment system
established in 2011 for large banks is
also designed to capture performance
over a period longer than one year. The
FDIC would update the financial
measures used in the financial ratios
method to be consistent with the
proposed statistical model. All of the
proposed measures were statistically
significant in predicting a bank’s
probability of failure within a three-year
period.
Second, because the model allows the
FDIC to estimate the probability of
failure directly, it allows the FDIC to
apply the model to all established small
banks, not just those in Risk Category I.
In part because CAMELS ratings can
incorporate information that the model
cannot, the FDIC proposes to apply
minimum or maximum initial base
assessment rates that will depend on a
bank’s CAMELS composite rating. Thus,
as it has with large banks, the FDIC
would eliminate risk categories for
small banks (other than new small
banks and insured branches of foreign
banks)
in Risk Category I.
In part because CAMELS ratings can
incorporate information that the model
cannot, the FDIC proposes to apply
minimum or maximum initial base
assessment rates that will depend on a
bank’s CAMELS composite rating. Thus,
as it has with large banks, the FDIC
would eliminate risk categories for
small banks (other than new small
banks and insured branches of foreign
banks).
Third, because the model predicts the
probability of failure three years ahead
using data on hundreds of failures
(including failures during the recent
crisis), it better reflects banks’ actual
risks and provides incentives to banks
to monitor and reduce risks that
increase potential losses to the DIF.
Because it measures risk more
accurately, the model reduces the
subsidization of riskier banks by less
risky banks.
The FDIC intends to preserve the
lower range of initial base assessment
rates previously adopted by the Board.
The FDIC is proposing that the new
assessment system go into operation the
quarter after the reserve ratio reaches
1.15 percent. At that time, under the
initial base assessment rate schedules
adopted by the Board in 2011, initial
based assessment rates will fall
automatically from the current 5 basis
point to 35 basis point range to a 3 basis
point to 30 basis point range, as
reflected in Table 4.25 The FDIC adopted
this schedule of assessment rates
pursuant to its long-term fund
management plan as the FDIC’s best
estimate of the assessment rates that
would have been needed from 1950 to
2010 to maintain a positive fund
balance during the past two banking
crises.
The FDIC proposes to convert the
statistical model to assessment rates
within this 3 basis point to 30 basis
point assessment range in a revenue
neutral way; that is, in a manner that
does not change the aggregate
assessment revenue collected from
established small banks
hat
would have been needed from 1950 to
2010 to maintain a positive fund
balance during the past two banking
crises.
The FDIC proposes to convert the
statistical model to assessment rates
within this 3 basis point to 30 basis
point assessment range in a revenue
neutral way; that is, in a manner that
does not change the aggregate
assessment revenue collected from
established small banks. Specifically,
the conversion would be done to ensure
that aggregate assessments for an
assessment period shortly before
adoption of a final rule would have been
approximately the same under the final
rule as they would have been under the
assessment rate schedule set forth in
Table 4 (the rates that, under current
rules, will automatically go into effect
when the reserve ratio reaches 1.15
percent).
To avoid unnecessary burden, the
FDIC is proposing a revised small bank
assessment system that does not require
small banks to report any new data in
their Reports of Condition and Income
(Call Reports).
Implementation of the Proposed Rule
The FDIC proposes that a final rule go
into effect the quarter after a final rule
is adopted; by their terms, however, the
proposed revisions would not become
operative until the quarter after the DIF
reserve ratio reaches 1.15 percent.
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FDIC proposes that a final rule go
into effect the quarter after a final rule
is adopted; by their terms, however, the
proposed revisions would not become
operative until the quarter after the DIF
reserve ratio reaches 1.15 percent.
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40843
Federal Register / Vol. 80, No. 133 / Monday, July 13, 2015 / Proposed Rules
26 For certain lagged variables, such as one-year
asset growth rates, the statistical analysis also used
bank financial data from 1984.
27 Current rules provide that, if a Risk Category
I small bank’s CAMELS component ratings change
during a quarter in a way that changes the bank’s
initial base assessment rate, 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. Beginning on the date of
the CAMELS component ratings change, the initial
base assessment rate for the remainder of the
quarter is determined using the CAMELS
component ratings in effect after the change. 12 CFR
327.9(a)(4)(iv)(B). Under the proposal, this rule
would remain essentially unchanged, but would
apply to all established small banks rather than just
banks within Risk Category I.
28 Two measures in the current financial ratios
method—net loan charge-offs/gross assets and loans
past due 30–89 days/gross assets—are not used in
the statistical analysis and are not among the
proposed measures.
29 The adjusted brokered deposit ratio can affect
assessment rates only if a bank’s brokered deposits
(excluding reciprocal deposits) exceed 10 percent of
its non-reciprocal brokered deposits and its assets
have grown more than 40 percent in the previous
4 years. 12 CFR 327 Appendix A to Subpart A.
30 As of December 31, 2014, the adjusted brokered
deposit ratio affected the assessment rate of 81
banks
ted brokered deposit ratio can affect
assessment rates only if a bank’s brokered deposits
(excluding reciprocal deposits) exceed 10 percent of
its non-reciprocal brokered deposits and its assets
have grown more than 40 percent in the previous
4 years. 12 CFR 327 Appendix A to Subpart A.
30 As of December 31, 2014, the adjusted brokered
deposit ratio affected the assessment rate of 81
banks.
31 Credit card loans were excluded from the loan
mix index because they produced anomalously high
assessment rates for banks with significant credit
card loans. Credit card loans have very high charge-
off rates, which the loan mix index can capture, but
they also tend to have very high interest rates to
compensate. In addition, few small banks have
significant concentrations of credit card loans.
Consequently, credit card loans are omitted from
the index.
Detailed Description of the Proposed
Rule
Risk Differentiation
As mentioned above, the FDIC is
proposing to update the financial
measures used in the financial ratios
method consistent with the statistical
model, eliminate risk categories for all
established small banks, and use the
financial ratios method to determine
assessment rates for all such banks.
CAMELS composite ratings would be
used to place a maximum on the
assessment rates that CAMELS
composite 1- and 2-rated banks could be
charged, and minimums on the
assessment rates that CAMELS
composite 3-, 4- and 5-rated banks could
be charged.
The financial ratios method as revised
would use the measures described in
the right-hand column of Table 7 below.
For comparison’s sake, the measures
currently used in the financial ratios
method are set out on the left-hand
column of the table.
TABLE 7—COMPARISON OF CURRENT AND PROPOSED MEASURES IN THE FINANCIAL RATIOS METHOD
Current risk category I financial ratios method
Proposed financial ratios method
• Weighted Average CAMELS Component Rating .................................
• Weighted Average CAMELS Component Rating
the measures
currently used in the financial ratios
method are set out on the left-hand
column of the table.
TABLE 7—COMPARISON OF CURRENT AND PROPOSED MEASURES IN THE FINANCIAL RATIOS METHOD
Current risk category I financial ratios method
Proposed financial ratios method
• Weighted Average CAMELS Component Rating .................................
• Weighted Average CAMELS Component Rating.
• Tier 1 Leverage Ratio ...........................................................................
• Tier 1 Leverage Ratio.
• Net Income before Taxes/Risk-Weighted Assets .................................
• Net Income before Taxes/Total Assets.
• Nonperforming Assets/Gross Assets ....................................................
• Nonperforming Loans and Leases/Gross Assets.
• Other Real Estate Owned/Gross Assets.
• Adjusted Brokered Deposit Ratio .........................................................
• Core Deposits/Total Assets.
• One Year Asset Growth.
• Net Loan Charge-Offs/Gross Assets
• Loans Past Due 30–89 Days/Gross Assets
• Loan Mix Index.
All of the proposed measures are
derived from a statistical analysis that
estimates a bank’s probability of failure
within three years. Each of the measures
was statistically significant in predicting
a bank’s probability of failure over that
period. The statistical analysis used
bank financial data and CAMELS ratings
from 1985 through 2011, failure data
from 1986 through 2014, and loan
charge-off data from 2001 through
2014.26 Appendix 1 to the
Supplementary Information section of
this notice and the proposed Appendix
E describe the statistical analysis and
the derivation of these proposed
measures in detail
ilure over that
period. The statistical analysis used
bank financial data and CAMELS ratings
from 1985 through 2011, failure data
from 1986 through 2014, and loan
charge-off data from 2001 through
2014.26 Appendix 1 to the
Supplementary Information section of
this notice and the proposed Appendix
E describe the statistical analysis and
the derivation of these proposed
measures in detail.
Two of the proposed measures—the
weighted average CAMELS component
rating and the tier 1 leverage ratio—are
identical to the measures currently used
in the financial ratios method.27 The
proposed net income before taxes/total
assets measure is also identical to the
current measure, except that the
denominator is total assets rather than
risk-weighted assets. The current
measure nonperforming assets/gross
assets includes other real estate owned.
In the proposal, other real estate owned/
gross assets is a separate measure from
nonperforming loans and leases/gross
assets.
