[Federal Register: September 8, 1999 (Volume 64, Number 173)]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 327
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Notice of proposed rulemaking.
SUMMARY: The Board of Directors of the FDIC (Board) is proposing
several changes to the FDIC's regulation governing assessments. The
Board is proposing to change the reporting date used to determine the
capital component of the assessment risk classifications assigned to
FDIC-insured depository institutions. The proposal is to move that date
closer by one calendar quarter to the assessment period for which the
capital component is assigned. This change would permit the FDIC to use
more up-to-date information in determining institutions' assessment
risk classifications. The proposed date would coincide with the date
currently used to determine the supervisory component of the assessment
To permit the use of more up-to-date capital information, the Board
is further proposing to shorten from 30 days to 15 days the prior
notice that the FDIC sends to institutions advising them of their
assessment risk classifications for the following semiannual assessment
period. The same reduction is proposed for the invoice sent by the FDIC
each quarter showing the amount of the assessment payment due for the
next quarterly collection. At the other end of the process, the Board
is proposing to increase from 30 days to 90 days the time within which
an institution may request review of its assessment risk
Additionally, to reflect a shift of certain assessment functions
within the FDIC, the Board is proposing to revise two of the references
in the regulation to FDIC offices or officials. Finally, the proposal
would correct a typographical error in the form of a misstated cross-
reference to another FDIC regulation.
DATES: Written comments must be received by the FDIC on or before
October 25, 1999.
ADDRESSES: All written comments should be addressed to Robert E.
Feldman, Executive Secretary, Attention: Comments/OES, Federal Deposit
Insurance Corporation, 550 17th Street, NW, Washington, DC 20429.
Comments may be hand-delivered to the guard station at the rear of the
550 17th Street Building (located on F Street) between 7:00 a.m. and
5:00 p.m. on business days. Comments may also be faxed to (202) 898-
3838, or sent via the Internet to firstname.lastname@example.org. Comments will be
available for inspection and photocopying at the FDIC Public
Information Center, Room 100, 801 17th Street, NW, between 9:00 a.m.
and 4:30 p.m. on business days.
FOR FURTHER INFORMATION CONTACT: James W. Thornton, Senior Banking
Analyst, Division of Insurance, (202) 898-6707; or Claude A. Rollin,
Senior Counsel, Legal Division, (202) 898-8741, Federal Deposit
Insurance Corporation, Washington, DC 20429.
Capital Group Determination Date
At present, the FDIC's risk-based assessments regulation specifies
that the capital component of the assessment risk classification
assigned to each FDIC-insured institution for each semiannual
assessment period will be determined on the basis of data reported by
an institution in its Consolidated Reports of Condition and Income,
Thrift Financial Report, or Report of Assets and Liabilities of U.S.
Branches and Agencies of Foreign Banks (collectively, call reports) for
the quarter ending six months earlier (12 CFR 327.4(a)(1)). As a
result, an institution's capital group is assigned on the basis of
information that is approximately six months old when the assessment
period begins. While the FDIC has long preferred to use more current
information, it has been constrained from doing so because of the time
needed to process the capital data submitted by institutions in their
call reports.\1\ However, recent developments, such as improvements in
the FDIC's internal processing procedures and an increase in the number
of institutions filing reports electronically, now permit more rapid
processing of the data. Accordingly, the Board is proposing to base
capital group determinations on data reported by institutions in their
call reports for the quarter ending three months before the beginning
of the assessment period to which the determination will apply.
\1\ Institutions have 30 days (or 45 days for institutions with
foreign branches) from quarter-end to file their call reports. Once
the FDIC receives the reports, they are checked for obvious errors
(such as omitted information) and then input into the FDIC's
automated system. Only after this has been done can the calculations
be performed to determine the appropriate capital group assignment
for each of the more than 10,000 insured institutions. These
functions must be performed in time to prepare and mail notices to
each institution before the beginning of the next semiannual
For ease of reference, the dates for capital group determinations
would be stated in terms of actual dates--that is, March 31 for the
semiannual period beginning the following July 1, and September 30 for
the semiannual period beginning the following January 1. At present,
the capital date is described by reference to other dates rather than
It is anticipated that this change would be effective beginning
with the semiannual assessment period that commences July 1, 2000. For
that period, the capital component of an institution's assessment risk
classification would be determined based on data reported as of March
31, 2000, rather than as of December 31, 1999.
Change in Notice Dates for Assessment Risk Classifications and
Quarterly Payment Invoices
The Board also is proposing to shorten--from 30 days to 15 days--
the time between the date institutions are notified of their assessment
risk classifications for the upcoming semiannual assessment period and
the date the assessment is collected for the first quarter of that
upcoming period. The same reduction is proposed, for both the first and
second quarters of each semiannual assessment period, in the time
between the date of the quarterly assessment invoice and the date the
invoiced amount is collected.
