As required by the Federal Deposit Insurance Act,1 the FDIC has been operating under a Deposit Insurance Fund 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 as of June 30, 2020. 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, which is September 30, 2028.
On June 21, 2022, the FDIC Board amended the Restoration Plan based on analysis indicating that the reserve ratio was at risk of not reaching the statutory minimum of 1.35 percent by September 30, 2028.3 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.
Since the previous update, the DIF reserve ratio increased by 4 basis points from 1.11 percent as of June 30, 2023 to 1.15 percent at the end of 2023 as the growth in the DIF balance in the second half of 2023 outpaced insured deposit growth. In this first semiannual update of 2024, the DIF balance totaled $121.8 billion as of December 31, 2023, up $4.8 billion from the previous update, as of June 30, 2023. The increase in the DIF balance was primarily driven by assessment revenue. 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 at this time. 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.
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.
- 1
Section 7(b)(3)(E) of the Federal Deposit Insurance Act, 12 U.S.C. 1817(b)(3)(E), available at https://www.fdic.gov/regulations/laws/rules/1000-800.html#fdic1000sec.7b.
- 2
2020 FDIC Restoration Plan, 85 FR 59306 (Sept. 21, 2020), available at https://www.fdic.gov/news/board-matters/2020/2020-09-15-notice-dis-a-fr.pdf.
- 3
2022 FDIC Amended Restoration Plan, 87 FR 39518 (July 1, 2022), available at https://www.fdic.gov/news/board-matters/2022/2022-06-21-notice-sum-b-fr.pdf.
- 4
Final Rule on Assessments, Revised Deposit Insurance Assessment Rates, 87 FR 64314 (Oct. 24, 2022), available at https://www.fdic.gov/news/board-matters/2022/2022-10-18-notice-dis-a-fr.pdf.