The remaining three proposed
measures—core deposits/total assets,
one-year asset growth, and the loan mix
index—are new.28
Under the proposal, the core deposits/
total assets and the one-year asset
growth measures would replace the
adjusted brokered deposit ratio
currently used in the financial ratios
method. The adjusted brokered deposit
ratio increases a Risk Category I small
bank’s assessment rate only if the bank
has both large amounts of brokered
deposits and high asset growth.29 Few
banks have both, so the ratio affects few
banks.30 One of the proposed
replacement measures—core deposits/
total assets—will tend to lower
assessment rates for most small banks.
The other proposed replacement
measure—one-year asset growth—will
tend to raise assessment rates for small
banks that grow significantly over a year
(other than through merger or by
acquiring failed banks).
The loan mix index is a measure of
the extent to which a bank’s total assets
include higher-risk categories of loans
l assets—will tend to lower
assessment rates for most small banks.
The other proposed replacement
measure—one-year asset growth—will
tend to raise assessment rates for small
banks that grow significantly over a year
(other than through merger or by
acquiring failed banks).
The loan mix index is a measure of
the extent to which a bank’s total assets
include higher-risk categories of loans.
Each category of loan in a bank’s loan
portfolio is divided by the bank’s total
assets to determine the percentage of the
bank’s assets represented by that
category of loan. Each percentage is then
multiplied by that category of loan’s
historical weighted average industry-
wide charge-off rate. The products are
then summed to determine the loan mix
index value for that bank.
The loan categories in the loan mix
index were selected based on the
availability of category-specific charge-
off rates over a sufficiently lengthy
period (2001 through 2014) to be
representative. The loan categories
exclude credit card loans.31 For each
loan category, the weighted average
charge-off rate weights each industry-
wide charge-off rate for each year by the
number of bank failures in that year.
Thus, charge-off rates from 2009
through 2014, during the recent banking
crisis, have a much greater influence on
the weighted average charge-off rate
than charge-off rates from the years
before the crisis, when few failures
occurred. The weighted averages assure
that types of loans that have high
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nking
crisis, have a much greater influence on
the weighted average charge-off rate
than charge-off rates from the years
before the crisis, when few failures
occurred. The weighted averages assure
that types of loans that have high
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Federal Register / Vol. 80, No. 133 / Monday, July 13, 2015 / Proposed Rules
32 As discussed above, the loan mix index uses
loan charge-off data from 2001 through 2014. As
discussed in greater detail below, if financial,
failure and charge-off data from later years is
available at the time the FDIC adopts a final rule
pursuant to this proposal, the FDIC may update the
statistical model, including the loan mix index,
using the methodology described in Appendix E.
The table shows industry-wide weighted charge-
off percentage rates, the loan category as a
percentage of total assets and the products to two
decimal places. In fact, the FDIC proposes to use
seven decimal places for industry-wide weighted
charge-off percentage rates, and as many decimal
places as permitted by the FDIC’s computer systems
for the loan category as a percentage of total assets
and the products. The total (the loan mix index
itself) would use three decimal places.
33 As under current rules, however, no
adjustments would apply to bridge banks or
conservatorships. These banks would continue to
be charged the minimum assessment rate applicable
to small banks. As under current rules, the brokered
deposit adjustment would not apply to insured
branches.
34 If the bank were less than well capitalized, it
would be subject to the brokered deposit
adjustment for the whole quarter.
35 See 12 CFR 327.10(b); 76 FR at 10718.
charge-off rates during downturns have
an appropriate influence on assessment
rates.
Table 8 below illustrates how the loan
mix index is calculated for a
hypothetical bank
it adjustment would not apply to insured
branches.
34 If the bank were less than well capitalized, it
would be subject to the brokered deposit
adjustment for the whole quarter.
35 See 12 CFR 327.10(b); 76 FR at 10718.
charge-off rates during downturns have
an appropriate influence on assessment
rates.
Table 8 below illustrates how the loan
mix index is calculated for a
hypothetical bank.
TABLE 8—LOAN MIX INDEX FOR A HYPOTHETICAL BANK 32
Weighted
charge-off rate
percent
Loan category
as a percent
of hypothetical
bank’s total
assets
Product of two
columns to the
left
Construction & Development .......................................................................................................
4.50
1.40
6.29
Commercial & Industrial ..............................................................................................................
1.60
24.24
38.75
Leases .........................................................................................................................................
1.50
0.64
0.96
Other Consumer ..........................................................................................................................
1.46
14.93
21.74
Loans to Foreign Government .....................................................................................................
1.34
0.24
0.32
Real Estate Loans Residual ........................................................................................................
1.02
0.11
0.11
Multifamily Residential .................................................................................................................
0.88
2.42
2.14
Nonfarm Nonresidential ...............................................................................................................
0.73
13.71
9.99
1–4 Family Residential ...............................................................................................................
.............................................................................................
0.88
2.42
2.14
Nonfarm Nonresidential ...............................................................................................................
0.73
13.71
9.99
1–4 Family Residential ................................................................................................................
0.70
2.27
1.58
Loans to Depository banks ..........................................................................................................
0.58
1.15
0.66
Agricultural Real Estate ...............................................................................................................
0.24
3.43
0.82
Agriculture ....................................................................................................................................
0.24
5.91
1.44
SUM (Loan Mix Index) .........................................................................................................
........................
70.45
84.79
The weighted charge-off rates in the
table are the same for all small banks.
The remaining two columns vary from
bank to bank, depending on the bank’s
loan portfolio. For each loan type, the
value in the rightmost column is
calculated by multiplying the weighted
charge-off rate by the bank’s loans of
that type as a percent of its total assets.
In this illustration, the sum of the right-
hand column (84.79) is the loan mix
index for this bank.
As in the current methodology for
Risk Category I small banks, under the
proposal the weighted CAMELS
components and financial ratios would
be multiplied by statistically derived
pricing multipliers, the products would
be summed, and the sum would be
added to a uniform amount that would
be: (a) Derived from the statistical
analysis, (b) adjusted for assessment
rates set by the FDIC, and (c) applied to
all established small banks. The total
would equal the bank’s initial
assessment rate
components and financial ratios would
be multiplied by statistically derived
pricing multipliers, the products would
be summed, and the sum would be
added to a uniform amount that would
be: (a) Derived from the statistical
analysis, (b) adjusted for assessment
rates set by the FDIC, and (c) applied to
all established small banks. The total
would equal the bank’s initial
assessment rate. If, however, the
resulting rate were below the minimum
initial assessment rate for small banks,
the bank’s initial assessment rate would
be the minimum initial assessment rate;
if the rate were above the maximum,
then the bank’s initial assessment rate
would be the maximum initial rate for
small banks. In addition, if the resulting
rate for a small bank were below the
minimum or above the maximum initial
assessment rate applicable to banks with
the bank’s CAMELS composite rating,
the bank’s initial assessment rate would
be the respective minimum or
maximum assessment rate for a small
bank with its CAMELS composite
rating. This approach would allow rates
to vary incrementally across a wide
range of rates for all small banks (other
than new small banks and insured
branches). The conversion of the
statistical model to pricing multipliers
and uniform amount are discussed
further below and in detail in the
proposed Appendix E. Appendix E also
discusses the derivation of the pricing
multipliers and the uniform amount.
Adjustments to Initial Base Assessment
Rates
As under current rules: (1) The DIDA
would continue to apply to all banks; (2)
the unsecured debt adjustment would
continue to apply to all banks except
new banks and insured branches; and
cussed
further below and in detail in the
proposed Appendix E. Appendix E also
discusses the derivation of the pricing
multipliers and the uniform amount.
Adjustments to Initial Base Assessment
Rates
As under current rules: (1) The DIDA
would continue to apply to all banks; (2)
the unsecured debt adjustment would
continue to apply to all banks except
new banks and insured branches; and
(3) the brokered deposit adjustment
would continue to apply to all small
banks except those that are well
capitalized and have a CAMELS
composite rating of 1 or 2.33 As under
current rules, if, during a quarter, a
bank’s supervisory rating changes from
a CAMELS composite 1 or 2 rating to a
CAMELS composite 3, 4 or 5 rating or
vice versa, the bank would be subject to
the brokered deposit adjustment for the
portion of the quarter that it did not
have a CAMELS composite 1 or 2
rating.34
Proposed Assessment Rates
As described above and as set out in
the rate schedule in Table 9 below, for
established small banks, the FDIC
proposes to eliminate risk categories,
but maintain the range of initial
assessment rates (3 basis points to 30
basis points) that the Board has
previously determined will go into
effect starting the quarter after the
reserve ratio reaches 1.15 percent and
include a maximum assessment rate that
would apply to CAMELS composite 1-
and 2-rated banks and the minimum
assessment rates that would apply to
CAMELS composite 3-rated banks and
CAMELS composite 4- and 5-rated
banks.35 Unless revised by the Board,
these rates would remain in effect so
long as the reserve ratio is less than 2
percent.
