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FIL-86-99 Attachment

[Federal Register: September 8, 1999 (Volume 64, Number 173)]

[Proposed Rules]

[Page 48719-48721]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr08se99-10]


 

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Proposed Rules

Federal Register

________________________________________________________________________


 

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.


 

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[[Page 48719]]



 

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FEDERAL DEPOSIT INSURANCE CORPORATION


 

12 CFR Part 327


 

RIN 3064-AC31


 

 

Assessments


 

AGENCY: Federal Deposit Insurance Corporation (FDIC).


 

ACTION: Notice of proposed rulemaking.


 

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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

risk classification.

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

classification.

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 comments@fdic.gov. 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.


 

SUPPLEMENTARY INFORMATION:


 

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.

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\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

assessment period.

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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

specifically stated.

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


 

[[Page 48720]]


 

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.

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\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.

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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

amount.

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

institutions.

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


 

[[Page 48721]]


 

supervisory subgroup information fits. The proposal corrects this

erroneous cross-reference.


 

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

notice.

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:


 

PART 327--ASSESSMENTS


 

1. The authority citation for part 327 continues to read as

follows:


 

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

(d)(1), respectively.

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,

Executive Secretary.

[FR Doc. 99-23266 Filed 9-7-99; 8:45 am]

BILLING CODE 6714-01-P

Last Updated: March 24, 2024