- Key insight: The FDIC proposed scaling back resolution planning requirements for banks and lowering deposit insurance assessments.
- Supporting data: The resolution planning proposal would raise the applicability threshold from $50 billion to $100 billion, exempting 16 of the 48 banks currently covered.
- Forward look: Comptroller of the Currency Jonathan Gould described the proposals as "initial but important steps" toward broader reform objectives.
The Federal Deposit Insurance Corp. on Thursday issued a proposed rule that would scale back banks' resolution planning requirements, as well as another rule reducing what firms pay the agency for deposit insurance through the Deposit Insurance Fund.
The first proposal would overhaul the agency's resolution planning rule for large insured depository institutions, in what FDIC Chair Travis Hill says replaces a process whereby banks themselves write lengthy road maps for their resolution with one that is more limited to the most crucial information needed to resolve a failed bank. Hill
"Earlier this month, I spoke about the challenges associated with resolving large insured depository institutions and the utility of advanced preparedness," Hill
The resolution proposal would raise the asset threshold for covered institutions from $50 billion to $100 billion, indexed for inflation going forward, which FDIC staff estimated would reduce the number of covered banks from 48 to 32. It would also move all covered institutions to a three-year filing cycle and eliminate previously required public sections of submissions, interim supplements, capabilities testing, credibility assessments and much of the hypothetical analysis banks currently provide.
Banks would instead be required to submit only fundamental information on their financial condition, corporate affairs and key internal systems. The proposal would maintain the requirements to submit operational data on areas like information technology architecture, deposit activities and qualified financial contracts. Banks that would otherwise have filing obligations in late 2026 or 2027 would be exempt while the rulemaking goes through the notice-and-comment process.
The second proposal would revise the FDIC's deposit insurance rates, increasing the asset threshold for institutions subject to the large-bank standard from $10 billion to $30 billion, also indexed for inflation. The change would shift 76 institutions from the "large" category into the small-bank assessment framework. Small institutions would see their assessment rates decrease by two basis points; large and highly complex institutions would enjoy a one-basis-point reduction.
The proposal would also establish a Resolution Readiness Adjustment that large, complex banks can opt into that would reduce their rates by up to one basis point. Banks could earn the reduction by demonstrating they can quickly populate a virtual data room with vital information for potential bidders in the event of failure and by providing the FDIC access to operational data needed to see a receivership through. According to FDIC staff, the changes would reduce industry assessments by roughly $4 billion per year while allowing the Deposit Insurance Fund to continue growing at a slower pace.
Hill said the resolution planning proposal reflects a shift toward a more practical approach to preparing for bank failures and that the proposals mark the "first step" of a broader effort to recalibrate the agency's insurance pricing standards.
Comptroller of the Currency Jonathan Gould, who sits on the FDIC board, backed both proposals and highlighted his support for future reform on these issues.
"Although I support the two items on the discussion agenda today, I do not view them as the culmination of the work before us," Gould said. "Rather, I view them as initial but important steps towards a more focused and effective FDIC."