Currently, the FDIC's assessments regulation specifies that notice
of the assessment risk classification applicable to a particular
semiannual period is to
be provided to the institution at the same time as the invoice showing
the amount of the assessment payment due from the institution for the
first quarter of that semiannual period (12 CFR 327.4(a)). This invoice
and notice are to be provided no later than 30 days before the first-
quarter payment date (12 CFR 327.3(c)). The regulation further requires
that an invoice showing the amount of the assessment payment due for
the second quarter of the semiannual period is to be provided no later
than 30 days before the second-quarter payment date (12 CFR 327.3(d)).
The Board is proposing to reduce to 15 days each of these 30-day
periods. For the first-quarter notice and invoice, the reduction is
necessary to permit the use of more current capital data in determining
an institution's capital group and, based on that determination, to
calculate the institution's first-quarter assessment payment.
For example, if the date of the data used as a basis for capital
group assignments for the assessment period beginning July 1 is changed
from December 31 to March 31, and the prior-notice date remains May 30
(which is 30 days before the June 30 payment date), the FDIC would have
as little as 15 to 30 days to receive the data, scan the reports, input
the information into the FDIC's system, perform capital group
calculations for more than 10,000 institutions, and prepare and mail
the assessment notices. Although the call report filing deadline for
most institutions is 30 days after the end of the quarter (April 30 in
this example), the deadline for institutions with foreign offices is 15
days later (here, May 15). Although internal processing improvements
and increased electronic filing allow the FDIC to perform these
functions more quickly, the FDIC cannot perform them in 30 days.
For consistency, the same reduction in the invoicing period is
proposed for both the first-and second-quarter assessment payments.
It is not anticipated that reduction of the notice and invoice
periods would have a significantly adverse impact on insured
institutions. The risk-based assessment system has been in place since
1993 and the industry is quite familiar with it. Institutions typically
know (or can anticipate with substantial certainty) the assessment risk
classification and corresponding assessment rate \2\ they will be
assigned for the next assessment period. For the second quarter of a
semiannual period, institutions will have known their capital category
for three months. An institution also knows the amount of its
assessment base for each quarter, since that amount is calculated from
data reported by the institution. By multiplying its rate by its
assessment base, an institution can very closely estimate its payment
well before it receives a FDIC assessment notice.
\2\ In the event the Board makes a limited adjustment to the
assessment rate schedule pursuant to the FDIC's assessments
regulation at 12 CFR 327.9(c), the adjustment is to be announced no
later than 15 days before the assessment notice date (which under
the existing regulations is, in turn, 30 days before the assessment
payment date). Under the proposal to move the assessment notice date
closer to the payment date, an adjustment announcement would come at
least 30 days before the assessment payment date.
The proposed change should have little effect on the small number
of institutions that believe they have received an incorrect assessment
classification. Even with the existing notice and invoice dates,
requests for review of assessment ratings that result in favorable
changes for requesting institutions can only rarely be decided before
the date on which the institution is required to pay the invoiced
Institutions are also able to anticipate their Financing
Corporation (FICO) assessment, which the FDIC bills and collects on
FICO's behalf. Although the FICO assessment rate varies from one
quarter to the next, the variation is typically small. Thus, under
normal circumstances, institutions can estimate with reasonable
accuracy the amount of their assessment payments well in advance of the
payment date. However, the Board recognizes that there might be some
instances in which significant developments could reduce that accuracy,
such as significant changes in the assessment base for one or both of
the deposit insurance funds that might cause material changes in the
FICO assessment rates. In these cases, the FDIC intends to provide
notice as early as possible through such means as mailings to insured
An example of a development expected to cause significant changes
in FICO assessments is the statutory equalization of the FICO
assessment rate applicable to deposits insured by the Bank Insurance
Fund (BIF) with the rate for deposits insured by the Savings
Association Insurance Fund (SAIF). However, under existing law, that
change is to become effective on January 1, 2000, six months before the
anticipated implementation of the changes proposed here. Thus, there
would be sufficient time to adjust to the newer, equalized FICO rates
before the shorter notice period is implemented.
Extension of Period for Requesting Reclassification
Another change proposed by the Board is to lengthen the period
during which an institution may seek a change in its assessment risk
classification. At present, the FDIC's assessments regulation requires
that a request that the FDIC review an institution's classification be
submitted within 30 days of the date of the notice by which the FDIC
informs the institution of its classification (12 CFR 327.4(d)). Based
on the FDIC's experience with the review process and the proposed
reduction of the existing prior-notice period, the FDIC has concluded
that a longer period would be beneficial. Thus, the Board is proposing
to expand the time for requesting review to 90 days.
Re-designations Resulting From Internal FDIC Reorganization
In order to reflect reorganizations within the FDIC, the Board is
further proposing to amend the assessments regulation to provide that
requests for review of assessment risk classifications be submitted to
the Director of the Division of Insurance, instead of the Director of
the Division of Supervision. Similarly, the Board proposes to move from
the Director of the Division of Supervision to the Director of the
Division of Insurance the existing delegation of authority in 12 CFR
327.4(d) to act on most such requests. However, the authority to act on
requests for changes in the supervisory subgroup assignment would
remain with the Director of the Division of Supervision if the request
is based on the appropriateness of that assignment as of the date set
for determining supervisory subgroup assignments. This delineation of
the delegated authority is represented by the phrase ``as appropriate''
in the proposed revision, which reads as follows: ``Upon completion of
a review, the Director of the Division of Insurance (or designee) or
the Director of the Division of Supervision (or designee), as
appropriate, shall promptly notify the institution in writing of his or
her determination of whether reclassification is warranted.''