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assessment rates that would apply to
CAMELS composite 3-rated banks and
CAMELS composite 4- and 5-rated
banks.35 Unless revised by the Board,
these rates would remain in effect so
long as the reserve ratio is less than 2
percent.
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40845
Federal Register / Vol. 80, No. 133 / Monday, July 13, 2015 / Proposed Rules
36 The reserve ratio for the immediately prior
assessment period must also be less than 2 percent.
TABLE 9—INITIAL AND TOTAL BASE ASSESSMENT RATES *
[In basis points per annum]
[Once the reserve ratio reaches 1.15 percent] 36
Established small banks
Large & highly
complex
institutions **
CAMELS Composite
1 or 2
3
4.or 5
Initial Base Assessment Rate ..........................................................................
3 to 16
6 to 30
16 to 30
3 to 30
Unsecured Debt Adjustment *** .......................................................................
¥5 to 0
¥5 to 0
¥5 to 0
¥5 to 0
Brokered Deposit Adjustment ..........................................................................
0 to10 ****
0 to10
0 to10
0 to 10
Total Base Assessment Rate ..........................................................................
1.5 to 26
3 to 40
11 to 40
1.5 to 40
* Total base assessment rates in the table do not include the DIDA.
** See § 327.8(f) and (g) for the definition of large and highly complex institutions.
*** The unsecured debt adjustment cannot exceed the lesser of 5 basis points or 50 percent of an insured depository institution’s initial base
assessment rate; thus, for example, an insured depository institution with an initial base assessment rate of 3 basis points will have a maximum
unsecured debt adjustment of 1.5 basis points and cannot have a total base assessment rate lower than 1.5 basis points
unsecured debt adjustment cannot exceed the lesser of 5 basis points or 50 percent of an insured depository institution’s initial base
assessment rate; thus, for example, an insured depository institution with an initial base assessment rate of 3 basis points will have a maximum
unsecured debt adjustment of 1.5 basis points and cannot have a total base assessment rate lower than 1.5 basis points.
**** The brokered deposit adjustment applies to established small banks with CAMELS composite ratings of 1 or 2 only if they are less than
well capitalized.
As discussed above, the FDIC adopted
the range of assessment rates in this rate
schedule pursuant to its long-term fund
management plan as the FDIC’s best
estimate of the assessment rates that
would have been needed from 1950 to
2010 to maintain a positive fund
balance during the past two banking
crises. This assessment rate schedule
remains the FDIC’s best estimate of the
long-term rates needed. Consequently,
and as discussed in greater detail further
below and in detail in Appendix E, the
FDIC proposes to convert its statistical
model to assessment rates within this 3
basis point to 30 basis point assessment
range in a revenue neutral way.
The FDIC proposes to maintain the
range of initial assessment rates, set out
in the rate schedule in Table 10 below,
that the Board has previously
determined will go into effect starting
the quarter after the reserve ratio
reaches or exceeds 2 percent and is less
than 2.5 percent. Unless revised by the
Board, these rates would remain in
effect so long as the reserve ratio is in
this range. Table 10 also includes the
maximum assessment rates that will
apply to CAMELS composite 1- and 2-
rated banks and the minimum
assessment rates that will apply to
CAMELS composite 3-rated banks and
CAMELS composite 4- and 5-rated
banks
eds 2 percent and is less
than 2.5 percent. Unless revised by the
Board, these rates would remain in
effect so long as the reserve ratio is in
this range. Table 10 also includes the
maximum assessment rates that will
apply to CAMELS composite 1- and 2-
rated banks and the minimum
assessment rates that will apply to
CAMELS composite 3-rated banks and
CAMELS composite 4- and 5-rated
banks.
TABLE 10—INITIAL AND TOTAL BASE ASSESSMENT RATES *
[In basis points per annum]
[If the reserve ratio for the prior assessment period is equal to or greater than 2 percent and less than 2.5 percent]
Established small banks
Large & highly
complex
institutions **
CAMELS Composite
1 or 2
3
4 or 5
Initial Base Assessment Rate ..........................................................................
2 to 14
5 to 28
14 to 28
2 to 28
Unsecured Debt Adjustment *** .......................................................................
¥5 to 0
¥5 to 0
¥5 to 0
¥5 to 0
Brokered Deposit Adjustment ..........................................................................
0 to 10 ****
0 to 10
0 to 10
0 to 10
Total Base Assessment Rate ..........................................................................
1 to 24
2.5 to 38
9 to 38
1 to 38
* Total base assessment rates in the table do not include the DIDA.
** See § 327.8(f) and (g) for the definition of large and highly complex institutions.
*** The unsecured debt adjustment cannot exceed the lesser of 5 basis points or 50 percent of an insured depository institution’s initial base
assessment rate; thus, for example, an insured depository institution with an initial base assessment rate of 2 basis points will have a maximum
unsecured debt adjustment of 1 basis point and cannot have a total base assessment rate lower than 1 basis point.
**** The brokered deposit adjustment applies to established small banks with CAMELS composite ratings of 1 or 2 only if they are less than
well capitalized
thus, for example, an insured depository institution with an initial base assessment rate of 2 basis points will have a maximum
unsecured debt adjustment of 1 basis point and cannot have a total base assessment rate lower than 1 basis point.
**** The brokered deposit adjustment applies to established small banks with CAMELS composite ratings of 1 or 2 only if they are less than
well capitalized.
The FDIC proposes to maintain the
range of initial assessment rates, set out
in the rate schedule in Table 11 below,
that the Board has previously
determined will go into effect, again
without further action by the Board,
when the fund reserve ratio at the end
of the prior assessment period meets or
exceeds 2.5 percent. Unless changed by
the Board, these rates would remain in
effect so long as the reserve ratio is at
or above this level. Table 11 also
includes the maximum assessment rates
that will apply to CAMELS composite 1-
and 2-rated banks and the minimum
assessment rates that will apply to
CAMELS composite 3-rated banks and
CAMELS composite 4- and 5-rated
banks.
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40846
Federal Register / Vol. 80, No. 133 / Monday, July 13, 2015 / Proposed Rules
37 The FDIC proposes to convert a linear version
of its model, which was estimated in a non-linear
manner. (See Appendix E.) The conversion using a
linear version of the model preserves the same rank
ordering as the non-linear model, but using the
linear version of the model allows initial
assessment rates to be expressed as a linear function
of the model variables. The FDIC also used a linear
version of its original non-linear downgrade
probability statistical model when it instituted
variable rates within Risk Category 1 (effective
January 1, 2007)
f the model preserves the same rank
ordering as the non-linear model, but using the
linear version of the model allows initial
assessment rates to be expressed as a linear function
of the model variables. The FDIC also used a linear
version of its original non-linear downgrade
probability statistical model when it instituted
variable rates within Risk Category 1 (effective
January 1, 2007).
38 Initial assessment rates under the rate schedule
actually in effect for the fourth quarter of 2014
ranged from 5 basis points to 35 basis points, since
the DIF reserve ratio was under 1.15 percent.
TABLE 11—INITIAL AND TOTAL BASE ASSESSMENT RATES *
[In basis points per annum]
[If the reserve ratio for the prior assessment period is equal to or greater than 2.5 percent]
Established small banks
Large & highly
complex
institutions **
CAMELS Composite
1 or 2
3
4 or 5
Initial Base Assessment Rate .........................
1 to 13 ............................................................
4 to 25
13 to 25
1 to 25
Unsecured Debt Adjustment *** ......................
¥5 to 0 ..........................................................
¥5 to 0
¥5 to 0
¥5 to 0
Brokered Deposit Adjustment .........................
0 to 10 **** ......................................................
0 to 10
0 to 10
0 to 10
Total Base Assessment Rate .........................
0.5 to 23 .........................................................
2 to 35
8 to 35
0.5 to 35
* Total base assessment rates in the table do not include the DIDA.
** See § 327.8(f) and (g) for the definition of large and highly complex institutions
0 to 10 **** ......................................................
0 to 10
0 to 10
0 to 10
Total Base Assessment Rate .........................
0.5 to 23 .........................................................
2 to 35
8 to 35
0.5 to 35
* Total base assessment rates in the table do not include the DIDA.
** See § 327.8(f) and (g) for the definition of large and highly complex institutions.
*** The unsecured debt adjustment cannot exceed the lesser of 5 basis points or 50 percent of an insured depository institution’s initial base
assessment rate; thus, for example, an insured depository institution with an initial base assessment rate of 1 basis point will have a maximum
unsecured debt adjustment of 0.5 basis points and cannot have a total base assessment rate lower than 0.5 basis points.
**** The brokered deposit adjustment applies to established small banks with CAMELS composite ratings of 1 or 2 only if they are less than
well capitalized.
