Final Rule on Special Assessment Pursuant to Systemic Risk Determination
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FDIC Financial Institution Letters › Final Rule on Special Assessment Pursuant to Systemic Risk Determination
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________________________
Federal Deposit Insurance
Corporation
MEMO
TO:
The Board of Directors
FROM:
Patrick Mitchell
Director, Division of Insurance and Research
DATE:
November 16, 2023
RE:
Final Rule on The Special Assessment Pursuant to Systemic Risk Determination
RECOMMENDATION
Staff recommend that the FDIC’s Board of Directors (Board) approve the attached final rule and
authorize its publication in the Federal Register. The final rule implements a special assessment to recover the
loss to the Deposit Insurance Fund (DIF or Fund) arising from the protection of uninsured depositors following
the closures of Silicon Valley Bank, Santa Clara, CA, and Signature Bank, New York, NY. The Federal Deposit
Insurance Act (FDI Act) requires the FDIC to take this action in connection with the systemic risk determination
announced on March 12, 2023.
The assessment base for the special assessment is equal to an insured depository institution’s (IDI)
estimated uninsured deposits, reported for the quarter that ended December 31, 2022, adjusted to exclude the
first $5 billion in estimated uninsured deposits from the IDI, or for IDIs that are part of a holding company with
one or more subsidiary IDIs, at the banking organization level. The FDIC will collect the special assessment at an
annual rate of approximately 13.4 basis points, over eight quarterly assessment periods, which it estimates will
result in total revenue of $16.3 billion, the estimated losses attributable to the protection of uninsured
depositors at the two failed banks
of a holding company with
one or more subsidiary IDIs, at the banking organization level. The FDIC will collect the special assessment at an
annual rate of approximately 13.4 basis points, over eight quarterly assessment periods, which it estimates will
result in total revenue of $16.3 billion, the estimated losses attributable to the protection of uninsured
depositors at the two failed banks. Because the estimated loss pursuant to the systemic risk determination will
be periodically adjusted, and because assessments collected may change due to corrective amendments to the
amount of uninsured deposits reported for the December 31, 2022, reporting period, the FDIC retains the ability
to cease collection early, extend the special assessment collection period, and impose a final shortfall special
assessment to collect the difference between actual losses and the amounts collected after the receiverships for
Silicon Valley Bank and Signature Bank terminate.
Staff recommend approval of the final rule, which adopts the proposal with a modification to apply any
corrective amendments to estimated uninsured deposits for the December 31, 2022, reporting period to the
calculation of the special assessment, following adoption of the final rule. The final rule will be effective April 1,
2024, with the first collection for the special assessment reflected on the invoice for the first quarterly
assessment period of 2024 (i.e., January 1 through March 31, 2024), with a payment date of June 28, 2024.
BACKGROUND
A. Silicon Valley Bank, Signature Bank, and the Systemic Risk Exception
On March 10, 2023, Silicon Valley Bank was closed by the California Department of Financial Protection
Concur:
Harrel M. Pettway
General Counsel
sessment reflected on the invoice for the first quarterly
assessment period of 2024 (i.e., January 1 through March 31, 2024), with a payment date of June 28, 2024.
BACKGROUND
A. Silicon Valley Bank, Signature Bank, and the Systemic Risk Exception
On March 10, 2023, Silicon Valley Bank was closed by the California Department of Financial Protection
Concur:
Harrel M. Pettway
General Counsel
and Innovation, followed by the closure of Signature Bank by the New York State Department of Financial
Services. The FDIC was appointed as the receiver for both institutions.1
Section 13(c)(4)(G) of the FDI Act permits the FDIC to take action or provide assistance to an IDI for
which the FDIC has been appointed receiver as necessary to avoid or mitigate adverse effects on economic
conditions or financial stability, following a recommendation by the Board, with the written concurrence of the
Board of Governors of the Federal Reserve System (Board of Governors), and a determination of systemic risk by
the Secretary of the U.S. Department of Treasury (Treasury) (in consultation with the President).2
On March 12, 2023, the Secretary of the Treasury, acting on the recommendation of the Board and
Board of Governors, and after consultation with the President, invoked the statutory systemic risk exception to
allow the FDIC to complete its resolution of both Silicon Valley Bank and Signature Bank in a manner that fully
protects depositors.3 The full protection of depositors, rather than imposing losses on uninsured depositors,
was intended to strengthen public confidence in the nation’s banking system.
B
, and after consultation with the President, invoked the statutory systemic risk exception to
allow the FDIC to complete its resolution of both Silicon Valley Bank and Signature Bank in a manner that fully
protects depositors.3 The full protection of depositors, rather than imposing losses on uninsured depositors,
was intended to strengthen public confidence in the nation’s banking system.
B. Legal Authority and Policy Objectives
Under section 13(c)(4)(G) of the FDI Act, the loss to the DIF arising from the use of a systemic risk
exception must be recovered from one or more special assessments on IDIs, depository institution holding
companies (with the concurrence of the Secretary of the Treasury with respect to holding companies), or both,
as the FDIC determines to be appropriate.4 As required by the FDI Act, the special assessment, detailed below, is
intended and designed to recover the losses to the DIF incurred as the result of the actions taken by the FDIC to
protect the uninsured depositors of Silicon Valley Bank and Signature Bank following a determination of
systemic risk.5
Section 13(c)(4)(G) of the FDI Act provides the FDIC with discretion in the design and timeframe for any
special assessments to recover the losses to the DIF as a result of a systemic risk determination. As detailed in
the sections that follow, and as required by section 13(c)(4)(G) of the FDI Act, the FDIC considered the types of
entities that benefit from any action taken or assistance provided under the determination of systemic risk,
economic conditions, the effects on the industry, and such other factors as the FDIC deemed appropriate and
relevant to the action taken or assistance provided.6
1 See FDIC PR-16-2023, “FDIC Creates a Deposit Insurance National Bank of Santa Clara to Protect Insured
Depositors of Silicon Valley Bank, Santa Clara, California.” March 10, 2023. https://www.fdic.gov/news/press
releases/2023/pr23016.html
c conditions, the effects on the industry, and such other factors as the FDIC deemed appropriate and
relevant to the action taken or assistance provided.6
1 See FDIC PR-16-2023, “FDIC Creates a Deposit Insurance National Bank of Santa Clara to Protect Insured
Depositors of Silicon Valley Bank, Santa Clara, California.” March 10, 2023. https://www.fdic.gov/news/press
releases/2023/pr23016.html. See also FDIC PR-18-2023, “FDIC Establishes Signature Bridge Bank, N.A., as
Successor to Signature Bank, New York, NY.” March 12, 2023. https://www.fdic.gov/news/press
releases/2023/pr23018.html.
2 12 U.S.C. 1823(c)(4)(G). As used in the final rule, 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).
3 12 U.S.C. 1823(c)(4)(G). See also: FDIC PR-17-2023. “Joint Statement by the Department of the Treasury, Federal
Reserve, and FDIC.” March 12, 2023. https://www.fdic.gov/news/press-releases/2023/pr23017.html. See also:
“Remarks by Chairman Martin J. Gruenberg on Recent Bank Failures and the Federal Regulatory Response
before the Committee on Banking, Housing, and Urban Affairs, United States Senate.” March 27, 2023.
https://www.fdic.gov/news/speeches/2023/spmar2723.html.
4 12 U.S.C. 1823(c)(4)(G)(ii)(I).
5 12 U.S.C. 1823(c)(4)(G)(ii)(III).
6 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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C
ate.” March 27, 2023.
https://www.fdic.gov/news/speeches/2023/spmar2723.html.
4 12 U.S.C. 1823(c)(4)(G)(ii)(I).
5 12 U.S.C. 1823(c)(4)(G)(ii)(III).
6 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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C. The Proposed Rule
On May 11, 2023, the Board approved a notice of proposed rulemaking (the proposed rule, or proposal)
to implement a special assessment, as required by the FDI Act, to recover the loss to the DIF arising from the
protection of uninsured depositors following the closures of Silicon Valley Bank and Signature Bank.7 The FDIC
proposed to collect a special assessment that would be approximately equal to the losses attributable to the
protection of uninsured depositors at these two failed banks, which were estimated to total $15.8 billion.
The FDIC proposed an annual special assessment rate that would be derived by dividing the loss
estimate attributable to the protection of uninsured depositors by the assessment base calculated for all IDIs
subject to the special assessment. The proposed assessment base (special assessment base) was equal to an
IDI’s estimated uninsured deposits as reported in the Consolidated Reports of Condition and Income (Call
Report) or Report of Assets and Liabilities of U.S
ed by dividing the loss
estimate attributable to the protection of uninsured depositors by the assessment base calculated for all IDIs
subject to the special assessment. The proposed assessment base (special assessment base) was equal to an
IDI’s estimated uninsured deposits as reported in the Consolidated Reports of Condition and Income (Call
Report) or Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks (FFIEC 002) as of
December 31, 2022, adjusted to exclude the first $5 billion of uninsured deposits at the banking organization
level.8
In response to the proposal, the FDIC received 312 comment letters from depository institutions,
depository institution holding companies, trade associations, members of Congress, and other interested
parties.9 As further detailed below, the majority of commenters expressed support for the proposal and for the
scope of application of the proposed rule, including the $5 billion deduction applied to the special assessment
base. Other comment letters suggested the exclusion, or different treatment, of certain types of uninsured
deposits included in the special assessment base, different reporting dates of estimated uninsured deposits
used to calculate the assessment base, or adjustment of the $5 billion deduction from the special assessment
base. Commenters additionally discussed a range of other matters that are addressed in the relevant sections
below.
