[Federal Register: December 29, 1994]
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FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Parts 304 and 327
RIN 3064-AB45
Assessments; Forms, Instructions, and Reports
AGENCY: Federal Deposit Insurance Corporation.
ACTION: Final rule.
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SUMMARY: The Board of Directors (Board) of the Federal Deposit
Insurance Corporation (FDIC) is amending its regulation on assessments
to provide for the quarterly collection of insurance premiums by means
of FDIC-originated direct debits through the Automated Clearing House
(ACH) network, based on invoices prepared by the FDIC using data
reported by insured institutions in their quarterly reports of
condition. The intended purpose of the amendments is to provide for a
more efficient collection process, to the benefit of the deposit
insurance funds and insured institutions, and to reduce the regulatory
burden on insured institutions. The Board is further amending the
assessments regulation to clarify the obligation of acquiring
institutions to pay assessments on deposits assumed from institutions
terminating their insured status; to delete from the assessments
regulation the existing references to experience factors, which are not
available for use after 1994; and to include such amendments to the
FDIC's regulation on forms as are necessitated by the foregoing changes
to the assessments regulation. With a few very limited exceptions, the
amendments made by the final rule to the existing regulation are those
previously proposed by the Board for public comment.
EFFECTIVE DATE: The final rule is effective April 1, 1995.
FOR FURTHER INFORMATION CONTACT: Connie Brindle, Chief, Assessment
Operations Section, Division of Finance, (703) 516-5553, or Martha
Coulter, Counsel, (202) 898-7348, regarding quarterly collections;
William Farrell, Chief, Assessment Management Section, Division of
Finance, (703) 516-5546, or Jules Bernard, Counsel, (202) 898-3731,
regarding assessment obligations of acquiring institutions; Federal
Deposit Insurance Corporation, Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
I. Collection Improvement Proposal
A. Background
Earlier this year, the Board issued for public comment a proposal
to revise the existing process for collecting deposit insurance
assessments. 59 FR 29965 (June 10, 1994). The Board is adopting the
revisions as proposed along with technical adjustments to conform the
provisions of the FDIC's assessment regulations at 12 CFR Part 327 to
the new collection process. Implementation of the new system will begin
with the semiannual assessment period that starts July 1, 1995.
At present, the FDIC's assessment regulations require the payment
of deposit insurance premiums twice a year, in an amount computed by
the institution. The computation, and the resulting assessment amount,
is shown on a certified statement submitted by the institution along
with a check for the full amount of the assessment. The payment must be
postmarked no later than January 31 for the first semiannual period of
the year (January through June), and July 31 for the second semiannual
period (July through December).
Under the proposal published in June, assessment payments would be
made in quarterly installments, in amounts computed by the FDIC from
data reported by each institution in its quarterly report of condition
for the preceding quarter.1 Institutions would be invoiced on
November 30 and February 28 for the first semiannual assessment period
of each year and on May 30 and August 30 for the second semiannual
period. Quarterly payment would be due one month later--December 30,
March 30, June 30, and September 30, respectively--and would be
collected by means of ACH debits originated by the FDIC. The first-
quarterly installment for the period beginning January 1 (due two days
earlier, on December 30) would be based on data reported in the
institution's report of condition for the preceding September 30. The
second-quarterly installment for that period (due February 28) would be
based on the report of condition for the preceding December 31. The
first-quarterly payment for the semiannual period beginning July 1 (due
June 30) would be based on the March 31 report of condition, and the
second-quarterly payment (due September 30) would be based on the June
30 report of condition. The following chart summarizes this schedule:
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\1\For banks, the report of condition is called the Report of
Income and Condition; for thrift institutions, the Thrift Financial
Report; and for insured branches of foreign banks, the Report of
Assets and Liabilities of U.S. Branches and Agencies of Foreign
Banks.
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Report of
Semiannual assessment Invoice Payment condition
period covered Quarter date date used for
preparation
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Jan.-June................. 1 Nov. 30... Dec. 30... Sep. 30.
2 Feb. 28... Mar. 30... Dec. 31.
July-Dec.................. 1 May 30.... June 30... Mar. 31.
2 Aug. 30... Sep. 30... June 30.
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The proposal required that each institution designate a deposit
account to be electronically debited by the FDIC for assessment
payments. It also provided a procedure for institutions to request
revision of the FDIC invoice showing the quarterly payment to be
debited. It further included a procedure to be followed if, for some
reason, a quarterly invoice was not timely received by an institution.