With respect to each of the three
assessment rate schedules (Tables 9, 10
and 11), the FDIC proposes that the
Board would retain its authority to
uniformly adjust assessment rates up or
down from the total base assessment
rate schedule without further
rulemaking, as long as adjustment does
not exceed 2 basis points. Also, with
respect to each of the three schedules,
the FDIC proposes that, if a bank’s
CAMELS composite or component
ratings change during a quarter in a way
that changes the institution’s initial base
assessment rate, then its assessment rate
would be determined separately for
each portion of the quarter in which it
had different CAMELS composite or
component ratings
eed 2 basis points. Also, with
respect to each of the three schedules,
the FDIC proposes that, if a bank’s
CAMELS composite or component
ratings change during a quarter in a way
that changes the institution’s initial base
assessment rate, then its assessment rate
would be determined separately for
each portion of the quarter in which it
had different CAMELS composite or
component ratings.
Conversion of Statistical Model to
Pricing Multipliers and Uniform
Amount
As discussed above, the FDIC
proposes to convert its statistical model
to assessment rates set out in Table 9 in
a revenue neutral manner.37
Specifically, and as described in detail
in Appendix E, the FDIC proposes to
convert the statistical model to
assessment rates to ensure that aggregate
assessments for an assessment period
shortly before adoption of a final rule
would have been approximately the
same under the final rule as they would
have been under the assessment rate
schedule set forth in Table 4 (the rates
that, under current rules, will
automatically go into effect when the
reserve ratio reaches 1.15 percent).
To illustrate the conversion, Table 12
below sets out the pricing multipliers
and uniform amounts that would have
resulted if the FDIC had converted the
statistical model to the assessment rate
schedule set out in Table 9 (with a range
of assessment rates from 3 basis points
to 30 basis points) so that, for the fourth
quarter of 2014, aggregate assessments
for all established small banks under the
proposal would have equaled, as closely
as reasonably possible, aggregate
assessments for all established small
banks had the assessment rate schedule
in Table 4 been in effect for that
assessment period.38 Partly because the
actual conversion will be based upon a
later quarter (and partly for the reasons
discussed directly below), the pricing
multipliers and the uniform amount
shown in Table 12 are likely to differ
somewhat from those in the final rule
regate
assessments for all established small
banks had the assessment rate schedule
in Table 4 been in effect for that
assessment period.38 Partly because the
actual conversion will be based upon a
later quarter (and partly for the reasons
discussed directly below), the pricing
multipliers and the uniform amount
shown in Table 12 are likely to differ
somewhat from those in the final rule.
TABLE 12—PRICING MULTIPLIERS AND
THE UNIFORM AMOUNT UNDER
A
HYPOTHETICAL CONVERSION OF THE
STATISTICAL
MODEL
TO
ASSESS-
MENT
RATES
BASED
ON
THE
FOURTH QUARTER OF 2014
Model measures
Pricing
multiplier
Weighted Average CAMELS
Component Rating ............
1.731
Tier 1 Leverage Ratio ...........
¥1.337
Net Income Before Taxes/
Total Assets ......................
¥0.652
Nonperforming Loans and
Leases/Gross Assets ........
0.924
TABLE 12—PRICING MULTIPLIERS AND
THE UNIFORM AMOUNT UNDER
A
HYPOTHETICAL CONVERSION OF THE
STATISTICAL
MODEL
TO
ASSESS-
MENT
RATES
BASED
ON
THE
FOURTH QUARTER OF 2014—Con-
tinued
Model measures
Pricing
multiplier
Other Real Estate Owned/
Gross Assets .....................
0.620
Core Deposits/Total Assets ..
¥0.139
One Year Asset Growth .......
0.043
Loan Mix Index .....................
0.066
Uniform Amount ....................
19.376
Updating the Statistical Model, Pricing
Multipliers and Uniform Amount
The statistical analysis used bank
financial data and CAMELS ratings from
1985 through 2011, failure data from
1986 through 2014 and loan charge-off
data from 2001 through 2014. The FDIC
proposes to retain the flexibility to
update the statistical model from time to
time using financial, failure and charge-
off data from later years and publish a
new loan mix index, uniform amount
and pricing multipliers based on the
updated model without further notice-
and-comment rulemaking. Any update
to the model would be done pursuant to
the methodology described in Appendix
E
DIC
proposes to retain the flexibility to
update the statistical model from time to
time using financial, failure and charge-
off data from later years and publish a
new loan mix index, uniform amount
and pricing multipliers based on the
updated model without further notice-
and-comment rulemaking. Any update
to the model would be done pursuant to
the methodology described in Appendix
E. No new financial ratios or other
measures would be introduced into the
model without notice-and-comment
rulemaking. Because the analysis would
continue to use earlier years’ data as
well, changes in estimations of failure
probability should usually be relatively
small. Similarly, if financial, failure and
charge-off data from later years is
available at the time the FDIC adopts a
final rule pursuant to this proposal, the
FDIC may update the statistical model,
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Federal Register / Vol. 80, No. 133 / Monday, July 13, 2015 / Proposed Rules
39 These supervisory evaluations result in the
assignment of supervisory ratings referred to as
ROCA ratings. ROCA stands for Risk Management,
Operational Controls, Compliance, and Asset
Quality. Like CAMELS components, ROCA
component ratings range from a ‘‘1’’ (best rating) to
a ‘‘5’’ rating (worst rating). A Risk Category I
insured branch generally has a ROCA composite
rating of 1 or 2.
40 Specifically, the assessment rate depends on
the insured branch’s weighted average ROCA
component ratings. The weights applied to
individual ROCA component ratings are 35 percent,
25 percent, 25 percent, and 15 percent, respectively.
41 No insured branch in any risk category is
subject to the unsecured debt adjustment or
brokered deposit adjustment. Insured branches are
subject to the DIDA
Specifically, the assessment rate depends on
the insured branch’s weighted average ROCA
component ratings. The weights applied to
individual ROCA component ratings are 35 percent,
25 percent, 25 percent, and 15 percent, respectively.
41 No insured branch in any risk category is
subject to the unsecured debt adjustment or
brokered deposit adjustment. Insured branches are
subject to the DIDA.
42 As of March 31, 2015, there were only 9
insured branches that file regulatory financial
submissions (FFIEC Form 002). (One of these
branches, however, files for itself and another
branch of the same foreign bank that does not file
separately.)
43 For example, insured branches of foreign banks
do not report earnings and report only limited
balance sheet information in FFIEC Form 002.
44 New small banks are subject to the DIDA. New
small banks in Risk Categories II, III, and IV are
subject to the brokered deposit adjustment. New
small banks are not subject to the unsecured debt
adjustment.
45 As with other assessment rates, the Board has
the ability to adopt actual rates that are higher or
lower than these total assessment rates without the
necessity of further notice and comment
rulemaking, provided that: (1) The Board cannot
increase or decrease rates from one quarter to the
next by more than two basis points; and (2)
cumulative increases and decreases cannot be more
than two basis points higher or lower than the total
base rates.
46 Current rules provide that: (1) under specified
conditions, certain subsidiary small banks will be
considered established rather than new, 12 CFR
327.8(k)(4); and (2) the time that a bank has spent
as a federally insured credit union is included in
determining whether a bank is established, 12 CFR
327.8(k)(5)
nnot be more
than two basis points higher or lower than the total
base rates.
46 Current rules provide that: (1) under specified
conditions, certain subsidiary small banks will be
considered established rather than new, 12 CFR
327.8(k)(4); and (2) the time that a bank has spent
as a federally insured credit union is included in
determining whether a bank is established, 12 CFR
327.8(k)(5). If a Risk Category I small bank is
considered established under these rules, but has
no CAMELS component ratings, its initial
assessment rate is 2 basis points above the
minimum initial assessment rate applicable to Risk
Category I (which is equivalent to 2 basis points
above the minimum initial assessment rate for
established small banks) until it receives CAMELS
component ratings. Thereafter, the assessment rate
is determined by annualizing, where appropriate,
financial ratios obtained from all quarterly Call
Reports that have been filed, until the bank files
four quarterly Call Reports. For small banks that are
considered established under these rules, but do not
have CAMELS component ratings, the FDIC
proposes the following:
1. If the bank has no CAMELS composite rating,
its initial assessment rate would be 2 basis points
above the minimum initial assessment rate for
established small banks until it receives a CAMELS
composite rating; and
2. If the bank has a CAMELS composite rating but
no CAMELS component ratings, its initial
assessment rate would be determined using the
financial ratios method by substituting its CAMELS
composite rating for its weighted average CAMELS
component rating and, if the bank has not yet filed
four quarterly Call Reports, by annualizing, where
appropriate, financial ratios obtained from all
quarterly Call Reports that have been filed.
47 Empirical studies show that new banks exhibit
a ‘‘life cycle’’ pattern, and it takes close to a decade
after its establishment for a new bank to mature
ite rating for its weighted average CAMELS
component rating and, if the bank has not yet filed
four quarterly Call Reports, by annualizing, where
appropriate, financial ratios obtained from all
quarterly Call Reports that have been filed.
47 Empirical studies show that new banks exhibit
a ‘‘life cycle’’ pattern, and it takes close to a decade
after its establishment for a new bank to mature.