THE FINAL RULE
A. Description of the Final Rule
After careful consideration of the comments received on the proposal and analysis of the applicable
statutory factors, staff recommend that the Board adopt, as final, the proposed special assessment, with
clarifications to promote transparency and a modification to apply any corrective amendments to estimated
uninsured deposits for the December 31, 2022, reporting period to the calculation of the special assessment,
following adoption of the final rule.
B
osal and analysis of the applicable
statutory factors, staff recommend that the Board adopt, as final, the proposed special assessment, with
clarifications to promote transparency and a modification to apply any corrective amendments to estimated
uninsured deposits for the December 31, 2022, reporting period to the calculation of the special assessment,
following adoption of the final rule.
B. Estimated Special Assessment Amount
To determine the cost of the failures attributable to the cost of covering uninsured deposits pursuant to
the determination of systemic risk, the FDIC determined the percentage of deposits that were uninsured at the
time of failure and applied that percentage to the total cost of the failure for each bank.
At Signature Bank, for which 67 percent of deposits were uninsured at the time of failure, the portion of
the total estimated loss of $0.9 billion that is attributable to the protection of uninsured depositors is $0.6
billion. The cost estimate for the sale of the Signature Bridge Bank to New York Community Bancorp decreased
7 See 88 FR 32694 (May 22, 2023).
8 As used in the final rule, the term “banking organization” includes IDIs that are not subsidiaries of a holding
company as well as holding companies with one or more subsidiary IDIs.
9 See comments on the proposal, available at: https://www.fdic.gov/resources/regulations/federal-register
publications/2023/2023-special-assessments-systemic-risk-determination-3064-af93.html.
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, 2023).
8 As used in the final rule, the term “banking organization” includes IDIs that are not subsidiaries of a holding
company as well as holding companies with one or more subsidiary IDIs.
9 See comments on the proposal, available at: https://www.fdic.gov/resources/regulations/federal-register
publications/2023/2023-special-assessments-systemic-risk-determination-3064-af93.html.
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following the issuance of the proposal from $2.4 billion to approximately $0.9 billion. The decline in the cost
estimate was primarily attributable to recoveries from assets in receivership that were higher than previously
estimated offset, in part, by higher costs of liabilities assumed by the receivership.
At Silicon Valley Bank, for which 88 percent of deposits were uninsured at the time of failure, the portion
of the total estimated loss of $17.8 billion that is attributable to the protection of uninsured depositors is $15.7
billion. The cost estimate for the sale of the Silicon Valley Bridge Bank to First Citizens was revised following the
issuance of the proposal from $16.1 billion to approximately $17.8 billion mainly due to recoveries from assets in
receivership that were less than previously anticipated and higher costs of liabilities assumed by the
receivership.
The revised cost estimates form the basis for the current special assessment calculation in this final
rule. In total, of the $18.7 billion in estimated losses at the two banks and incurred by the DIF, the estimated loss
attributable to the protection of uninsured depositors is $16.3 billion, an increase of approximately $500 million
from the estimate of $15.8 billion described in the proposal
The revised cost estimates form the basis for the current special assessment calculation in this final
rule. In total, of the $18.7 billion in estimated losses at the two banks and incurred by the DIF, the estimated loss
attributable to the protection of uninsured depositors is $16.3 billion, an increase of approximately $500 million
from the estimate of $15.8 billion described in the proposal.
As with all failed bank receiverships, these loss estimates will be periodically adjusted as assets are
sold, liabilities are satisfied, and receivership expenses are incurred. The exact amount of losses incurred will be
determined when the FDIC terminates the receiverships. As noted below, the amount of the special assessment
will be adjusted as the loss estimates change.
C. Rate for the Special Assessment
The proposed special assessment rate was derived by dividing the loss estimate attributable to the
protection of uninsured depositors by the assessment base calculated for all IDIs subject to the special
assessment as of December 31, 2022. As described in detail below, the proposed assessment base was equal to
estimated uninsured deposits reported for the quarter that ended December 31, 2022, after applying the $5
billion deduction.
Staff recommend adopting the proposed calculation of the special assessment rate as final. Under the
final rule, the special assessment rate will equal 3.36 basis points quarterly, or approximately 13.4 basis points
annually, an increase from the 12.5 basis point annual rate in the proposal.10 Amendments to reported
estimated uninsured deposits filed since the adoption of the proposed rule have resulted in a decline in the total
assessment base. The decline in the total assessment base combined with the increase in the cost estimate have
resulted in a higher annual rate relative to the proposal.11 As of November 2, 2023, the total assessment base
was $6.0 trillion
in the proposal.10 Amendments to reported
estimated uninsured deposits filed since the adoption of the proposed rule have resulted in a decline in the total
assessment base. The decline in the total assessment base combined with the increase in the cost estimate have
resulted in a higher annual rate relative to the proposal.11 As of November 2, 2023, the total assessment base
was $6.0 trillion. The special assessment rate will not change following the date of adoption of this final rule
10 The proposed rule noted that the special assessment rate in the proposal was subject to change prior to any
final rule depending on any adjustments to the loss estimate, mergers or failures, or amendments to reported
estimates of uninsured deposits. Estimates of the special assessment rate and expected effects in the proposed
rule generally reflected any amendments to data reported through February 21, 2023, for the reporting period
that ended December 31, 2022, while estimates for this final rule reflect any amendments reported as of
November 2, 2023. Given the closure of First Republic Bank, San Francisco, CA, announced on May 1, 2023,
estimates in the proposed rule and this final rule exclude First Republic Bank in addition to Silicon Valley Bank
and Signature Bank. See FDIC: PR-34-2023. “JPMorgan Chase Bank, National Association, Columbus, Ohio
Assumes All the Deposits of First Republic Bank, San Francisco, California.” May 1, 2023.
https://www.fdic.gov/news/press-releases/2023/pr23034.html.
11 The special assessment rate, base, and expected effects in this final rule reflect any amendments to data as of
November 2, 2023, for the reporting period that ended December 31, 2022.
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Chase Bank, National Association, Columbus, Ohio
Assumes All the Deposits of First Republic Bank, San Francisco, California.” May 1, 2023.
https://www.fdic.gov/news/press-releases/2023/pr23034.html.
11 The special assessment rate, base, and expected effects in this final rule reflect any amendments to data as of
November 2, 2023, for the reporting period that ended December 31, 2022.
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through the duration of the initial eight-quarter collection period.
D. Assessment Base and Scope of Application for the Special Assessment
Under the proposal, each IDI’s assessment base for the special assessment would be equal to estimated
uninsured deposits as reported in the Call Report or FFIEC 002 for the quarter that ended December 31, 2022,
after applying the $5 billion deduction.12 As a result of this deduction, most small IDIs and IDIs that are part of a
small banking organization would not pay anything towards the special assessment. The special assessment
would not be not applicable to any banking organizations with total assets under $5 billion.
1. Comments Received on the Calculation of the Special Assessment
The majority of commenters stated that community banks should be exempt from the special
assessment. The FDIC received 63 comments related to the calculation of the special assessment base and the
scope of application for the special assessment, or the calculation of the special assessment rate. Among these
comments, 22 supported the resulting exclusion of community banks, or banking organizations with total assets
of $5 billion or less, from the scope of application
m the special
assessment. The FDIC received 63 comments related to the calculation of the special assessment base and the
scope of application for the special assessment, or the calculation of the special assessment rate. Among these
comments, 22 supported the resulting exclusion of community banks, or banking organizations with total assets
of $5 billion or less, from the scope of application. Other commenters stated that certain groups of banks should
be exempt from or pay less of the special assessment, while one commenter recommended that all banks be
subject to the special assessment.13
One commenter noted that given that the FDIC is required by statute to recover the estimated amount
of loss attributable to the protection of uninsured depositors following the determination of systemic risk, any
changes to the proposed special assessment base will necessarily redistribute the obligation among banking
organizations subject to the special assessment.
Several commenters recommended alternative measures for the special assessment base, including
total assets, total deposits, uninsured deposits as a percentage of total deposits, an institution’s regular risk-
based deposit insurance assessment base, or to otherwise take a more risk-based approach to calculating the
special assessment base.
Defining the assessment base for the special assessment as estimated uninsured deposits reported as
of December 31, 2022, and deducting $5 billion from a banking organization’s assessment base, serves several
purposes. First, banking organizations that reported $5 billion or less in estimated uninsured deposits as of
December 31, 2022, would not be subject to the special assessment
sment base.
Defining the assessment base for the special assessment as estimated uninsured deposits reported as
of December 31, 2022, and deducting $5 billion from a banking organization’s assessment base, serves several
purposes. First, banking organizations that reported $5 billion or less in estimated uninsured deposits as of
December 31, 2022, would not be subject to the special assessment. Banking organizations that reported more
than $5 billion in estimated uninsured deposits would pay based on the marginal amounts of uninsured
deposits they reported, helping to mitigate a “cliff effect” that might otherwise apply if a different method, such
as applying an asset size threshold, were used to determine applicability, and thereby ensuring more equitable
treatment. Otherwise, a situation may arise in which a banking organization just over a particular size threshold
would pay a special assessment, while a banking organization just below such size threshold would pay none.
