Our Position

Deposit Insurance

Our Position

  • Our nation’s federal deposit insurance system is critical to depositor confidence in the banking system, to the protection of small depositors, and to the funding base of community banks. A strong Deposit Insurance Fund (DIF) is important to maintaining public confidence that the FDIC has adequate resources to protect the nation’s depositors.
  • ICBA strongly supported the changes to the deposit insurance assessment base as a result of the Dodd-Frank Act which are saving the community banking industry billions of dollars.
  • Because of ICBA’s advocacy, the larger banks were required to indemnify banks with assets under $10 billion from the costs of raising the DIF reserve ratio from 1.15% to 1.35%. As a result, in the second quarter of 2019, these banks began receiving approximately $764 million in FDIC assessment credits.
  • ICBA supported S. 2155 which ensures that reciprocal deposits are not considered brokered deposits under the Federal Deposit Insurance Act.
  • ICBA commends the FDIC for substantially mitigating the impact of Small Business Administration (SBA) Paycheck Protection Program (PPP) lending on FDIC insurance assessments. ICBA urges the FDIC to exclude PPP loans from the Tier 1 leverage ratio.

Background

Deposit insurance has been the stabilizing force of our nation’s banking system for more than 85 years. It promotes public confidence by providing safe and secure depositories for small businesses and individuals alike.

Banks Under $10 Billion Awarded Assessment Credits
ICBA supported the FDIC’s final rule which surcharged banks with assets over $10 billion to pay for raising the DIF reserve ratio from 1.15 percent to 1.35 percent, as required by the Dodd-Frank Act. In the second quarter of 2019, banks with assets less than $10 billion began receiving FDIC assessment credits of approximately $764 million provided that the DIF reserve ratio is maintained at 1.35 percent.

Reciprocal Deposits
In a victory for ICBA, Congress passed S. 2155 in 2018 which ensures that reciprocal deposits of an insured depository institution are not considered to be “brokered deposits,” or funds obtained by or through a deposit broker under the Federal Deposit Insurance Act. This legislation will allow reciprocal deposits to serve as a stable source of funding for community banks. Because reciprocal deposits have been wrongly classified as brokered deposits, it has been difficult for community banks to utilize them to their full potential. This new law supports local depositors while ensuring stable funding for community lending.

SBA Lending
ICBA commends the FDIC for substantially mitigating the impact of SBA PPP lending on FDIC insurance assessments. For instance, nearly every ratio that determines a small bank’s assessment rate excludes PPP loans because of the FDIC’s recent rule changes. These ratios include: the net income before taxes to total assets ratio, the nonperforming loans and leases to gross assets ratio, the other real estate owned to gross assets ratio, the brokered deposit ratio, the one-year asset growth measure, and the loan mix index (LMI). Furthermore, the assessment base used to determine assessments excludes PPP loans.

However, there is one ratio that does not exclude PPP loans—the Tier 1 leverage ratio. ICBA believes that the FDIC should also have excluded PPP loans from the Tier 1 leverage ratio to fully mitigate the impact of PPP lending on FDIC insurance assessments. Loans made under any future PPP lending program should be excluded from the Tier 1 leverage ratio.


Staff Contact

Christopher Cole

Executive Vice President, Senior Regulatory Counsel

Washington, DC

Email