Continued
including the loan mix index, using the
methodology described in Appendix E.
Insured Branches of Foreign Banks and
New Small Banks
The FDIC proposes to make no
changes to the rules governing the
assessment rate schedules applicable to
insured branches or to the assessment
rate schedule applicable to new small
banks. The FDIC also proposes to make
no changes to the way in which
assessment rates for insured branches
and new small banks are determined.
Insured Branches
The current risk-based deposit
insurance assessment system for small
banks assigns insured branches an
assessment risk classification that is
based on the FDIC’s consideration of
supervisory evaluations provided by the
institution’s primary federal regulator.39
Within Risk Category I, each insured
branch’s assessment rate is based on
these supervisory evaluations.40 Insured
branches not in Risk Category I are
charged the initial base assessment rate
for the risk category to which they are
assigned.41 Once the DIF reserve ratio
reaches 1.15 percent, 2 percent, and 2.5
percent, assessment rate schedules
previously adopted by the Board will go
into effect and remain in place for
insured branches
essment rate is based on
these supervisory evaluations.40 Insured
branches not in Risk Category I are
charged the initial base assessment rate
for the risk category to which they are
assigned.41 Once the DIF reserve ratio
reaches 1.15 percent, 2 percent, and 2.5
percent, assessment rate schedules
previously adopted by the Board will go
into effect and remain in place for
insured branches.
The FDIC does not propose changing
the way assessment rates applicable to
insured branches are determined.42
Insured branches do not report the
information that the FDIC would need
to apply the financial ratios method to
them.43 Moreover, because insured
branches operate as extensions of a
foreign bank’s global banking
operations, they pose unique risks,
which the financial ratios method may
not be able to capture. An insured
branch operates without capital of its
own (capital is held by the foreign
bank), its business strategies are
typically directed by the foreign bank, it
relies extensively on the foreign bank
for liquidity and funding, and it often
has considerable country and transfer
risk exposures not typically found in
other insured institutions of similar
size. Insured branches also present
potentially challenging concerns in the
event of failure.
New Small Banks
New small banks are currently
assigned to risk categories in the same
manner as all other small banks. All
new small banks in Risk Category I,
however, are charged the maximum rate
applicable to Risk Category I. New small
banks not in Risk Category I are charged
the initial base assessment rate for the
risk category to which they are
assigned.44 Once the DIF reserve ratio
reaches 1.15 percent, new small banks
will be charged initial rates under the
previously adopted rate schedule that
automatically goes into effect then
ory I,
however, are charged the maximum rate
applicable to Risk Category I. New small
banks not in Risk Category I are charged
the initial base assessment rate for the
risk category to which they are
assigned.44 Once the DIF reserve ratio
reaches 1.15 percent, new small banks
will be charged initial rates under the
previously adopted rate schedule that
automatically goes into effect then. This
rate schedule will remain in place even
if the reserve ratio equals or exceeds 2
percent or 2.5 percent.45 After applying
all possible adjustments, minimum and
maximum total assessment rates for new
small banks in each risk category are set
forth in Table 13 below.
TABLE 13—TOTAL BASE ASSESSMENT RATES, NEW SMALL BANKS *
[In basis points per annum]
Risk category
I
Risk category
II
Risk category
III
Risk category
IV
Initial Assessment Rate ...................................................................................
7
12
19
30
Brokered Deposit Adjustment (added) ............................................................
N/A
0 to 10
0 to 10
0 to 10
Total Assessment Rate ...................................................................................
7
12 to 22
19 to 29
30 to 40
* The unsecured debt adjustment does not apply to new banks. Total assessment rates do not include the DIDA.
The FDIC does not propose changing
the way assessment rates applicable to
new small banks are determined.46 The
financial data on which the financial
ratios method is based tends to be
harder to interpret and less meaningful
for new small banks. A new bank
undergoes rapid changes in the scale
and scope of operations, often causing
financial ratios to be fairly volatile
include the DIDA.
The FDIC does not propose changing
the way assessment rates applicable to
new small banks are determined.46 The
financial data on which the financial
ratios method is based tends to be
harder to interpret and less meaningful
for new small banks. A new bank
undergoes rapid changes in the scale
and scope of operations, often causing
financial ratios to be fairly volatile. In
addition, a new bank’s loan portfolio is
often unseasoned, and therefore it is
difficult to assess credit risk based
solely on current financial ratios.47
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Despite low profitability and rapid growth, banks
that are three years or newer have, on average, a
probability of failure lower than established banks,
perhaps owing to large capital cushions and close
supervisory attention. However, after three years,
new banks’ failure probability, on average,
surpasses that of established banks. New banks
typically grow more rapidly than established banks
and tend to engage in more high-risk lending
activities funded by large deposits. Studies based
on data from the 1980s showed that asset quality
deteriorated rapidly for many new banks as a result,
and failure probability (conditional upon survival
in prior years) reached a peak by the ninth year.
Many financial ratios of new banks generally begin
to resemble those of established banks by about the
seventh or eighth year of their operation. See
Chiwon Yom, ‘‘Recently Chartered Banks’’
Vulnerability to Real Estate Crisis,’’ FDIC Banking
Review 17 (2005): 115 and Robert DeYoung, ‘‘For
How Long Are Newly Chartered Banks Financially
Fragile?’’ Federal Reserve Bank of Chicago Working
Paper Series 2000–09.
48 The proposal assumes a range of initial
assessment rates from 3 basis points to 30 basis
points
th year of their operation. See
Chiwon Yom, ‘‘Recently Chartered Banks’’
Vulnerability to Real Estate Crisis,’’ FDIC Banking
Review 17 (2005): 115 and Robert DeYoung, ‘‘For
How Long Are Newly Chartered Banks Financially
Fragile?’’ Federal Reserve Bank of Chicago Working
Paper Series 2000–09.
48 The proposal assumes a range of initial
assessment rates from 3 basis points to 30 basis
points. For purposes of determining assessment
rates for the illustration, the FDIC converted the
statistical model to a range of assessment rates from
3 basis points to 30 basis points so that, for the
fourth quarter of 2014, aggregate assessments for all
established small banks under the proposal would
have equaled, as closely as reasonably possible,
aggregate assessments for all established small
banks under the rate schedule in Table 4 (the rates
that, under current rules, will automatically go into
effect when the reserve ratio reaches 1.15 percent).
Initial assessment rates under the rate schedule
actually in effect for the fourth quarter of 2014
ranged from 5 basis points to 35 basis points, since
the DIF reserve ratio was under 1.15 percent.
Further, on average, new banks have a
higher failure rate than established
institutions.
V. Expected Effects of the Proposed
Rule
Effect on Assessment Rates
To illustrate the effects of the
proposal on small bank assessment
rates, the FDIC compared actual
assessment rates of established small
banks as of the end of 2014, using a
range of initial assessment rates of 5
basis points to 35 basis points with
hypothetical assessment rates under
Table 9 of the proposal (which has an
overall range of assessment rates of 3
basis points to 30 basis points).48 The
proportion (and number) of established
small banks paying the minimum initial
assessment rate would have increased
significantly, from 23.3 percent in
actuality (1,493 small banks) to 56.0
percent under the proposal (3,584 small
banks)
hypothetical assessment rates under
Table 9 of the proposal (which has an
overall range of assessment rates of 3
basis points to 30 basis points).48 The
proportion (and number) of established
small banks paying the minimum initial
assessment rate would have increased
significantly, from 23.3 percent in
actuality (1,493 small banks) to 56.0
percent under the proposal (3,584 small
banks). The proportion (and number) of
established small banks paying the
maximum assessment rate would have
decreased from 0.7 percent of
established small banks in actuality (43
small banks) to 0.1 percent of
established small banks under the
proposal (7 small banks). Most
established small banks (5,922 or 92.5
percent) would have had rate decreases.
On average, Risk Category I established
small banks would have had a rate
decrease of 2.4 basis points, and Risk
Category II, III, and IV established small
banks would have had a rate decrease of
6.5 basis points. Of the Risk Category II,
III, and IV established small banks, 96.3
percent would have had rate decreases;
the average decrease would have been
6.8 basis points. 481 established small
banks (7.5 percent of established small
banks) would have had rate increases.
Of the Risk Category I established small
banks, 8.0 percent would have had rate
increases; the average increase would
have been 1.6 basis points.
Chart 1 below graphically compares
the distribution of established small
bank initial assessment rates under this
illustration. The horizontal axis in the
chart represents established small banks
ranked by risk, from the least risky on
the left to the most risky on the right.
Because actual risk rankings under the
current small bank deposit insurance
assessment system differ from risk
rankings under the proposal, a
particular point on the horizontal axis is
not likely to represent the same bank for
the current system and the proposal
n the
chart represents established small banks
ranked by risk, from the least risky on
the left to the most risky on the right.
Because actual risk rankings under the
current small bank deposit insurance
assessment system differ from risk
rankings under the proposal, a
particular point on the horizontal axis is
not likely to represent the same bank for
the current system and the proposal.