Second, the $5 billion deduction from the assessment base results in most small IDIs and IDIs that are
12 IDIs with less than $1 billion in total assets as of June 30, 2021, were not required to report the estimated
amount of uninsured deposits on the Call Report for December 31, 2022. Therefore, for IDIs that had less than $1
billion in total assets as of June 30, 2021, the amount and share of estimated uninsured deposits as of December
31, 2022, would be zero.
13 Among the groups of banks commenters stated should be exempt from the special assessment were: banks
under a range of other asset or uninsured deposit thresholds, banks not considered systemically important
financial institutions, Community Development Financial Institutions (CDFIs), Minority Depository Institutions
(MDIs), rural banks, and mutual banks.
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31, 2022, would be zero.
13 Among the groups of banks commenters stated should be exempt from the special assessment were: banks
under a range of other asset or uninsured deposit thresholds, banks not considered systemically important
financial institutions, Community Development Financial Institutions (CDFIs), Minority Depository Institutions
(MDIs), rural banks, and mutual banks.
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part of a small banking organization not paying anything towards the special assessment. The special
assessment is not applicable to any banking organizations with total assets under $5 billion.14
Finally, deducting $5 billion from the assessment base of estimated uninsured deposits at the banking
organization level rather than at the IDI level for banking organizations with more than one subsidiary IDI
ensures that banking organizations with similar amounts of estimated uninsured deposits pay a similar special
assessment, regardless of banking organization structure. For example, a banking organization with multiple
IDIs with large amounts of estimated uninsured deposits will not have an advantage over other banking
organizations with only one subsidiary IDI with a similarly large amount of estimated uninsured deposits
because instead of excluding $5 billion of estimated uninsured deposits for each IDI in one banking
organization, the $5 billion deduction will be distributed across multiple affiliated IDIs
IDIs with large amounts of estimated uninsured deposits will not have an advantage over other banking
organizations with only one subsidiary IDI with a similarly large amount of estimated uninsured deposits
because instead of excluding $5 billion of estimated uninsured deposits for each IDI in one banking
organization, the $5 billion deduction will be distributed across multiple affiliated IDIs.
In implementing special assessments, the FDI Act requires the FDIC to consider the types of entities that
benefit from any action taken or assistance provided pursuant to the determination of systemic risk.15 The
assessment base of estimated uninsured deposits with the $5 billion deduction ensures that the banks that
benefited most from the assistance provided under the systemic risk determination will be charged a special
assessment to recover losses to the DIF resulting from the protection of uninsured depositors, with banks of
larger asset sizes and that hold greater amounts of uninsured deposits paying a h
igher special assessment. For
these reasons, staff recommend that the Board adopt the proposed exclusion of the first $5 billion from
estimated uninsured deposits from the assessment base for the special assessment, without change.
2. Comments on the Reporting Date of Uninsured Deposits for Special Assessment Base
Two commenters expressed support for the proposed December 31, 2022, reporting date for uninsured
deposits to determine the special assessment base. Thirteen commenters, including two trade associations and
three letters from members of Congress, requested that estimated uninsured deposits reported as of a more
recent date than December 31, 2022, be used to calculate the assessment base for the special assessment
essed support for the proposed December 31, 2022, reporting date for uninsured
deposits to determine the special assessment base. Thirteen commenters, including two trade associations and
three letters from members of Congress, requested that estimated uninsured deposits reported as of a more
recent date than December 31, 2022, be used to calculate the assessment base for the special assessment. Some
commenters that supported a later reporting date said that institutions, particularly mid-sized and regional
banks, that reported declines in uninsured deposit balances after December 31, 2022, should not be charged a
special assessment on uninsured deposit balances that they no longer hold or that are now insured.
In staff’s view, estimated uninsured deposits as of December 31, 2022, most closely approximate an
institution’s vulnerability to significant deposit withdrawals in the absence of the determination of systemic risk,
and therefore reflect the institutions that most benefited from such determination. An assessment base that is
calculated using the amount of uninsured deposits as of December 31, 2022, would result in transparent and
consistent payments, best approximate an institution’s vulnerability to deposit withdrawals, and would result in
a more simplified framework for calculating the special assessment. For these reasons, staff is recommending
the Board adopt as final the proposed special assessment base of estimated uninsured deposits as of December
31, 2022.
3. Comments Recommending Exclusions from Uninsured Deposits for Special Assessment Base
Multiple commenters supported the exclusion of, or different treatment for, certain types of uninsured
deposits included in the proposed assessment base for the special assessment of estimated uninsured deposits
reported as of December 31, 2022, less the $5 billion deduction
osits as of December
31, 2022.
3. Comments Recommending Exclusions from Uninsured Deposits for Special Assessment Base
Multiple commenters supported the exclusion of, or different treatment for, certain types of uninsured
deposits included in the proposed assessment base for the special assessment of estimated uninsured deposits
reported as of December 31, 2022, less the $5 billion deduction.
14 Some IDIs that report less than $5 billion in estimated uninsured deposits will be subject to the special
assessment if they are part of banking organizations with multiple IDIs that report a combined total of estimated
uninsured deposits in excess of $5 billion.
15 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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a. Collateralized Deposits
b. Custody Bank Adjustments
c. Intercompany Deposits
The FDIC received 25 comments requesting that the FDIC either exclude, or provide a different
treatment for, collateralized deposits in the calculation of the special assessment base. According to the
commenters, collateralized deposits are more stable than other uninsured deposits because they are secured
and therefore pose little risk to the DIF.
In staff’s view, the presence of collateral does not fully mitigate run risk. Collateral may not always be
sufficient to cover the full amount of such a deposit, depending on the economic environment, and particularly
in the event of a liquidity crisis during which loss in value may need to be realized
other uninsured deposits because they are secured
and therefore pose little risk to the DIF.
In staff’s view, the presence of collateral does not fully mitigate run risk. Collateral may not always be
sufficient to cover the full amount of such a deposit, depending on the economic environment, and particularly
in the event of a liquidity crisis during which loss in value may need to be realized. Further, in certain types of
resolutions, collateralized deposits reduce the assets available to the FDIC as receiver to satisfy claims, including
the FDIC’s subrogated claim as deposit insurer, and result in a higher loss to the DIF in the event of a bank failure
compared to a bank holding the same level of deposits that are not collateralized.
The FDIC received one joint comment from three custody banks stating that the special assessment
base should be adjusted to mitigate the disproportionate and unwarranted impact on the custody bank
business model and on sound asset-liability and risk management practices.
Staff disagree. The banks that benefited most from the assistance provided under the systemic risk
determination were large banks and those that held greater amounts of uninsured deposits, regardless of the
assets that those deposits were used to fund. Custody banks, especially those whose primary business is
fiduciary and custodial and safekeeping, hold large amounts of uninsured deposits, including uninsured
deposits are from depositors with large deposit balances. Further, while certain deposits held by custody banks,
such as operational deposits, may be more stable than non-operational funding, in the event of idiosyncratic
stress, counterparties likely would reduce the amount of their operational deposits.16 The adjustments
proposed in the joint comment letter would result in custody banks paying significantly lower amounts of the
special assessment despite holding significant amounts of uninsured deposits
such as operational deposits, may be more stable than non-operational funding, in the event of idiosyncratic
stress, counterparties likely would reduce the amount of their operational deposits.16 The adjustments
proposed in the joint comment letter would result in custody banks paying significantly lower amounts of the
special assessment despite holding significant amounts of uninsured deposits.
The FDIC received 12 comments requesting the exclusion of, or different treatment for, intercompany
deposits in the calculation of the special assessment base. Commenters argued that intercompany deposits,
such as the deposits of subsidiaries that are not IDIs, deposits of other affiliates such as sister companies that
are not IDIs, or deposits of a parent holding company of the IDI, are stable and present minimal run risk because
entities within the banking organization’s structure are unlikely to withdraw funds in a crisis.
There is no clear evidence that intercompany deposits are more stable relative to other deposits.
Organizational structures, board members, governance, and decision making can differ between entities within
the same banking organization. Likewise, the behavior of creditors, including uninsured depositors, of each
entity can differ. Further, an affiliated entity’s deposits at a bank are insured to the same extent as an
unaffiliated entity’s deposits in the event of the bank’s failure. Each depositor is entitled to deposit insurance as
permitted by law, and to pro rata receivership distribution on the remaining, uninsured balances. Additionally,
it is not possible to accurately estimate the portion of uninsured deposits that are intercompany deposits using
existing items on the Call Report.
Deposits are the most common funding source for many banks. Depositors and other creditors are
often differentiated by their stability and customer profile characteristics. While some uninsured deposit
16 See 79 FR at 61502 (Oct. 10, 2014).
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is not possible to accurately estimate the portion of uninsured deposits that are intercompany deposits using
existing items on the Call Report.
Deposits are the most common funding source for many banks. Depositors and other creditors are
often differentiated by their stability and customer profile characteristics. While some uninsured deposit
16 See 79 FR at 61502 (Oct. 10, 2014).
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4. Final Assessment Base for the Special Assessment
relationships remain stable when a bank is in good condition, such relationships might become less stable due
to their uninsured status if a bank experiences financial problems or if the banking industry experiences stress
events.
