WASHINGTON – The Federal Deposit Insurance Corporation (FDIC) Board of Directors today released the latest semiannual update on the Restoration Plan for the agency’s Deposit Insurance Fund (DIF). FDIC staff projects that the reserve ratio remains on track to reach the statutory minimum of 1.35 percent ahead of the statutory deadline of September 30, 2028.
Since the previous semiannual update, the DIF reserve ratio increased by 6 basis points—from 1.15 percent as of December 31, 2023, to 1.21 percent as of June 30, 2024, due to growth in the DIF balance and slower-than-average insured deposit growth.
“The increase in the DIF balance was primarily driven by assessments earned, which reflect the 2 basis point increase in initial base assessment rate schedules that became effective at the beginning of 2023,” said FDIC Chairman Martin J. Gruenberg. “Had this rate increase not been in effect prior to the failure of three large regional banks in 2023, which resulted in $19.6 billion in losses to the DIF, the Board likely would have had to consider a more sizeable rate increase in order to restore the reserve ratio to 1.35 percent with less time remaining before the statutory deadline.”
Background
The Federal Deposit Insurance Act (FDI Act) requires the FDIC Board to adopt a restoration plan when the DIF’s reserve ratio—the ratio of the fund balance relative to insured deposits—falls below 1.35 percent. On September 15, 2020, the FDIC established the Restoration Plan (the Plan) to restore the DIF reserve ratio to at least 1.35 percent by the statutory deadline, after extraordinary deposit growth during the first half of 2020 caused the DIF reserve ratio to decline below the statutory minimum. The Plan maintained the assessment rate schedules in place at the time.
On June 21, 2022, the FDIC Board amended the Plan following staff projections the reserve ratio was at risk of not reaching the required minimum by the statutory deadline. In conjunction with the Amended Restoration Plan, the FDIC Board increased deposit insurance assessment rates by 2 basis points for all insured depository institutions (IDIs), effective the first quarterly assessment period of 2023.
The FDIC Board also maintained the designated reserve ratio for the DIF at 2 percent for 2025. The FDIC is required to designate a reserve ratio for the DIF each year, based on an analysis of statutory factors. This long-range, minimum goal is designed to increase the likelihood that the DIF will remain positive throughout periods of significant losses due to bank failures and reduce the risk that the FDIC might need to consider a pro-cyclical assessment rate increase when IDIs can least afford to pay higher assessment rates.