Assessments

Published date03 October 2019
Citation84 FR 52826
Record Number2019-21322
SectionProposed rules
CourtFederal Deposit Insurance Corporation
Federal Register, Volume 84 Issue 192 (Thursday, October 3, 2019)
[Federal Register Volume 84, Number 192 (Thursday, October 3, 2019)]
                [Proposed Rules]
                [Pages 52826-52827]
                From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
                [FR Doc No: 2019-21322]
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                FEDERAL DEPOSIT INSURANCE CORPORATION
                12 CFR Part 327
                RIN 3064-AF16
                Assessments
                AGENCY: Federal Deposit Insurance Corporation (FDIC).
                ACTION: Notice of proposed rulemaking; supplemental notice.
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                SUMMARY: On September 4, 2019, the Federal Deposit Insurance
                Corporation (FDIC) issued a notice of proposed rulemaking with request
                for comments on proposed that would amend the deposit insurance
                assessment regulations that govern the use of small bank assessment
                credits (small bank credits) and one-time assessment credits (OTACs) by
                certain insured depository institutions (IDIs). The FDIC is
                supplementing that notice of proposed rulemaking with an updated
                regulatory flexibility analysis to reflect changes to the Small
                Business Administration's monetary-based size standards which were
                adjusted for inflation as of August 19, 2019.
                DATES: Comments on the updated regulatory flexibility analysis must be
                received on or before November 4, 2019.
                ADDRESSES: You may submit comments by any of the following methods:
                 FDIC Website: https://www.fdic.gov/regulations/laws/federal/. Follow instructions for submitting comments on the agency
                website.
                 Email: [email protected]. Include RIN 3064-AF16 on the
                subject line of the message.
                 Mail: Robert E. Feldman, Executive Secretary, Attention:
                Comments, Federal Deposit Insurance Corporation, 550 17th Street NW,
                Washington, DC 20429.
                 Hand Delivery to FDIC: Comments may be hand-delivered to
                the guard station at the rear of the 550 17th Street Building (located
                on F Street) on business days between 7 a.m. and 5 p.m.
                 Federal eRulemaking Portal: http://www.regulations.gov.
                Follow the instructions for submitting comments.
                 Please include your name, affiliation, address, email address, and
                telephone number(s) in your comment. All statements received, including
                attachments and other supporting materials, are part of the public
                record and are subject to public disclosure. You should submit only
                information that you wish to make publicly available.
                 Public Inspection: All comments received will be posted generally
                without change to https://www.fdic.gov/regulations/laws/federal/,
                including any personal information provided.
                FOR FURTHER INFORMATION CONTACT: Ryan T. Singer, Chief, Regulatory
                Analysis Section, Division of Insurance and Research, (202) 898-7352,
                [email protected]; Jennifer M. Jones, Counsel, Legal Division, (202)
                898-6768, [email protected].
                SUPPLEMENTARY INFORMATION: On September 4, 2019, the FDIC issued a
                notice of proposed rulemaking with request for comments on proposed
                that would amend the deposit insurance assessment regulations that
                govern the use of small bank credits and OTACs by certain IDIs. (See 84
                FR 45443 (August
                [[Page 52827]]
                29, 2019).) The FDIC is supplementing that notice of proposed
                rulemaking with an updated regulatory flexibility analysis to reflect
                changes to the Small Business Administration's monetary-based size
                standards which were adjusted for inflation as of August 19, 2019. (See
                84 FR 34261 (July 18, 2019).)
                Updated Regulatory Flexibility Act
                 The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq.,
                generally requires an agency, in connection with a proposed rule, to
                prepare and make available for public comment an initial regulatory
                flexibility analysis that describes the impact of a proposed rule on
                small entities.\1\ However, a regulatory flexibility analysis is not
                required if the agency certifies that the rule will not have a
                significant economic impact on a substantial number of small entities.
                The Small Business Administration (SBA) has defined ``small entities''
                to include banking organizations with total assets of less than or
                equal to $600 million.\2\ Generally, the FDIC considers a significant
                effect to be a quantified effect in excess of 5 percent of total annual
                salaries and benefits per institution, or 2.5 percent of total non-
                interest expenses. The FDIC believes that effects in excess of these
                thresholds typically represent significant effects for FDIC-insured
                institutions. Certain types of rules, such as rules of particular
                applicability relating to rates or corporate or financial structures,
                or practices relating to such rates or structures, are expressly
                excluded from the definition of ``rule'' for purposes of the RFA.\3\
                The proposed rule relates directly to the rates imposed on IDIs for
                deposit insurance and to the deposit insurance assessment system that
                measures risk and determines each established small bank's assessment
                rate and is, therefore, not subject to the RFA. Nonetheless, the FDIC
                is voluntarily presenting information in this RFA section.