Thus, the chart does not show how an
individual bank’s assessment would
change under the proposal; it simply
compares the distribution of assessment
rates under the current system to the
distribution under the proposal.
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40849
Federal Register / Vol. 80, No. 133 / Monday, July 13, 2015 / Proposed Rules
To further illustrate the effects of the
proposal on small bank assessment
rates, the FDIC compared hypothetical
assessment rates under the proposal
with the assessment rates established
small banks would have been charged as
of the end of 2014 if the assessment rate
schedule that, under current rules, will
go into effect when the reserve ratio
reaches 1.15 percent had been in effect.
The proportion of established small
banks paying the minimum initial
assessment rate would also have
increased from 23.3 percent in actuality
to 56.0 percent under the proposal and
the proportion of established small
banks paying the maximum assessment
rate would also have decreased from 0.7
percent of established small banks in
actuality to 0.1 percent of established
small banks under the proposal. Most
established small banks (3,814 or 59.5
percent) would have had rate decreases.
On average, Risk Category I established
small banks would have had a rate
decrease of 0.4 basis points, and Risk
Category II, III, and IV established small
banks would have had a rate decrease of
3.7 basis points
lished small banks in
actuality to 0.1 percent of established
small banks under the proposal. Most
established small banks (3,814 or 59.5
percent) would have had rate decreases.
On average, Risk Category I established
small banks would have had a rate
decrease of 0.4 basis points, and Risk
Category II, III, and IV established small
banks would have had a rate decrease of
3.7 basis points. Of the Risk Category II,
III, and IV established small banks, 90.9
percent would have had rate decreases;
the average decrease would have been
4.4 basis points. 1,268 established small
banks (19.8 percent of established small
banks) would have had rate increases.
Of the Risk Category I established small
banks, 21.4 percent would have had rate
increases; the average increase would
have been 1.9 basis points.
Chart 2 below graphically compares
the distribution of established small
bank initial assessment rates under this
illustration.
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40850
Federal Register / Vol. 80, No. 133 / Monday, July 13, 2015 / Proposed Rules
Effect on Capital and Earnings
Appendix 2 to the Supplementary
Information section of this notice
discusses the effect of the proposal on
the capital and earnings of small
established banks in detail. Annualizing
fourth quarter 2014 balance sheet data,
Appendix 2 analyzes the effects of the
proposal on capital and income in two
ways: (1) The effect of the proposal
compared to the current small bank
deposit insurance assessment system
under the rate schedule in Table 3 (with
an initial assessment rate range of 5
basis points to 35 basis points) (the first
comparison); and (2) the effect of the
proposal compared to the current small
bank deposit insurance assessment
system under the rate schedule in Table
4 (with an initial assessment rate range
of 3 basis points to 30 basis points; this
rate sc
rance assessment system
under the rate schedule in Table 3 (with
an initial assessment rate range of 5
basis points to 35 basis points) (the first
comparison); and (2) the effect of the
proposal compared to the current small
bank deposit insurance assessment
system under the rate schedule in Table
4 (with an initial assessment rate range
of 3 basis points to 30 basis points; this
rate schedule is to go into effect the
quarter after the DIF reserve ratio
reaches 1.15 percent) (the second
comparison).
Under either comparison, the
proposal would cause no small banks to
fall below a 4 percent or 2 percent
leverage ratio that would otherwise be
above these thresholds. Similarly, the
proposal would cause no small banks to
rise above a 2 percent leverage ratio that
would otherwise be below this
threshold. Two established small banks
facing a decrease in assessments under
the first comparison and one established
small bank facing a decrease in
assessments under the second
comparison would, as a result of the
proposal, have their leverage ratios rise
above 4 percent, when they would have
been below 4 percent otherwise.
In the first comparison, only
approximately 7 percent of profitable
established small banks and
approximately 6 percent of unprofitable
small banks would face a rate increase;
all but a very few (26) banks would have
resulting declines in income (or
increases in losses, where the bank is
unprofitable) of 5 percent or less. As
discussed above, assessment rates for
approximately 92 percent of established
small banks would decline, resulting in
increases in income (or decreases in
losses), some of which would be
substantial
small banks would face a rate increase;
all but a very few (26) banks would have
resulting declines in income (or
increases in losses, where the bank is
unprofitable) of 5 percent or less. As
discussed above, assessment rates for
approximately 92 percent of established
small banks would decline, resulting in
increases in income (or decreases in
losses), some of which would be
substantial.
In the second comparison,
approximately 20 percent of profitable
established small banks and
approximately 14 percent of
unprofitable established small banks
would face a rate increase; all but 111
established small banks would have
resulting declines in income (or
increases in losses, where the bank is
unprofitable) of 5 percent or less. As
discussed above, assessment rates for
approximately 60 percent of established
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40851
Federal Register / Vol. 80, No. 133 / Monday, July 13, 2015 / Proposed Rules
49 The current small bank deposit insurance
assessment system did not exist at the end of 2006
and existed in somewhat different forms in years
before 2011. The comparison assumes that the small
bank deposit insurance assessment system in its
current form existed in each year of the comparison.
50 A ‘‘perfect’’ projection is defined as one where
the projection rates every bank that fails over the
projection period as more risky than every bank that
does not fail. A random projection is one where the
projection does no better than chance; that is, any
given percentage of banks with projected higher risk
will include the same percentage of banks that fail
over the projection period
50 A ‘‘perfect’’ projection is defined as one where
the projection rates every bank that fails over the
projection period as more risky than every bank that
does not fail. A random projection is one where the
projection does no better than chance; that is, any
given percentage of banks with projected higher risk
will include the same percentage of banks that fail
over the projection period. Thus, for example, in a
random projection, the 10 percent of banks that
receive the highest risk projections will include 10
percent of the banks that fail over the projection
period; the 20 percent of banks that receive the
highest risk projections will include 20 percent of
the banks that fail over the projection period, and
so on.
51 As implied in the footnote to Table 14, the
accuracy ratios in the table for the proposed system
are based on in-sample backtesting. In-sample
backtesting compares model forecasts to actual
outcomes where those outcomes are included in the
data used in model development. Out-of-sample
backtesting is the comparison of model predictions
against outcomes where those outcomes are not
used as part of the model development used to
generate predictions. Out-of-sample backtesting,
discussed in Appendix 1 of the Supplementary
Information section of this notice, also shows that,
while the current assessment system for small
banks did relatively well at predicting failures in
more recent years, the proposed system would have
done significantly better immediately before the
recent crisis and at the beginning of the crisis, but
also better overall.
small banks would decline, resulting in
increases in income (or decreases in
losses), some of which would be
substantial
hile the current assessment system for small
banks did relatively well at predicting failures in
more recent years, the proposed system would have
done significantly better immediately before the
recent crisis and at the beginning of the crisis, but
also better overall.
small banks would decline, resulting in
increases in income (or decreases in
losses), some of which would be
substantial.
In sum, because the proposed
revisions are intended to generate the
same total revenue from small banks as
would have been generated absent the
proposal, the revisions should, overall,
have no effect on the capital and
earnings of the banking industry,
although the revisions will affect the
earnings and capital of individual
institutions.
VI. Backtesting
To evaluate the proposed revisions to
the risk-based deposit insurance
assessment system for small banks, the
FDIC tested how well the revised system
would have differentiated between
banks that failed and those that did not
during the recent crisis compared to the
current small bank deposit insurance
assessment system.
Table 14 compares accuracy ratios for
the proposed system and the current
small bank deposit insurance
assessment system. An accuracy ratio
compares how well each approach
would have discriminated between
banks that failed within the projection
period and those that did not. The
projection period in each case is the
three years following the date of the
projection (the first column), which is
the last day of the year given
the proposed system and the current
small bank deposit insurance
assessment system. An accuracy ratio
compares how well each approach
would have discriminated between
banks that failed within the projection
period and those that did not. The
projection period in each case is the
three years following the date of the
projection (the first column), which is
the last day of the year given. Thus, for
example, the accuracy ratios for 2006
reflect how well each approach would
have discriminated in its projection
between banks that failed and those that
did not from 2007 through 2009.49 A
‘‘perfect’’ projection would receive an
accuracy ratio of 1; a random projection
would receive an accuracy ratio of 0.50
TABLE 14—ACCURACY RATIO COMPARISON BETWEEN THE PROPOSAL AND THE CURRENT SMALL BANK DEPOSIT
INSURANCE ASSESSMENT SYSTEM
Year of projection
Accuracy ratio for
the proposal *
Accuracy ratio for
the current small
bank assessment
system
Accuracy ratio for
the proposal—
accuracy ratio for
the current system
(A)
(B)
(A–B)
2006 ...........................................................................................................................
0.7029
0.3491
0.3539
2007 ...........................................................................................................................
0.7779
0.5616
0.2163
2008 ...........................................................................................................................
0.8930
0.7825
0.1105
2009 ...........................................................................................................................