Any revisions to the methodology for calculating the special assessment base, such as excluding or
adjusting for certain types of uninsured deposits, would change the allocation of the special assessment, but the
FDIC is required by statute to recover the full amount of the losses to the DIF incurred as the result of the
systemic risk determination. As a result, any exclusion for a type of uninsured deposits from the special
assessment base would reduce the amount of the special assessment for banking organizations that hold those
excluded, uninsured deposits, and increase the assessment burden for all other banks holding other types of
uninsured deposits. For this reason, and for the reasons described above, and consistent with the proposal, staff
recommend that the Board adopt the assessment base for the special assessment as proposed and decline to
exclude any particular type of uninsured deposits
ons that hold those
excluded, uninsured deposits, and increase the assessment burden for all other banks holding other types of
uninsured deposits. For this reason, and for the reasons described above, and consistent with the proposal, staff
recommend that the Board adopt the assessment base for the special assessment as proposed and decline to
exclude any particular type of uninsured deposits.
Following careful consideration of the comments, and for the reasons described above, staff
recommend that the Board adopt as final the proposed assessment base for the special assessment, while
applying any corrective amendments to estimated uninsured deposits reported for the December 31, 2022,
reporting period in calculating the assessment base. The methodology for calculating the assessment base for
the special assessment ensures that the banks that benefited most from the assistance provided under the
systemic risk determination will be charged a special assessment to recover losses to the DIF resulting from the
protection of uninsured depositors, with banks of larger asset sizes and that hold greater amounts of uninsured
deposits paying a higher special assessment.
Consistent with the proposal, each IDI’s assessment base for the special assessment will be equal to
estimated uninsured deposits as reported in the Call Report or FFIEC 002 as of December 31, 2022, after applying
the $5 billion deduction. The deduction of the first $5 billion from estimated uninsured deposits in the
assessment base for the special assessment is applicable either to the IDI, if an IDI is not a subsidiary of a holding
company, or at the banking organization level, to the extent that an IDI is part of a holding company with one or
more subsidiary IDIs
of December 31, 2022, after applying
the $5 billion deduction. The deduction of the first $5 billion from estimated uninsured deposits in the
assessment base for the special assessment is applicable either to the IDI, if an IDI is not a subsidiary of a holding
company, or at the banking organization level, to the extent that an IDI is part of a holding company with one or
more subsidiary IDIs.
For a banking organization that has more than one subsidiary IDI, the assessment base for the special
assessment is equal to the IDI’s total estimated uninsured deposits reported as of December 31, 2022, less its
share of the $5 billion deduction, which is based on its share of total estimated uninsured deposits held by all IDI
affiliates in the banking organization.17
Based on data reported for the quarter that ended December 31, 2022, and as illustrated in Table 1
below, the staff estimate that 114 banking organizations, which include IDIs that are not subsidiaries of a
holding company and holding companies with one or more subsidiary IDIs and which comprise 81.3 percent of
industry assets, will be subject to the special assessment, including 48 banking organizations with total assets
over $50 billion and 66 banking organizations with total assets between $5 and $50 billion. No banking
organizations with total assets under $5 billion would pay the special assessment, based on data as of
17 As used in this final rule, the term “affiliate” has the same meaning as defined in section 3 of the FDI Act, 12
U.S.C. 1813(w)(6), which references the Bank Holding Company Act (“any company that controls, is controlled
by, or is under common control with another company”). See 12 U.S.C. 1841(k).
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h total assets under $5 billion would pay the special assessment, based on data as of
17 As used in this final rule, the term “affiliate” has the same meaning as defined in section 3 of the FDI Act, 12
U.S.C. 1813(w)(6), which references the Bank Holding Company Act (“any company that controls, is controlled
by, or is under common control with another company”). See 12 U.S.C. 1841(k).
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December 31, 2022.18
Table 1 – Banking Organizations Required to Pay Special Assessment,
Based on Data Reported for the December 31, 2022, Reporting Period1
Asset Size of
Banking Organization
Number of Banking
Organizations
Required to Pay
Special Assessment
Percentage of
All Banking
Organizations
in Asset Size
Category
Required to
Pay Special
Assessment
[Percent]
Share of
Special
Assessment
[Percent]
Share of
Industry
Assets
[Percent]
Greater than $50 billion
48
1.1
95.3
74.5
Between $5 and $50 billion
66
1.5
4.7
6.8
Under $5 billion
0
0.0
0.0
0.0
Total
114
2.6
100.0
81.3
1Reflects reporting amendments to estimated uninsured deposits, mergers, acquisitions, and failures
through November 2, 2023.
5. Prior Period Amendments
Under the proposal, amendments to an IDI’s Call Report for the December 31, 2022, reporting period
made after the date of adoption of any final rule would not have affected an institution’s rate or base for the
special assessment
100.0
81.3
1Reflects reporting amendments to estimated uninsured deposits, mergers, acquisitions, and failures
through November 2, 2023.
5. Prior Period Amendments
Under the proposal, amendments to an IDI’s Call Report for the December 31, 2022, reporting period
made after the date of adoption of any final rule would not have affected an institution’s rate or base for the
special assessment.
Staff recommend that the Board finalize this aspect of the rule as proposed, but in calculating the
special assessment, apply any amendments made by IDIs to correct the reporting of estimated uninsured
deposits that are confirmed through or, associated with the result of, the FDIC’s review of an institution’s
reporting methodology (as described below).
Following the issuance of the proposed rule, the FDIC observed that some IDIs were reporting or filing
amendments to the reporting of estimated uninsured deposits for the December 31, 2022, reporting period in a
manner that is inconsistent with the instructions to the Call Report.
The FDIC did not receive any comments on the proposed treatment of prior period amendments. Some
commenters, however, raised concerns about the accuracy of the amount of estimated uninsured deposits
reported on the Call Report. The FDIC received two comment letters indicating that banks may be reporting
uninsured deposits differently, or in an inconsistent manner, and one comment letter indicating that some
banks were confused about whether to include collateralized deposits in the amount of estimated uninsured
deposits reported on the Call Report.
On July 24, 2023, the FDIC issued a Financial Institution Letter (FIL) on Estimated Uninsured Deposits
Reporting Expectations, reiterating longstanding instructions and stating that each IDI is responsible for the
18 The special assessment rate, base, and expected effects in this final rule reflect any amendments to data as of
November 2, 2023, for the reporting period that ended December 31, 2022
July 24, 2023, the FDIC issued a Financial Institution Letter (FIL) on Estimated Uninsured Deposits
Reporting Expectations, reiterating longstanding instructions and stating that each IDI is responsible for the
18 The special assessment rate, base, and expected effects in this final rule reflect any amendments to data as of
November 2, 2023, for the reporting period that ended December 31, 2022. These estimates may change
depending on any subsequent amendments to reported estimates of uninsured deposits.
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9
accuracy of the data reported in its Call Report and for filing amendments as necessary to ensure Call Report
accuracy.19 The FIL stated that, consistent with the requirement to file accurate Call Reports, IDIs that incorrectly
reported uninsured deposits should amend their Call Reports by making the appropriate changes to the data
and submitting the revised data file.
As a general matter, the amount of estimated uninsured deposits reported on the Call Report is
monitored as one of many indicators of safety and soundness, and its accuracy, as with all items collected on
the Call Report, is of the utmost importance. The reported amount of estimated uninsured deposits is also used
to determine the amount of estimated insured deposits in calculating the DIF reserve ratio, which is the ratio of
the DIF balance to all insured deposits.20
The FDIC is conducting a review (Assessment Reporting Review) of the reporting methodology for
estimated uninsured deposits and related items on the Call Report b ecause of the importance of these items as
indicators of safety and soundness.21 The Assessment Reporting Review may result in amendments to uninsured
deposits and related items reported on the Call Report
ll insured deposits.20
The FDIC is conducting a review (Assessment Reporting Review) of the reporting methodology for
estimated uninsured deposits and related items on the Call Report b ecause of the importance of these items as
indicators of safety and soundness.21 The Assessment Reporting Review may result in amendments to uninsured
deposits and related items reported on the Call Report.
Given the planned Assessment Reporting Review, staff are recommending that in calculating the
special assessment, the final rule apply any amendments made by IDIs to correct the reporting of estimated
uninsured deposits that are either confirmed through, or associated with the result of, the FDIC’s review of an
institution’s reporting methodology.
Under the final rule, each institution’s special assessment base has been calculated using estimated
uninsured deposits for the December 31, 2022, reporting period as reported on November 2, 2023.22
Amendments made to an institution’s December 31, 2022, Call Report through November 2, 2023, have been
accounted for in the calculations, as proposed. In addition, under the final rule, certain amendments filed after
November 2, 2023, will affect the calculation of an institution’s special assessment base. In particular, if as part
of the FDIC’s Assessment Reporting Review of an institution’s reporting methodology (described above), the
FDIC finds that as of November 2, 2023, an institution was not reporting uninsured deposits for the December 31,
2022, reporting period in accordance with the Call Report instructions, and corrective amendments are filed as a
result of the FDIC’s review after November 2, 2023, those amendments will affect the special assessment base
for such institution, and any affiliates, as applicable, for all collection periods.
