The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank) was a wide-ranging statute that had significant effects on the regulation of the US financial system. This summary covers only the provisions of the law related to the Deposit Insurance Fund. Dodd-Frank provided the FDIC added flexibility to manage the Deposit Insurance Fund, and made specific changes that affected the FDIC's management of the fund, some temporarily, and others on an ongoing basis.
- Deposit Insurance Coverage. Section 335 permanently increased the basic deposit insurance coverage limit to $250,000. The coverage limit had been increased to $250,000 on a temporary basis in October 2008 until December 31, 2009 by the Emergency Economic Stabilization Act of 2008 (Pub. Law 110-343, Sec. 135(a)), and was extended to December 31, 2013 in May 2009 by the Helping Families Save Their Homes Act of 2009 (Pub. Law 111-22 Sec. 204(a)). This provision of Dodd-Frank has an ongoing effect on the total amount of deposits insured by the FDIC as well as on the fund's reserve ratio.
- Assessment Base. Section 331 made a significant change to the FDIC's assessment base. In the past, insured institutions had paid an assessment based on adjusted total deposits. Under the new provision, an insured institution's assessment base is defined as its average consolidated total assets minus its average tangible equity. Assessments therefore changed from being based on an institution's adjusted total deposits to being based on its total liabilities.
- Dividends. Section 332 sought to eliminate what had been a historical pattern of pro-cyclical assessments (meaning that the FDIC had had to charge the highest assessment rates during times when the banking industry faced difficulties). Although the statute continued the FDIC's requirement to issue a dividend to insured institutions when the DRR exceeded 1.5 percent, the FDIC Board of Directors was given sole discretion to suspend or limit such dividends. This change had the effect of removing the upper limit on the DRR and therefore on the size of the DIF. This flexibility was integral to the FDIC's development of a long-term fund management plan. [we could link back to fund management here]
- Designated Reserve Ratio. Section 334 raised the minimum Designated Reserve Ratio (DRR), which the FDIC must set annually, to 1.35 percent of estimated insured deposits, or a comparable percentage of the new assessment base. (Before the law was passed, under the Federal Deposit Insurance Reform Act of 2005, the DRR could be set within a range from 1.15 percent to 1.5 percent.) For at least 5 years the FDIC was required to make available to the public both the reserve ratio and the DRR using both estimated insured deposits and the new assessment base.
- Restoration Plan and Offset. Section 334 also gave the FDIC additional time to return the DIF's reserve ratio to 1.35 percent. The FDIC was to take the steps necessary to return the ratio to 1.35 percent by September 30, 2020. (The reserve ratio reached 1.36 percent on September 30, 2018, two years before required by the law). The statutory requirement is that if the reserve ratio falls below 1.35 percent, or the FDIC projects that it will do so within 6 months, that the FDIC generally must adopt a restoration plan that returns the DIF's reserve ratio to 1.35 percent within 8 years (this period was put in place in 2009 [Pub. Law. 111-22, Sec. 204(b)], an increase from the 5-year restoration plan period in the 2005 Reform Act). In addition, the FDIC had to offset the effect of the return of the DIF to a reserve ratio to 1.35 percent on insured institutions with total assets under $10 billion by the end of 2016. In March 2016, the FDIC approved a final rule implementing these requirements. The FDIC imposed surcharges on the quarterly assessments of institutions with total consolidated assets of $10 billion or more. The surcharges were suspended as of September 30, 2018 when the reserve ratio reached 1.35 percent.
- Non-Interest Bearing Transaction Accounts. Section 343 provided that the FDIC should fully insure noninterest-bearing transaction accounts, effective December 31, 2010, through December 31, 2012. This was essentially a temporary statutory continuation for an additional two years of the FDIC's Transaction Account Guarantee Program that was part of the Temporary Liquidity Guarantee Program put in place in October 2008, and that, after two extensions, would expire at year-end 2010. The Dodd-Frank provision expired as scheduled.