0.9398
0.9015
0.0383
2010 ...........................................................................................................................
0.9657
0.9394
0.0262
2011 ..........................................................................................................................
...............................................................................................
0.9398
0.9015
0.0383
2010 ...........................................................................................................................
0.9657
0.9394
0.0262
2011 ...........................................................................................................................
0.9485
0.9323
0.0161
* The accuracy ratio for the proposal is based on the conversion of the statistical model as estimated through 2014.
The table reveals that, while the
current system did relatively well at
capturing risk and predicting failures in
more recent years, the proposed system
would have not only done significantly
better immediately before the recent
crisis and at the beginning of the crisis,
but also better overall.51 In the early part
of the crisis, when CAMELS ratings had
not fully reflected the worsening
condition of many banks, the proposed
system would have recognized risk far
better than the current system, primarily
because the rates under the proposed
system are not constrained by risk
categories. As the crisis progressed and
CAMELS ratings more fully reflected
crisis conditions, the superiority of the
proposed system decreased, but it still
performed better than the current
system.
Appendix 1 to the Supplementary
Information section of this notice
contains a more detailed description of
the FDIC’s backtests of the proposal.
VII. Alternatives Considered
Alternative Minimum and Maximum
Assessment Rates Based on CAMELS
Composite Ratings
The FDIC considered imposing no
minimum or maximum initial
assessment rates based on a bank’s
CAMELS composite rating, which
would have allowed initial assessment
rates to vary between the minimum and
maximum initial assessment rates of the
entire rate schedule without regard to a
bank’s CAMELS composite rating (the
unbounded variation)
Assessment Rates Based on CAMELS
Composite Ratings
The FDIC considered imposing no
minimum or maximum initial
assessment rates based on a bank’s
CAMELS composite rating, which
would have allowed initial assessment
rates to vary between the minimum and
maximum initial assessment rates of the
entire rate schedule without regard to a
bank’s CAMELS composite rating (the
unbounded variation). Thus, for
example, under the 3 basis point to 30
basis point initial assessment range, a
CAMELS composite 5 rated bank could,
in principle, have paid a 3 basis point
initial rate and a CAMELS composite 1
rated bank could, in principle, have
paid a 30 basis point initial rate. As
Table 15 shows, the accuracy ratios for
this unbounded variation would have
been similar to the accuracy ratios for
the proposal.
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40852
Federal Register / Vol. 80, No. 133 / Monday, July 13, 2015 / Proposed Rules
52 To be revenue neutral, using different
maximums or minimums will lead to different
uniform amounts and pricing multipliers from the
proposal when the new statistical model is
converted to assessment rates.
53 Similarly, the first alternative would maintain
the proposed assessment rate schedule that would
go into effect the quarter after the reserve ratio
reaches or exceeds 2 percent, but is less than 2.5
percent, and include the same maximum and
minimum assessment rates determined by CAMELS
composite ratings (see Table 10), except that it
would lower the maximum initial assessment rate
for a CAMELS composite 1 rated bank from 14 basis
points to 10 basis points
ment rate schedule that would
go into effect the quarter after the reserve ratio
reaches or exceeds 2 percent, but is less than 2.5
percent, and include the same maximum and
minimum assessment rates determined by CAMELS
composite ratings (see Table 10), except that it
would lower the maximum initial assessment rate
for a CAMELS composite 1 rated bank from 14 basis
points to 10 basis points. Also, the first alternative
would maintain the proposed assessment rate
schedule that would go into effect the quarter after
the reserve ratio reaches or exceeds 2.5 percent, and
include the same maximum and minimum
assessment rates determined by CAMELS composite
ratings (see Table 11), except that it would lower
the maximum initial assessment rate for a CAMELS
composite 1 rated bank from 13 basis points to 9
basis points.
TABLE 15—ACCURACY RATIO COMPARISON BETWEEN THE PROPOSAL AND THE UNBOUNDED VARIATION
Year of projection
Accuracy ratio for
the unbounded
variation
Accuracy ratio for
the proposal *
Accuracy ratio for
the unbounded
variation—accu-
racy ratio for the
proposal (A–B)
(A)
(B)
2006 ...........................................................................................................................
0.6959
0.7029
¥0.0070
2007 ...........................................................................................................................
0.7779
0.7779
0.0001
2008 ...........................................................................................................................
0.9121
0.8930
0.0191
2009 ...........................................................................................................................
0.9407
0.9398
0.0010
2010 ...........................................................................................................................
0.9670
0.9657
0.0013
2011 ..........................................................................................................................
...............................................................................................
0.9407
0.9398
0.0010
2010 ...........................................................................................................................
0.9670
0.9657
0.0013
2011 ...........................................................................................................................
0.9514
0.9485
0.0029
* The accuracy ratios for the variation and for the proposal are based on the conversion of the statistical model as estimated through 2014.
The FDIC decided not to propose the
unbounded variation, however. Other
than taking into account weighted
average CAMELS component ratings,
the statistical model uses historical
financial data to estimate average
relationships between financial
measures and the risk of failure. The
statistical model does not take into
account idiosyncratic or unquantifiable
risk or risk mitigators (e.g., entering or
exiting a risky line of lending; having
inexperienced or experienced
management, reducing or tightening
underwriting requirements), again
except through weighted average
CAMELS component ratings. The model
does take into account weighted average
CAMELS component ratings, but it
assigns the same weight to them for
each bank. Thus, for banks that have
significant idiosyncratic or
unquantifiable risk or risk mitigators,
the model may not assign an assessment
rate that reflects their actual risk. The
proposal, however, ensures that the
assessment system takes idiosyncratic
and unquantifiable risks and risk
mitigators into account to the extent that
they are reflected in CAMELS composite
ratings, and prevents the assessment
system from assigning a rate that reflects
either too little risk (for a bank with a
CAMELS composite 3, 4 or 5 rating) or
too much risk (for a bank with a
CAMELS composite 1 or 2 rating)
es that the
assessment system takes idiosyncratic
and unquantifiable risks and risk
mitigators into account to the extent that
they are reflected in CAMELS composite
ratings, and prevents the assessment
system from assigning a rate that reflects
either too little risk (for a bank with a
CAMELS composite 3, 4 or 5 rating) or
too much risk (for a bank with a
CAMELS composite 1 or 2 rating). As a
result, under the proposal, initial
assessment rates for small banks that are
well rated (those with CAMELS
composite ratings of 1 or 2) would not
overlap with initial assessment rates for
troubled small banks (those with
CAMELS composite ratings of 4 or 5),
except at the maximum initial rate for
CAMELS composite 1- and 2-rated
banks and the minimum initial rate for
CAMELS composite 4- and 5-rated
banks.
In seeking the proper balance between
maintaining the accuracy of the
assessment system overall and reducing
the risk that a particular bank’s
assessment rate might be inappropriate,
the FDIC considered many other
variations of minimum and maximum
initial assessment rates based on a
bank’s CAMELS composite rating. Some
variations with lower (or no) minimums
for CAMELS 3- and/or CAMELS 4- and
5-rated banks and/or higher (or no)
maximums for CAMELS 1- and/or
CAMELS 2-rated banks had slightly
higher accuracy ratios, but would have
increased the risk of inappropriate
assessment rates for some banks. Some
variations with higher minimums for
CAMELS 3- and/or CAMELS 4- and 5-
rated banks and/or lower maximums for
CAMELS 1- and/or CAMELS 2-rated
banks had somewhat lower (or
significantly lower) accuracy ratios. The
maximums and minimums in the
proposal represent the FDIC’s best
judgment on the proper balance. The
FDIC is requesting comment on whether
the proposal achieves the proper
balance and whether the final rule
should, instead, use alternative (or no)
maximums and minimums based on
CAMELS composite ratings
CAMELS 2-rated
banks had somewhat lower (or
significantly lower) accuracy ratios. The
maximums and minimums in the
proposal represent the FDIC’s best
judgment on the proper balance. The
FDIC is requesting comment on whether
the proposal achieves the proper
balance and whether the final rule
should, instead, use alternative (or no)
maximums and minimums based on
CAMELS composite ratings. Because the
FDIC intends that the effect of the
proposal be revenue neutral, any
reduction in the maximum initial
assessment rate applicable to CAMELS
composite 1- or CAMELS 2-rated banks
that lowers some banks’ assessment
rates will increase the assessment rates
of other banks.52
The FDIC is particularly interested in
comment on two alternatives to the
proposal, both of which would
distinguish between CAMELS
composite 1- and 2-rated small banks.