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                 \1\ 5 U.S.C. 601 et seq.
                 \2\ The SBA defines a small banking organization as having $600
                million or less in assets, where ``a financial institution's assets
                are determined by averaging the assets reported on its four
                quarterly financial statements for the preceding year.'' See 13 CFR
                121.201 (as amended by 84 FR 34261, effective August 19, 2019).
                ``SBA counts the receipts, employees, or other measure of size of
                the concern whose size is at issue and all of its domestic and
                foreign affiliates.'' See 13 CFR 121.103. Following these
                regulations, the FDIC uses a covered entity's affiliated and
                acquired assets, averaged over the preceding four quarters, to
                determine whether the covered entity is ``small'' for purposes of
                the RFA.
                 \3\ 5 U.S.C. 601.
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                 Based on quarterly regulatory report data as of March 31, 2019, the
                FDIC insures 5,371 depository institutions, of which 4,004 are defined
                as small entities by the terms of the RFA. Further, 4,001 RFA-defined
                small, FDIC-insured institutions have small bank credits totaling
                $183.7 million.
                 As stated previously, the proposed rule eliminates the possibility
                that affected small, FDIC-insured institutions would begin receiving
                small bank credits in the quarter when the reserve ratio first reaches
                or exceeds 1.38 percent, but that these credits then would be suspended
                if the reserve ratio subsequently falls below 1.38 percent (but remains
                at least 1.35 percent). Therefore, the economic effect of this aspect
                of the proposed rule is a reduction in the potential future costs
                associated with a disruption of the type just described in the
                application of small bank credits by affected small, FDIC-insured
                institutions. It is difficult to accurately estimate the magnitude of
                this benefit to affected small, FDIC-insured institutions, because it
                depends, among other things, on future economic and financial
                conditions, the operational and financial management practices at
                affected small, FDIC-insured institutions, and the future levels of the
                reserve ratio. However, the FDIC believes the economic effects of the
                proposed rule are likely to be small, because an estimated 41 percent
                of the aggregate amount of small bank credits would be applied in the
                first quarter that the reserve ratio is at least 1.38 percent. Further,
                the FDIC estimates that 3,851 small, FDIC-insured institutions (or 96.3
                percent) would exhaust their individual shares of small bank credits
                within four assessment periods. Of the 150 small, FDIC-insured
                institutions that the FDIC estimates would have small bank credits that
                would last more than four quarters, 139 are expected to exhaust their
                individual shares after being applied for two additional assessment
                periods (i.e., after a total of six assessment periods of application),
                and four within four additional assessment periods of application
                (i.e., after a total of eight assessment periods), and seven will last
                more than eight quarters. Therefore, the dollar amount of remaining
                small bank credits declines substantially after the initial application
                of credits in the first quarter of use, reducing the effects of credit
                application being suspended due to a decrease in the reserve ratio.
                Additionally, recent history suggests a generally positive near-term
                outlook for the banking sector (implying lower costs to the DIF),
                therefore the probability of suspension of applying small bank credits
                is low, particularly in the near-term quarters.
                 As stated previously, the proposed rule would require the FDIC to
                remit the outstanding balances of remaining OTACs in a lump-sum
                payment, in the next assessment period in which the reserve ratio is at
                least 1.35 percent, at the same time that the outstanding small bank
                credit balances are remitted. As of March 31, 2019, only two IDIs have
                outstanding OTACs, totaling approximately $300,000. However, both
                institutions are subsidiaries of large banking organizations and
                therefore do not qualify as small entities under the RFA. Therefore,
                this aspect of the proposed rule would not affect any small, FDIC-
                insured institutions. The FDIC invites comments on all aspects of the
                supporting information provided in this RFA section. In particular,
                would this proposed rule have any significant effects on small entities
                that the FDIC has not identified?
                Federal Deposit Insurance Corporation.
                 Dated at Washington, DC, on September 26, 2019.
                Robert E. Feldman,
                Executive Secretary.
                [FR Doc. 2019-21322 Filed 10-2-19; 8:45 am]
                 BILLING CODE 6714-01-P
                

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