E
ember 2, 2023, an institution was not reporting uninsured deposits for the December 31,
2022, reporting period in accordance with the Call Report instructions, and corrective amendments are filed as a
result of the FDIC’s review after November 2, 2023, those amendments will affect the special assessment base
for such institution, and any affiliates, as applicable, for all collection periods.
E. Collection Period for the Special Assessment
Under the proposal, the special assessment would be collected beginning with the first quarterly
assessment period of 2024 (i.e., January 1 through March 31, 2024), with an invoice payment date of June 28,
2024. In order to mitigate the risk of overcollecting as the loss estimates for the failed banks are periodically
adjusted, to preserve liquidity at IDIs, and in the interest of consistent and predictable assessments, the special
assessment would be collected over eight quarters.
If, prior to the end of the initial eight-quarter collection period, the FDIC expects the loss to be lower
19 FDIC Financial Institution Letter (FIL 37-2023), Estimated Uninsured Deposits Reporting Expectations.
https://www.fdic.gov/news/financial-institution-letters/2023/fil23037.html.
20 Section 3(y)(3) of the FDI Act, 12 U.S.C. 1813(y)(3).
21 Consistent with the FDIC’s practice of conducting reviews under Section 7(b)(4) of the FDI Act to confirm the
correctness of any assessment, the FDIC will review an institution’s reporting methodology for estimated
uninsured deposits and related items. See 12 U.S.C. 1817(b)(4).
22 As proposed, the assessment base and rate would be calculated as of the date the final rule is adopted;
however, under the final rule, this is calculated on November 2, 2023, shortly before the date of adoption, for
operational and administrative reasons.
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ll review an institution’s reporting methodology for estimated
uninsured deposits and related items. See 12 U.S.C. 1817(b)(4).
22 As proposed, the assessment base and rate would be calculated as of the date the final rule is adopted;
however, under the final rule, this is calculated on November 2, 2023, shortly before the date of adoption, for
operational and administrative reasons.
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10
than the amount it expects to collect from the special assessment, the FDIC proposed to cease collection of the
special assessment before the end of the initial eight-quarter collection period, in the quarter after it has
collected enough to recover actual or estimated losses. Alternatively, if, at the end of the eight-quarter
collection period, the estimated or actual loss exceeds the amount collected, the FDIC proposed to extend the
collection period over one or more quarters as needed in order to collect the difference between the amount
collected and the estimated or actual loss at the end of the eight-quarter collection period, (the shortfall
amount).
In the likely event that a final loss amount at the termination of the receiverships is not determined
until after the initial collection period and any extended collection period, and if losses at the termination of the
receiverships exceed the amount collected through such special assessment, the FDIC proposed to impose a
one-time final shortfall special assessment to collect the final shortfall amount
ely event that a final loss amount at the termination of the receiverships is not determined
until after the initial collection period and any extended collection period, and if losses at the termination of the
receiverships exceed the amount collected through such special assessment, the FDIC proposed to impose a
one-time final shortfall special assessment to collect the final shortfall amount.
Comments Received on the Collection Period
The FDIC received three comments on the length of the initial collection period, with one commenter
requesting a longer collection period to help with cash flow, one commenter requesting a shorter collection
period, and one commenter suggesting that banks should have the option to fully fund obligations prior to the
end of the proposed collection period.
The FDIC is required by statute to place the excess funds collected through the special assessment in
the DIF.23 By spreading out the collection period over eight quarters, a length of time that would enable the FDIC
to develop a more accurate estimate of loss, and allowing for early cessation after the FDIC has collected enough
to recover actual or estimated losses, the FDIC mitigates the risk of overcollecting. Reducing the length of the
collection period could also adversely impact liquidity. Therefore, staff recommend that the Board adopt the
initial collection period of eight quarters as proposed, with a modification to apply any corrective amendments
to estimated uninsured deposits for the December 31, 2022, reporting period to the calculation of the special
assessment, following adoption of the final rule.
In the event that an extended collection period is needed, staff recommend finalizing its proposal to
extend the collection period over one or more quarters to collect the difference between the amount collected
and the estimated or actual loss at the end of the eight-quarter collection period
reporting period to the calculation of the special
assessment, following adoption of the final rule.
In the event that an extended collection period is needed, staff recommend finalizing its proposal to
extend the collection period over one or more quarters to collect the difference between the amount collected
and the estimated or actual loss at the end of the eight-quarter collection period. In the interest of consistency
and predictability, the quarterly rate will not exceed the 3.36 basis point quarterly special assessment rate
applied during the initial eight-quarter collection period, and such extended special assessment will be
collected for the minimum number of quarters needed to recover the shortfall amount at such quarterly rate.
The FDIC received four comments on the one-time final shortfall special assessment. One supported the
proposed calculation. One commenter recommended that if the amount collected exceeds the final loss
estimate, that the excess collected should be credited against future assessments. One commenter requested
that the assessment base methodology be adjusted to incorporate a risk-based component. One commenter
said that the one-time final shortfall special assessment should be calculated at the end of a recommended one-
year payment period.
The FDIC would only collect a one-time final shortfall special assessment if the final loss amount at the
termination of the receiverships is not determined until after the initial collection period and any extended
collection period, and if losses at the termination of the receiverships exceed the amount collected through such
special assessment. Therefore, staff recommend that the Board adopt the one-time final shortfall special
assessment as proposed, while accommodating amendments to the reported amount of uninsured deposits.
23 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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11
tion period and any extended
collection period, and if losses at the termination of the receiverships exceed the amount collected through such
special assessment. Therefore, staff recommend that the Board adopt the one-time final shortfall special
assessment as proposed, while accommodating amendments to the reported amount of uninsured deposits.
23 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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11
Given that the planned review of the reporting methodology for estimated uninsured deposits may
result in amendments to uninsured deposits and related items reported on the Call Report, staff also
recommend a modification to apply any corrective amendments that are confirmed through, or resulting from,
the FDIC’s review of an institution’s reporting methodology to the reported amount of estimated uninsured
deposits to the calculation of the assessment base for the initial eight-quarter collection period, any extended
collection period, and for a one-time final shortfall special assessment, if needed.
F. Collection of Special Assessment and Any Shortfall Special Assessment
The special assessment and any shortfall special assessment will be collected at the same time and in
the same manner as an IDI’s regular quarterly deposit insurance assessment. Invoices for an IDI’s regular
quarterly deposit insurance assessment will disclose the amount of any special assessment or shortfall special
assessment due.
Comments Received on Communication of Loss Estimate
Two commenters requested that the FDIC communicate any revisions to the loss estimate and updates
on the collection of the special assessment
ular quarterly deposit insurance assessment. Invoices for an IDI’s regular
quarterly deposit insurance assessment will disclose the amount of any special assessment or shortfall special
assessment due.
Comments Received on Communication of Loss Estimate
Two commenters requested that the FDIC communicate any revisions to the loss estimate and updates
on the collection of the special assessment. To increase transparency and in response to comments on the
proposal, staff are recommending clarifications, including that the FDIC plans to communicate any changes to
the loss estimate, as applicable, and to provide updates on the collection of the special assessment to banking
organizations subject to the special assessment.
G. Mergers, Consolidations and Terminations of Deposit Insurance
Under the proposed rule, if an IDI were to acquire—through merger or consolidation—another IDI
following the adoption of this final rule or during any collection period, the acquiring IDI would be required to
pay the acquired IDI’s special assessment, if any, including any unpaid special assessment, in addition to its own
special assessment, from the quarter of the acquisition through the remainder of all special assessment
collection periods. Under the proposal, in the event that the FDIC extends the collection period or imposes a
one-time final shortfall assessment, each banking organization’s assessment base would be adjusted for
mergers or failures that occurred during the eight-quarter collection period
wn
special assessment, from the quarter of the acquisition through the remainder of all special assessment
collection periods. Under the proposal, in the event that the FDIC extends the collection period or imposes a
one-time final shortfall assessment, each banking organization’s assessment base would be adjusted for
mergers or failures that occurred during the eight-quarter collection period.
Under the proposed rule, when the insured status of an IDI is terminated and the deposit liabilities of
the IDI are not assumed by another IDI, the IDI whose insured status is terminating must, among other things,
continue to pay assessments, including the special assessment, for the assessment periods that its deposits are
insured, but not thereafter.24
When an IDI voluntarily terminates its deposit insurance under the FDI Act, the IDI whose insured status
is terminating must, among other things, continue to pay assessments for the assessment periods that its
deposits are insured.25
Comments Received on Mergers, Consolidations, and Terminations of Deposit Insurance
One commenter expressed concern that use of the December 31, 2022, reporting date ignores recent
acquisition activity while another commenter requested clarification that the estimates in the proposed rule
exclude the uninsured deposits that New York Community Bank assumed following its acquisition of Signature
24 See 12 CFR 327.6(c).
25 See 12 CFR 327.6(c).
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ns of Deposit Insurance
One commenter expressed concern that use of the December 31, 2022, reporting date ignores recent
acquisition activity while another commenter requested clarification that the estimates in the proposed rule
exclude the uninsured deposits that New York Community Bank assumed following its acquisition of Signature
24 See 12 CFR 327.6(c).
25 See 12 CFR 327.6(c).
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Bank in March 2023.26 One commenter requested clarification of the point at which obligation to pay the special
assessment would end if a bank were to voluntarily terminate its insured status during the collection period.
