Deposit Insurance Fund Restoration Plan Semiannual Update

As required by the Federal Deposit Insurance Act,¹ the FDIC has been operating under a Restoration Plan since September 15, 2020.² At that time, extraordinary growth in insured deposits caused the Deposit Insurance Fund (DIF) reserve ratio to decline below the statutory minimum of 1.35 percent.  The reserve ratio is the ratio of the Fund to insured deposits.  The Restoration Plan is intended to restore the DIF to the statutory minimum of 1.35 percent within the eight-year deadline required by statute, September 30, 2028.

On June 21, 2022, based on projections that the reserve ratio was at risk of not reaching the statutory minimum of 1.35 percent by September 30, 2028, the Board amended the Restoration Plan.³ In conjunction with the Amended Restoration Plan, the Board proposed, and subsequently finalized, an increase in initial base deposit insurance assessment rate schedules of 2 basis points, to improve the likelihood that the reserve ratio would be restored to at least 1.35 percent by September 30, 2028.⁴

The Amended Restoration Plan requires the FDIC to update its analysis and projections for the DIF balance and reserve ratio at least semiannually and, if necessary, recommend modifications to the Amended Restoration Plan. Staff project that the reserve ratio remains on track to reach the statutory minimum of 1.35 percent ahead of the statutory deadline and recommend no changes to the Amended Restoration Plan. Reaching the statutory minimum reserve ratio in advance of the statutory deadline strengthens the DIF so that it can better withstand unexpected losses and reduces the likelihood of pro-cyclical assessment increases.

Since the previous semiannual update, the DIF reserve ratio increased by 6 basis points from 1.15 percent at the end of 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 DIF balance totaled $129.2 billion, up $7.5 billion from the previous update as of December 31, 2023. 

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. 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.

Finally, I would like to thank the FDIC staff for their work on providing this semiannual update to the Restoration Plan and their continued efforts to monitor potential losses, deposit balance trends, and other factors that affect the reserve ratio.