WASHINGTON The Federal Deposit Insurance Corp. unveiled a proposal Tuesday that would change the calculus used in determining assessment fees for small banks, resulting in most of those institutions paying less in premiums.
The plan is intended to be revenue neutral, but would shift premium calculations to make riskier banks pay more while safer institutions would pay less. The proposal would apply only to institutions with less than $10 billion of assets that have been insured for at least five years.
"This proposal updates the data and methods that we use to determine risk-based assessments for small banks to reflect the experience during the recent financial crisis and make assessment rates more forward-looking in how they capture risk," FDIC Chairman Martin Gruenberg said in a press release.
The proposal would go into effect one quarter after the Deposit Insurance Fund reaches 1.15%. The DIF's ratio of reserves to insured deposits stood at 1.03% at the end of the first quarter. Once it reaches 1.15%, a separate assessment change will also kick in that requires the largest banks to bear the burden of increasing the DIF's reserve ratio to 1.35% by 2020.
If the proposal is finalized in its current form, the revised calculation would result in 60% of small banks paying lower premiums, 20% paying the same and 20% seeing an increase.
The new calculation would make a number of adjustments, including taking into account a bank's loan portfolio. For example, a bank that had more construction and development loans, which are viewed as riskier, may pay more in bank assessments. Other changes including going from an "adjusted brokered deposit ratio" to one that looks at core deposits as a percentage of total assets.