The uninsured deposits of First Republic Bank, Silicon Valley Bank, and Signature Bank, which failed
prior to the adoption of the proposed rule, were excluded from the calculation of the assessment rate and base
for the special assessment, and the estimated expected effects in the proposed rule and in this final rule. Staff
recommend that such exclusion be adopted in the final rule. This exclusion was intended to prevent
disincentivizing any potential future acquisition activity following the adoption of the proposed rule, particularly
given the uncertainty in the banking sector at the time the proposal was adopted.
Staff recommend that the Board adopt as final the proposed provisions related to mergers,
acquisitions, and terminations of deposit insurance, with two adjustments. First, in the event that the FDIC
extends the collection period or imposes a one-time final shortfall assessment, each banking organization’s
assessment base will not be adjusted for mergers or failures that occurred after the adoption of this final rule or
during the eight-quarter collection period. In staff’s view, each banking organization’s assessment base reflects
its relative benefit from the assistance provided under the systemic risk determination
d or imposes a one-time final shortfall assessment, each banking organization’s
assessment base will not be adjusted for mergers or failures that occurred after the adoption of this final rule or
during the eight-quarter collection period. In staff’s view, each banking organization’s assessment base reflects
its relative benefit from the assistance provided under the systemic risk determination. This treatment would
ensure that an acquiring bank’s special assessment, and any special assessment assumed for an acquired bank,
continues to reflect each banking organization’s relative benefit from the assistance provided under the
systemic risk determination, and would have the result that a banking organization subject to the special
assessment that acquires another banking organization also subject to the special assessment would derive
benefit from the $5 billion deduction for both special assessment payments.
The FDIC is also clarifying that the special assessment base of the acquiring bank in a merger or
consolidation that occurred prior to the March 12, 2023, determination of systemic risk would be adjusted to
include the uninsured deposits of the acquired bank and would derive benefit of a single $5 billion deduction.
Calculating the assessment base in this manner best reflects the structure of the banking organization at the
time the determination of systemic risk was made, and reflects the organization’s relative benefit from the
assistance provided.
Second, in order to avoid incentivizing banks to voluntarily terminate their insured status to avoid
paying the special assessment under the final rule, staff recommend that under the final rule, the FDIC require
any bank that voluntarily terminates its insured status after the adoption of this final rule or during any special
assessment collection period to pay the entire remaining amount of its special assessment at the same time its
obligation to pay regular deposit insurance assessments would end.27
H
cial assessment under the final rule, staff recommend that under the final rule, the FDIC require
any bank that voluntarily terminates its insured status after the adoption of this final rule or during any special
assessment collection period to pay the entire remaining amount of its special assessment at the same time its
obligation to pay regular deposit insurance assessments would end.27
H. Accounting Treatment
Each institution should account for the special assessment in accordance with U.S. generally accepted
accounting principles (GAAP). In accordance with Financial Accounting Standards Board Accounting Standards
Codification Topic 450, Contingencies (FASB ASC Topic 450), an estimated loss from a loss contingency shall be
accrued by a charge to income if information indicates that it is probable that a liability has been incurred and
the amount of loss is reasonably estimable.28 Therefore, an institution will recognize in the Call Report and other
financial statements the accrual of a liability and estimated loss (i.e., expense) from a loss contingency for the
special assessment when the institution determines that the conditions for accrual under GAAP have been met.
In addition, the General Instructions to the Call Report provide guidance on ASC Topic 855, Subsequent Events,
26 FDIC PR-21-2023. “Subsidiary of New York Community Bancorp, Inc. to Assume Deposits of Signature Bridge
Bank, N.A., From the FDIC.” March 19, 2023. https://www.fdic.gov/news/press-releases/2023/pr23021.html.
27 See 12 CFR 327.6(c).
28 FASB ASC paragraph 450-20-25-2.
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t.
In addition, the General Instructions to the Call Report provide guidance on ASC Topic 855, Subsequent Events,
26 FDIC PR-21-2023. “Subsidiary of New York Community Bancorp, Inc. to Assume Deposits of Signature Bridge
Bank, N.A., From the FDIC.” March 19, 2023. https://www.fdic.gov/news/press-releases/2023/pr23021.html.
27 See 12 CFR 327.6(c).
28 FASB ASC paragraph 450-20-25-2.
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13
which may be applicable.29
Similarly, each institution should account for any shortfall special assessment in accordance with FASB
ASC Topic 450 when the conditions for accrual under GAAP have been met.
Comments Received on Accounting Treatment
The FDIC received two comments that supported restructuring the special assessment as a prepaid
expense that could be amortized over a multi-year period.
Structuring the special assessment as a prepaid expense would reduce the one-time effect on income
but would also reduce liquidity by the full amount of the special assessment at payment. In staff’s view, the
proposed structure of the special assessment best promotes maintenance of liquidity, which will allow
institutions to absorb any potential unexpected setbacks while continuing to meet the credit needs of the U.S.
economy. For these reasons, staff recommend against the Board restructuring the special assessment as a
prepaid expense.
ANALYSIS AND EXPECTED EFFECTS
The following summarizes the factors considered in recommending adoption of the special
assessment.30
A
uidity, which will allow
institutions to absorb any potential unexpected setbacks while continuing to meet the credit needs of the U.S.
economy. For these reasons, staff recommend against the Board restructuring the special assessment as a
prepaid expense.
ANALYSIS AND EXPECTED EFFECTS
The following summarizes the factors considered in recommending adoption of the special
assessment.30
A. The Types of Entities that Benefit
In implementing special assessments under section 13(c)(4)(G) of the FDI Act, the FDIC is required to
consider the types of entities that benefit from any action taken or assistance provided pursuant to
determination of systemic risk.31
With the rapid collapse of Silicon Valley Bank and Signature Bank in the space of 48 hours, concerns
arose that risk could spread more widely to other institutions and that the financial system as a whole could be
placed at risk. Shortly after Silicon Valley Bank was closed on March 10, 2023, a number of institutions with large
amounts of uninsured deposits reported that depositors had begun to withdraw their funds. The extent to which
IDIs rely on uninsured deposits for funding varies significantly. Uninsured deposits were used to fund nearly
three-quarters of the assets at Silicon Valley Bank and Signature Bank. On March 12, 2023, the Board and the
Board of Governors voted unanimously to recommend, and the Treasury Secretary, in consultation with the
President, determined that the FDIC could use emergency systemic risk authorities under the FDI Act to
complete its resolution of both Silicon Valley Bank and Signature Bank in a manner that fully protects
depositors.32 The full protection of depositors, rather than imposing losses on uninsured depositors, was
29 See General Instructions to the Call Report, available at: https://www.fdic.gov/resources/bankers/call
reports/crinst-031-041/2022/2022-12-generalinstructions.pdf.
30 In prescribing special assessments, the FDIC is required by statute to consider:
Bank in a manner that fully protects
depositors.32 The full protection of depositors, rather than imposing losses on uninsured depositors, was
29 See General Instructions to the Call Report, available at: https://www.fdic.gov/resources/bankers/call
reports/crinst-031-041/2022/2022-12-generalinstructions.pdf.
30 In prescribing special assessments, the FDIC is required by statute to consider:
(i) The types of entities that benefit from any action taken or assistance provided.
(ii) Economic conditions.
(iii) The effects on the industry.
(iv) Such other factors as the FDIC deems appropriate and relevant to the action taken or assistance provided.
Section 13(c)(4)(G)(ii)(III) of the FDI Act.
31 12 U.S.C. 1823(c)(4)(G)(ii)(III).
32 12 U.S.C. 1823(c)(4)(G). See also: FDIC PR-17-2023. “Joint Statement by the Department of the Treasury,
Federal Reserve, and FDIC.” March 12, 2023. https://www.fdic.gov/news/press-releases/2023/pr23017.html.
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14
intended to strengthen public confidence in the nation’s banking system.
In the weeks that followed the determination of systemic risk, efforts to stabilize the banking system
and stem potential contagion from the failures of Silicon Valley Bank and Signature Bank ensured that
depositors would continue to have access to their savings, that small businesses and other employers could
continue to make payrolls, and that other banks could continue to extend credit to borrowers and serve as a
source of support. In general, large banks and regional banks, and particularly those with large amounts of
uninsured deposits, were the banks most exposed to and likely would have been the most affected by uninsured
deposit runs. Indeed, shortly after Silicon Valley Bank was closed, a number of institutions with large amounts of
uninsured deposits reported that depositors had begun to withdraw their funds
pport. In general, large banks and regional banks, and particularly those with large amounts of
uninsured deposits, were the banks most exposed to and likely would have been the most affected by uninsured
deposit runs. Indeed, shortly after Silicon Valley Bank was closed, a number of institutions with large amounts of
uninsured deposits reported that depositors had begun to withdraw their funds. The failure of Silicon Valley
Bank and the impending failure of Signature Bank raised concerns that, absent immediate assistance for
uninsured depositors, there could be negative knock-on consequences for similarly situated institutions,
depositors, and the financial system more broadly.