The first alternative would maintain the
assessment rate schedule that would go
into effect starting the quarter after the
reserve ratio reaches 1.15 percent (with
a range of initial assessment rates of 3
basis points to 30 basis points) and
include the same maximum and
minimum assessment rates based upon
banks’ CAMELS composite ratings (see
Table 9), except that it would lower the
maximum initial assessment rate for a
CAMELS composite 1-rated bank from
16 basis points to 12 basis points.53 As
reflected in Table 16 below, compared
to the proposal, this alternative would
have virtually no effect on accuracy
(that is, on how well the assessment
system would have differentiated
between banks that failed and those that
did not during the recent crisis); the
alternative, like the proposal, is also
significantly more accurate than the
current small bank deposit insurance
assessment system. On the other hand,
the FDIC has never before distinguished
between CAMELS composite 1-rated
banks and CAMELS composite 2-rated
banks for deposit insurance assessment
purposes
d
between banks that failed and those that
did not during the recent crisis); the
alternative, like the proposal, is also
significantly more accurate than the
current small bank deposit insurance
assessment system. On the other hand,
the FDIC has never before distinguished
between CAMELS composite 1-rated
banks and CAMELS composite 2-rated
banks for deposit insurance assessment
purposes.
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40853
Federal Register / Vol. 80, No. 133 / Monday, July 13, 2015 / Proposed Rules
54 The second alternative would have the same
assessment rate schedule go into effect the quarter
after the reserve ratio reaches or exceeds 2 percent,
but is less than 2.5 percent, as the first alternative
and include the same maximum and minimum
assessment rates determined by CAMELS composite
ratings, except that it would lower the minimum
initial assessment rate for a CAMELS composite 4
and 5 rated banks from 14 basis points to 10 basis
points. Also, the second alternative would have the
same assessment rate schedule go into effect the
quarter after the reserve ratio reaches or exceeds 2.5
percent as the first alternative, and include the
same maximum and minimum assessment rates
determined by CAMELS composite ratings (see
Table 11), except that it would lower the minimum
initial assessment rate for a CAMELS composite 4-
and 5-rated banks from 13 basis points to 9 basis
points.
55 Under either alternative, if a bank’s CAMELS
composite or component ratings changed during a
quarter (other than a change in CAMELS composite
rating from a 4 to a 5 or a 5 to a 4 with no change
in component ratings), including a change in
CAMELS composite rating from a 1 to a 2 or a 2
to a 1, its assessment rate would be determined
separately for each portion of the quarter in which
it had different CAMELS composite or component
ratings
posite or component ratings changed during a
quarter (other than a change in CAMELS composite
rating from a 4 to a 5 or a 5 to a 4 with no change
in component ratings), including a change in
CAMELS composite rating from a 1 to a 2 or a 2
to a 1, its assessment rate would be determined
separately for each portion of the quarter in which
it had different CAMELS composite or component
ratings.
TABLE 16—ACCURACY RATIO COMPARISON BETWEEN THE FIRST ALTERNATIVE, THE PROPOSAL AND THE CURRENT SMALL
BANK DEPOSIT INSURANCE ASSESSMENT SYSTEM
Year of projection
Accuracy ratio for
the alternative *
Accuracy ratio for
the proposal *
Accuracy ratio for
the alternative—ac-
curacy ratio for the
proposal (A–B)
Accuracy ratio for
the current small
bank assessment
system
Accuracy ratio for
the alternative—ac-
curacy ratio for the
current system (A–
C)
(A)
(B)
(C)
2006 ...................................
0.7045
0.7029
0.0016
0.3491
0.3555
2007 ...................................
0.7770
0.7779
¥0.0009
0.5616
0.2154
2008 ...................................
0.8895
0.8930
¥0.0035
0.7825
0.1070
2009 ...................................
0.9398
0.9398
0.0000
0.9015
0.0383
2010 ...................................
0.9657
0.9657
0.0000
0.9394
0.0262
2011 ...................................
0.9485
0.9485
0.0000
0.9323
0.0161
* The accuracy ratios for the alternative and for the proposal are based on the conversion of the statistical model as estimated through 2014
0.7825
0.1070
2009 ...................................
0.9398
0.9398
0.0000
0.9015
0.0383
2010 ...................................
0.9657
0.9657
0.0000
0.9394
0.0262
2011 ...................................
0.9485
0.9485
0.0000
0.9323
0.0161
* The accuracy ratios for the alternative and for the proposal are based on the conversion of the statistical model as estimated through 2014.
The second alternative is the same as
the first, except that, for the rate
schedule that would go into effect the
quarter after the reserve ratio reaches
1.15 percent, the minimum initial
assessment rate applicable to CAMELS
composite 4- and 5-rated banks would
be lowered from 16 basis points to 12
basis points.54 55 As reflected in Table 17
below, compared to the proposal, this
alternative would also have little effect
on accuracy and, like the proposal, is
significantly more accurate than the
current small bank deposit insurance
assessment system.
TABLE 17—ACCURACY RATIO COMPARISON BETWEEN THE SECOND ALTERNATIVE, THE PROPOSAL AND THE CURRENT
SMALL BANK DEPOSIT INSURANCE ASSESSMENT SYSTEM
Year of projection
Accuracy ratio for
the alternative *
Accuracy ratio for
the proposal *
Accuracy ratio for
the alternative-
accuracy ratio for the
proposal (A–B)
Accuracy ratio for
the current small
bank assessment
system
Accuracy ratio for
the alternative-
accuracy ratio for the
current system (A–
C)
2006 ...................................
0.7061
0.7029
0.0032
0.3491
0.3570
2007 ...................................
0.7779
0.7779
0.0000
0.5616
0.2163
2008 ...................................
0.8903
0.8930
¥0.0027
0.7825
0.1078
2009 ...................................
0.9407
0.9398
0.0009
0.9015
0.0392
2010 ...................................
0.9671
0.9657
0.0014
0.9394
0.0276
2011 ..................................
61
0.7029
0.0032
0.3491
0.3570
2007 ...................................
0.7779
0.7779
0.0000
0.5616
0.2163
2008 ...................................
0.8903
0.8930
¥0.0027
0.7825
0.1078
2009 ...................................
0.9407
0.9398
0.0009
0.9015
0.0392
2010 ...................................
0.9671
0.9657
0.0014
0.9394
0.0276
2011 ...................................
0.9504
0.9485
0.0019
0.9323
0.0180
* The accuracy ratios for the alternative and for the proposal are based on the conversion of the statistical model as estimated through 2014.
In addition to the numerous
variations on minimum and maximum
initial assessment rates based on
CAMELS composite ratings, the FDIC
also considered other alternatives when
developing this proposal.
Loss Given Default
Though expected losses to the DIF are
a function of bo

[Text truncated at 120,000 characters. The full text is on the page linked above.]

## Nearby sections

- [FDIC FIL-1-2002 FOREIGN ASSETS CONTROL ACT](https://www.frixlaw.com/law-library/statutes/FDIC_FIL02001.md)
- [FDIC FIL-1-2010 Employee Compensation Advance Notice of Proposed Rulemaking](https://www.frixlaw.com/law-library/statutes/FDIC_FIL10001.md)
- [FDIC FIL-1-2024 Consolidated Reports of Condition and Income for Fourth Quarter 2023](https://www.frixlaw.com/law-library/statutes/FDIC_FIL24001.md)
- [FDIC FIL-2-2004 Foreign Assets Control Act](https://www.frixlaw.com/law-library/statutes/FDIC_FIL04002.md)
- [FDIC FIL-2-2020 Consolidated Reports of Condition and Income for Fourth Quarter 2019](https://www.frixlaw.com/law-library/statutes/FDIC_FIL20002.md)
- [FDIC FIL-3-2003 FILING PROCEDURES](https://www.frixlaw.com/law-library/statutes/FDIC_FIL03003.md)
- [FDIC FIL-4-2006 Commercial Real Estate Lending Proposed Interagency Guidance](https://www.frixlaw.com/law-library/statutes/FDIC_FIL06004.md)
- [FDIC FIL-4-2021 Revised Guidelines for Appeals of Material Supervisory Determinations](https://www.frixlaw.com/law-library/statutes/FDIC_FIL21004.md)
- [FDIC FIL-4-2023 Guidance to Help Financial Institutions and Facilitate Recovery in Areas of California Affected by Severe Winter Storms, Flooding, Landslides and Mudslides](https://www.frixlaw.com/law-library/statutes/FDIC_FIL23004.md)
- [FDIC FIL-4-2025 FDIC Statement of Policy on Bank Merger Transactions](https://www.frixlaw.com/law-library/statutes/FDIC_FIL25004.md)
- [FDIC FIL-5-2000 Consumer Credit Reporting Practices](https://www.frixlaw.com/law-library/statutes/FDIC_FIL00005.md)
- [FDIC FIL-5-2003 LETTER TO STAKEHOLDERS](https://www.frixlaw.com/law-library/statutes/FDIC_FIL03005.md)
- [FDIC FIL-5-2021 Frequently Asked Questions Regarding Suspicious Activity Reporting and Other Anti-Money Laundering (AML) Considerations](https://www.frixlaw.com/law-library/statutes/FDIC_FIL21005.md)
- [FDIC FIL-6-2000 Special Alert](https://www.frixlaw.com/law-library/statutes/FDIC_FIL00006.md)

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/FDIC_FIL15025. Check the current official text before relying on it. Not legal advice.