Correction of Cross Reference
Section 327.5(f) of the FDIC's assessments regulation imposes
disclosure restrictions regarding the supervisory subgroup assigned by
the FDIC. At present, this section gives an erroneous cross-reference
to another, nonexistent, section of the FDIC's regulations to identify
the category of exempt information into which the
supervisory subgroup information fits. The proposal corrects this
Request for Comment
The Board requests comment on the proposed regulatory amendments
described above. In particular, comment is requested regarding any
adverse impact the shorter notice periods might have. If it is believed
that a 15-day notice period would be insufficient, comment is requested
as to what period would be minimally sufficient to prove reasonable
Comment is further requested on any alternative means of permitting
the use of more up-to-date capital data without shortening the notice
periods. Possible alternatives might include, for example, moving the
assessment payment date to a later date. It is requested that
suggestions for alternative means to those proposed by the Board
include a discussion of any benefits and disadvantages associated with
the alternatives suggested.
The comment period has been set at 45 days to allow the proposal,
if adopted, to be implemented beginning with the second semiannual
assessment period of 2000 and to give insured institutions as much time
as possible before implementation to adjust to the changes. The Board
wishes to address the proposal expeditiously because of its belief that
the use of more current capital data would be of significant benefit
for both the industry and the risk-based assessment system.
Regulatory Flexibility Act
The Board hereby certifies that the proposed rule would not have a
significant economic impact on a substantial number of small entities
within the meaning of the Regulatory Flexibility Act (5 U.S.C. 601 et
seq.). No new or increased reporting, recordkeeping, or other
compliance requirements would be imposed by the proposed rule. Of the
changes proposed, only one--lengthening the time for filing requests
for review of assessment risk classifications--addresses actions to be
initiated by insured institutions. The remaining proposals address
actions to be undertaken by the FDIC. The proposal addressing actions
to be initiated by institutions would relax an existing time
restriction, and it is expected that any impact on insured
institutions, of whatever size, would be positive rather than adverse.
Assessment of Impact of Federal Regulation on Families
The FDIC has determined that this proposed amendment would not
affect family well-being within the meaning of section 654 of the
Treasury Department Appropriations Act, 1999, enacted as part of the
Omnibus Consolidated and Emergency Supplemental Appropriations Act,
1999 (Pub. L. 105-277, 112 Stat. 2681).
List of Subjects in 12 CFR Part 327
Assessments, Bank deposit insurance, Banks, banking, Reporting and
recordkeeping requirements, Savings associations.
For the reasons stated in the preamble, the Board proposes to amend
12 CFR part 327 as follows:
1. The authority citation for part 327 continues to read as
Authority: 12 U.S.C. 1441, 1441b, 1813, 1815, 1817-1819; Pub. L.
104-208, 110 Stat. 3009-479 (12 U.S.C. 1821).
2. Section 327.3 is amended by removing the phrase ``30 days'' and
adding in its place the phrase ``15 days'' in paragraphs (c)(1) and
3. Section 327.4 is amended by removing the citation to
``309.5(c)(8)'' in paragraph (e) and adding in its place the citation
``309.5(g)(8)'', and by revising paragraphs (a)(1) introductory text
and (d) to read as follows:
Sec. 327.4 Annual assessment rate.
(a) * * *
(1) Capital factors. Institutions will be assigned to one of the
following three capital groups on the basis of data reported in the
institution's Consolidated Reports of Condition and Income, Report of
Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks,
or Thrift Financial Report dated as of March 31 for the assessment
period beginning the following July and as of September 30 for the
assessment period beginning the following January 1.
* * * * *
(d) Requests for review. An institution may submit a written
request for review of its assessment risk classification. Any such
request must be submitted within 90 days of the date of the assessment
risk classification notice provided by the Corporation pursuant to
paragraph (a) of this section. The request shall be submitted to the
Corporation's Director of the Division of Insurance in Washington, DC,
and shall include documentation sufficient to support the
reclassification sought by the institution. If additional information
is requested by the Corporation, such information shall be provided by
the institution within 21 days of the date of the request for
additional information. Any institution submitting a timely request for
review will receive written notice from the Corporation regarding the
outcome of its request. Upon completion of a review, the Director of
the Division of Insurance (or designee) or the Director of the Division
of Supervision (or designee), as appropriate, shall promptly notify the
institution in writing of his or her determination of whether
reclassification is warranted. Notice of the procedures applicable to
reviews will be included with the assessment risk classification notice
to be provided pursuant to paragraph (a) of this section.
* * * * *
By order of the Board of Directors.
Dated at Washington, DC, this 31st day of August, 1999.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
[FR Doc. 99-23266 Filed 9-7-99; 8:45 am]
BILLING CODE 6714-01-P