Uninsured deposit concentrations of IDIs, meaning the percentage of domestic deposits that are
uninsured, vary significantly. At Silicon Valley Bank, 88 percent of deposits were uninsured at the point of failure
compared to 67 percent at Signature Bank. On average, the largest banking organizations by asset size reported
significantly greater uninsured deposit concentrations relative to smaller banking organizations, as illustrated in
Table 2 below, based on data as of December 31, 2022. Banking organizations with total assets between $1
billion and $5 billion generally reported the lowest percentage of uninsured deposits to total domestic deposits,
averaging 33.0 percent, compared with the largest banking organizations with total assets greater than $250
billion, which averaged 50.4 percent
organizations, as illustrated in
Table 2 below, based on data as of December 31, 2022. Banking organizations with total assets between $1
billion and $5 billion generally reported the lowest percentage of uninsured deposits to total domestic deposits,
averaging 33.0 percent, compared with the largest banking organizations with total assets greater than $250
billion, which averaged 50.4 percent.
Table 2 – Uninsured Deposits as a Percentage of Total Domestic Deposits,
By Banking Organization Asset Size,
Based on Data for the December 31, 2022, Reporting Period1
[Percent]
Asset Size of
Banking Organization
Ratio of Uninsured
Deposits to Total
Domestic Deposits
[Percent]
$1 to $5 Billion
33.0
$5 to $10 Billion
35.0
$10 to $50 Billion
40.3
$50 to $250 Billion
42.8
Greater than $250 Billion
50.4
1Reflects reporting amendments to estimated uninsured deposits,
mergers, acquisitions, and failures through November 2, 2023.
Following the announcement of the systemic risk determination, the FDIC observed a significant
slowdown in uninsured deposits leaving certain institutions, evidence that the systemic risk determination
helped stem the outflow of these deposits while providing stability to the banking industry.
Between December 31, 2022, and March 31, 2023, banks in all asset size groups experienced quarterly
declines in uninsured deposit balances, but these declines were particularly severe and widespread among
banks between $50 billion and $250 billion in total assets. In addition, between December 31, 2022, and March
31, 2023, the eight U.S. GSIBs reported a weighted average decline in uninsured deposits of 2.1 percent, albeit
slower than the industry average of approximately eight percent. However, changes in uninsured deposit
balances over this time period varied widely for the GSIBs. Two of the eight GSIBs experienced growth in
uninsured deposits of 2.6 percent and 2.0 percent over this period while the other six GSIBs experienced
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d a weighted average decline in uninsured deposits of 2.1 percent, albeit
slower than the industry average of approximately eight percent. However, changes in uninsured deposit
balances over this time period varied widely for the GSIBs. Two of the eight GSIBs experienced growth in
uninsured deposits of 2.6 percent and 2.0 percent over this period while the other six GSIBs experienced
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declines, some significant, ranging between less than two percent to nearly 17 percent.
Generally speaking, larger banks benefited the most from the stability provided to the banking industry
under the systemic risk determination. Under the final rule, the banks that benefited most from the assistance
provided under the systemic risk determination will be charged a special assessment to recover losses to the DIF
resulting from the protection of uninsured depositors, with banks of larger asset sizes and that hold greater
amounts of uninsured deposits paying a higher special assessment.
B. Effects on the Industry
In calculating the assessment base for the special assessment, the FDIC will deduct $5 billion from each
IDI or banking organization’s aggregate estimated uninsured deposits reported for the quarter that ended
December 31, 2022. As a result, any institution that did not report any uninsured deposits as of December 31,
2022, will not be subject to the special assessment. Additionally, most small IDIs and IDIs that are part of a small
banking organization will not pay anything towards the special assessment
anking organization’s aggregate estimated uninsured deposits reported for the quarter that ended
December 31, 2022. As a result, any institution that did not report any uninsured deposits as of December 31,
2022, will not be subject to the special assessment. Additionally, most small IDIs and IDIs that are part of a small
banking organization will not pay anything towards the special assessment. Some small and mid-size IDIs will be
subject to the special assessment if they are subsidiaries of a banking organization with more than $5 billion in
uninsured deposits and such IDIs report positive amounts of uninsured deposits after application of the
deduction, or if they directly hold more than $5 billion in estimated uninsured deposits as of December 31, 2022,
which for smaller institutions would constitute heavy reliance on uninsured deposits.
Based on data reported for the quarter ended December 31, 2022, and as captured in Table 1 above,
the FDIC estimates that 114 banking organizations will be subject to the special assessment upon adoption of
the final rule, including 48 banking organizations with total assets over $50 billion and 66 banking organizations
with total assets between $5 and $50 billion. No banking organizations with total assets under $5 billion will pay
a special assessment, based on data reported as of December 31, 2022. 33 It is anticipated that the same banking
organizations subject to the special assessment would also be subject to any extended special assessment or
one-time final shortfall special assessment, absent the effects of any amendments to estimated uninsured
deposits, mergers, consolidations, failures, or other terminations of deposit insurance that occur through the
determination of such extended special assessment or one-time final shortfall special assessment.
C
e special assessment would also be subject to any extended special assessment or
one-time final shortfall special assessment, absent the effects of any amendments to estimated uninsured
deposits, mergers, consolidations, failures, or other terminations of deposit insurance that occur through the
determination of such extended special assessment or one-time final shortfall special assessment.
C. Capital and Earnings Analysis
Staff estimate that the FDIC will collect through the special assessment the estimated loss from
protecting uninsured depositors at Silicon Valley Bank and Signature Bank of approximately $16.3 billion, over
the initial eight-quarter collection period. Banking organizations will recognize the accrual of a liability and an
estimated loss (i.e., expense) from a loss contingency for the special assessment when the institution
determines that the conditions for accrual under GAAP have been met. This analysis assumes that the effects on
capital and earnings of the entire amount of the special assessment to be collected over eight quarters would
occur in one quarter only.
To estimate the effects of the special assessment relative to a banking organization’s capital, the
analysis considers the effective pre-tax cost of the special assessment, and assumes that an institution will
maintain its dividend rate (that is, dividends as a percentage of net income) unchanged from the weighted
average rate reported over the four quarters between July 1, 2022, and June 30, 2023.34 Given the current loss
33 Some IDIs that report less than $5 billion in estimated uninsured deposits will be subject to the special
assessment if they are part of banking organizations with multiple IDIs that report a combined total of estimated
uninsured deposits in excess of $5 billion.
34 For purposes of this analysis, Tier 1 capital to assets is used as the measure of capital adequacy
3.34 Given the current loss
33 Some IDIs that report less than $5 billion in estimated uninsured deposits will be subject to the special
assessment if they are part of banking organizations with multiple IDIs that report a combined total of estimated
uninsured deposits in excess of $5 billion.
34 For purposes of this analysis, Tier 1 capital to assets is used as the measure of capital adequacy. In the event
that the ratio of Tier 1 capital to assets falls below four percent, however, this assumption is modified such that
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estimate and the assumptions in the analysis, staff estimate that, on average, the special assessment will
decrease the dollar amount of Tier 1 capital of banking organizations required to pay the special assessment by
an estimated 62 basis points.35 No banking organizations are estimated to fall below the minimum capital
requirement (a four percent Tier 1 capital-to-assets ratio) as a result of the special assessment.
While the special assessment is allocated based on estimated uninsured deposits reported at the
banking organization level, IDIs will be responsible for payment of the special assessment. Staff analyzed the
effect of the special assessment on income reported at the IDI-level for IDIs subject to the special assessment
that are not subsidiaries of a holding company or that are subsidiaries of a holding company with only one IDI
subsidiary. For IDIs that are subsidiaries of a holding company with more than one IDI subsidiary, staff analyzed
the effect of the special assessment by aggregating the income reported by all IDIs subject to the special
assessment within each banking organization since the IDIs will be responsible for payment
of a holding company or that are subsidiaries of a holding company with only one IDI
subsidiary. For IDIs that are subsidiaries of a holding company with more than one IDI subsidiary, staff analyzed
the effect of the special assessment by aggregating the income reported by all IDIs subject to the special
assessment within each banking organization since the IDIs will be responsible for payment. Staff analyzed the
impact of the special assessment on banking organizations that were profitable based on their average
quarterly income from July 1, 2022, to June 30, 2023.36
The effects on income of the entire amount of the special assessment to be collected over eight
quarters are assumed to occur in one quarter only. Given the assumptions and the estimated loss amount, staff
estimate that the special assessment would result in an average one-quarter reduction in income of 20.4 percent
for banking organizations subject to the special assessment.37 Staff estimate that approximately 66 percent of
profitable banking organizations subject to the proposal are projected to have a special assessment of less than
20 percent of income, including 23 percent with a special assessment of less than 5 percent of income. Another
34 percent of profitable banking organizations subject to the proposal are projected to have a special
assessment equal to or exceeding 20 percent of income.
Comments Received on the Effect of the Special Assessment on Capital and Earnings
The FDIC received 13 comments, including three comments from trade associations, suggesting
modifications to change the timing of, or otherwise mitigate the effect of the special assessment on capital,
earnings, and regular deposit insurance assessments. Seven commenters supported an optional transition
period or a similar approach to allow banking organizations to phase in the effects of the special assessment on
their regulatory capital ratios over the eight-quarter collection period
odifications to change the timing of, or otherwise mitigate the effect of the special assessment on capital,
earnings, and regular deposit insurance assessments. Seven commenters supported an optional transition
period or a similar approach to allow banking organizations to phase in the effects of the special assessment on
their regulatory capital ratios over the eight-quarter collection period.
One commenter said that for purposes of calculating requirements and guidance related to levels of
an institution retains the amount necessary to reach a four percent minimum and distributes any remaining
funds according to the dividend payout rate. The analysis uses four percent as the threshold because IDIs
generally need to maintain a Tier 1 leverage ratio of 4.0 percent or greater to be considered “adequately
capitalized” under Prompt Corrective Action Standards. See 12 CFR 324.403(b)(2). Additionally, Federal Reserve
Board-regulated institutions must generally maintain a Tier 1 leverage ratio of 4.0 percent or greater to meet the
minimum capital requirements. See 12 CFR 217.10(a)(1).
35 Estimated effects on capital are calculated based on data reported as of June 30, 2023, on the Call Report and
the Consolidated Financial Statements for Holding Companies (FR Y-9C), respectively, for IDIs that are not
subsidiaries of a holding company or that are part of a banking organization with only one subsidiary IDI
required to pay the special assessment, and for banking organizations, to the extent that an IDI is part of a
holding company with more than one subsidiary IDI required to pay the special assessment.
36 There were two banking organizations that would be required to pay the special assessment that were
unprofitable based on average quarterly income from July 1, 2022, to June 30, 2023.
37 Earnings or income are quarterly income before assessments and taxes. Quarterly income is assumed to equal
average income from July 1, 2022, through June 30, 2023.
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to pay the special assessment.
36 There were two banking organizations that would be required to pay the special assessment that were
unprofitable based on average quarterly income from July 1, 2022, to June 30, 2023.
37 Earnings or income are quarterly income before assessments and taxes. Quarterly income is assumed to equal
average income from July 1, 2022, through June 30, 2023.
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dividends and stock repurchases, and for examination findings related to earnings, the reduction in earnings
resulting from the payment of the special assessment should be disregarded, or at least be amortized over the
collection period. The same commenter also requested an adjustment to eliminate the impact of the special
assessment on regular quarterly deposit insurance assessments for large banks and highly complex banks.38
As described above, given the loss estimate and the assumptions applied in the analysis, staff estimate
that, on average, the special assessment will decrease the dollar amount of Tier 1 capital of banking
organizations subject to the special assessment by an estimated 62 basis points. No banking organizations are
estimated to fall below the minimum capital requirement (a four percent Tier 1 capital-to-assets ratio) as a
result of the special assessment. As described above, the effect of the special assessment on Tier 1 capital is
minimal and is not estimated to cause any institutions to fall below the minimum capital requirement;
therefore, staff do not recommend adoption of a transition period to phase-in the special assessment’s effect on
regulatory capital.
In order to preserve liquidity at IDIs, and in the interest of consistent and predictable assessments, the
special assessment will be collected over eight quarters. The special assessment is applicable for the first
quarterly assessment period of 2024
irement;
therefore, staff do not recommend adoption of a transition period to phase-in the special assessment’s effect on
regulatory capital.
In order to preserve liquidity at IDIs, and in the interest of consistent and predictable assessments, the
special assessment will be collected over eight quarters. The special assessment is applicable for the first
quarterly assessment period of 2024. Given that the proposal was approved by the Board and published in the
Federal Register in May 2023, institutions were provided time to prepare and plan for the special assessment.
D. Economic Conditions
On September 7, 2023, the FDIC released the results of the Quarterly Banking Profile, which provided a
comprehensive summary of financial results for all FDIC-insured institutions for the second quarter of 2023.
Overall, key banking industry metrics remained favorable in the quarter.39
Net income declined from the previous quarter due to accounting gains on failed bank acquisitions that
occurred in the first and the second quarter. However, excluding these nonrecurring gains, net income was
relatively flat from the prior quarter. Net income remained relatively high by historical measures in the second
quarter, although the banking industry reported a tighter net interest margin and funding pressures driven by
increasing rates paid on deposits as well as high rates paid on non-deposit liabilities. Loan expansion continued,
asset quality metrics were favorable, and the banking industry remained well-capitalized.
The banking industry continues to face significant downside risks from the effects of inflation, rising
market interest rates, and geopolitical uncertainty. These risks could cause credit quality deterioration and
weakness in profitability, which may result in more stringent underwriting standards, a slowdown in loan
growth, higher provision expenses, and liquidity constraints
ll-capitalized.
The banking industry continues to face significant downside risks from the effects of inflation, rising
market interest rates, and geopolitical uncertainty. These risks could cause credit quality deterioration and
weakness in profitability, which may result in more stringent underwriting standards, a slowdown in loan
growth, higher provision expenses, and liquidity constraints. Also, commercial real estate portfolios are under
pressure from higher interest rates as loans mature and require refinancing, and office properties are
experiencing weak demand for space and softening property values.
Despite these challenges, the state of the U.S. banking system remains sound and institutions are well
positioned to absorb a special assessment.
38 For regular deposit insurance assessment purposes, a large bank is generally defined as an institution with $10
billion or more in total assets, and a highly complex bank is generally defined as an institution that has $50
billion or more in total assets and is controlled by a parent holding company that has $500 billion or more in
total assets, or is a processing bank or trust company. See 12 CFR 327.8(f) and (g).
39 FDIC Quarterly Banking Profile, Second Quarter 2023. https://www.fdic.gov/analysis/quarterly-banking
profile/qbp/2023jun/.
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ALTERNATIVES
While the FDIC is required by statute to recover the loss to the DIF arising from the use of a systemic risk
determination through one or more special assessments, Section 13(c)(4)(G) of the FDI Act provides the FDIC
with discretion in the design and timeframe for any special assessments to recover the losses from the systemic
risk determination.40 Staff considered several alternatives while developing the proposal and this final rule, but
believe, on balance, that the proposed special assessment is th
etermination through one or more special assessments, Section 13(c)(4)(G) of the FDI Act provides the FDIC
with discretion in the design and timeframe for any special assessments to recover the losses from the systemic
risk determination.40 Staff considered several alternatives while developing the proposal and this final rule, but
believe, on balance, that the proposed special assessment is the most appropriate and most straightforward
manner in which to collect the special assessment. Accordingly, and after consideration of the statutory factors
as described above, staff recommend adopting as final the proposed special assessment, with changes to
promote transparency and to apply any corrective amendments to the reporting of estimated uninsured
deposits to the calculation of the special assessment.
CONCLUSION
In staff’s view, the final rule reflects an appropriate balancing of the statutory requirement to apply the
special assessment to the types of entities that benefited the most from the protection of uninsured depositors
provided under the determination of systemic risk while ensuring equitable, transparent, and consistent
treatment based on amounts of uninsured deposits at the time of the determination of systemic risk. The final
rule also allows for payments to be collected over an extended period of time in order to mitigate the liquidity
effects of the special assessment by requiring smaller, consistent quarterly payments. On balance, in staff’s
view, the final rule best promotes maintenance of liquidity, which will allow institutions to absorb any potential
unexpected setbacks while continuing to meet the credit needs of the U.S. economy.
EFFECTIVE DATE AND APPLICATION DATE
Staff recommend issuing this final rule with an effective date of April 1, 2024
ssment by requiring smaller, consistent quarterly payments. On balance, in staff’s
view, the final rule best promotes maintenance of liquidity, which will allow institutions to absorb any potential
unexpected setbacks while continuing to meet the credit needs of the U.S. economy.
EFFECTIVE DATE AND APPLICATION DATE
Staff recommend issuing this final rule with an effective date of April 1, 2024. The first collection for
special assessment will be reflected on the invoice for the first quarterly assessment period of 2024 (i.e., January
1 through March 31, 2024), with a payment date of June 28, 2024, and the FDIC will continue to collect the
special assessment for an anticipated total of eight quarterly assessment periods. Because the estimated loss
pursuant to the systemic risk determination will be periodically adjusted, and to allow for any corrective
amendments to the amount of uninsured deposits reported for the December 31, 2022, reporting period applied
to the calculation of the special assessment, staff recommend that the FDIC retain the ability to cease collection
early, impose an extended special assessment collection period after the initial eight-quarter collection period
to collect the difference between losses and the amounts collected, and impose a one-time final shortfall special
assessment after both receiverships terminate.
40 12 U.S.C. 1823(c)(4)(G)(ii)(I). In implementing special assessments, the FDIC is required to consider the types of
entities that benefit from any action taken or assistance provided under the determination of systemic risk,
effects on the industry, economic conditions, and any such other factors as the FDIC deems appropriate and
relevant to the action taken or the assistance provided. See 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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Staff contacts:
DIR
Ashley Mihalik
Associate Director, Financial Risk Management
under the determination of systemic risk,
effects on the industry, economic conditions, and any such other factors as the FDIC deems appropriate and
relevant to the action taken or the assistance provided. See 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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Staff contacts:
DIR
Ashley Mihalik
Associate Director, Financial Risk Management
(202) 898-3793
Kayla Shoemaker
Senior Policy Analyst, Banking and Regulatory Policy
(202) 898-6962
Legal
Sheikha Kapoor
Assistant General Counsel
(202) 898-3960
Ryan McCarthy
Counsel
(202) 898-7301
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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.