Under section 7(c) of the Federal Deposit Insurance Act, 12 U.S.C.
1817(c), each insured depository institution is required to file with
the FDIC a certified statement containing such assessment information
as the FDIC may require for determining the institution's assessment
for the semiannual period. Under the proposal, pursuant to this
statutory provision, the second quarterly invoice for each semiannual
period would include a statement showing both the first- and second-
quarter assessment data. Each institution would be required to certify
its agreement with the assessment computation as shown on the form as
received from the FDIC or, alternatively, its agreement with that
computation as amended in a manner specified by the institution.
B. Discussion of Comments Received
The FDIC received 51 letters in response to its request for comment
on the proposal. Among the respondents were 40 depository institutions,
2 bank holding companies, 3 ACH associations, and 2 governmental
entities. Comment letters were also received from the American Bankers
Association, the Independent Bankers Association of America, the
Savings & Community Bankers of America, and the Independent Bankers
Association of Texas.
All of the responding bankers associations and ACH associations
generally supported the proposal, subject to certain recommendations
and concerns. According to one national bankers association, ``banker
response to the proposal has been overwhelmingly positive''. In
addition, 14 of the individual institutions favored the proposal. The
two bank holding companies generally supported the proposal, although
each objected to one particular element (but not the same one). Of the
remaining 28 commenters, 23 individual institutions generally opposed
the proposal, three institutions expressed support for some major
elements and opposition to other major elements, and 2 related
government agencies submitted letters expressing concern on a single
specific issue.
Significant issues raised by the comment letters are addressed
below. Included with the discussion of each issue is an explanation of
the FDIC's conclusions regarding that issue.
1. Quarterly Collection
One of the elements receiving the most attention from commenters
was the increased frequency of assessment payments, from semiannually
to quarterly. Of the 24 commenters specifically addressing this issue,
three bankers associations and seven individual institutions supported
it and 14 individual institutions opposed it. The final rule includes
this element as proposed.
The principal reasons given in support of quarterly collection were
that it would simplify the assessment calculation by basing each
quarterly payment on only one report of condition instead of an average
of two, and that it would reduce reporting and calculation errors by
moving payment dates further away from the date of the underlying
report-of-condition data, thereby allowing more time for refinement of
the relevant data. The reason most commonly given in opposition was
that increased frequency of payment would result in additional work or
increased costs for institutions. Two institutions objected to
quarterly assessment payments on the grounds that they generally
receive their interest income only semiannually, and one institution
preferred basing assessments on an average of two quarterly reports of
condition.
The issue of whether the proposal might result in increased costs
to institutions was expressly addressed in the comments received from a
national bankers association, which observed that any additional
expenses resulting from the proposed system should be offset by an
overall savings in paperwork and a reduction in assessment prepayment
interest expense. Another bankers association indicated that some
community banks were concerned about the additional work of verifying
the FDIC's calculation four times a year, and recommended that the
FDIC's quarterly assessment invoice be designed in a readily-verifiable
format. A fifth commenter indicated that most banks have automated
their assessment calculations and could use that capability to verify
the FDIC's invoice.
The Board believes that, while a shift to quarterly payments will
add two new collection dates each year and thus require institutions to
go through the payment process more often, the new collection procedure
on the whole will result in an overall reduction in the amount of time
devoted by institutions to assessment collections. Although it is
expected that institutions will want to verify the numbers shown on the
FDIC's invoice, it is also expected that institutions will need less
time to verify four FDIC quarterly invoices than they currently use to
compute their own assessments and prepare two semiannual assessment
statements. The numbers shown on the FDIC's invoice will be the
institution's own numbers, taken from its report of condition for the
preceding quarter. Institutions will need only to check the numbers to
satisfy themselves that they were accurately transferred from the
institution's report of condition. Although the numbers will be
electronically processed by the FDIC to determine an assessment amount,
the assessment calculation on the invoice will be based on only one
report of condition and thus require less time to verify than the
current calculation, which is based on a combination of two reports of
condition. Moreover, the FDIC intends to present the invoice in a
format designed for ease of verification.
In addition, there is more time under the new system between the
end of the applicable reporting period and the assessment payment date.
As a result, there is more time for rechecking the quarterly report
data and making corrections before payment of the assessment that is
derived from that data. The availability of more refined data for the
assessment computation should reduce the amount of time spent by
institutions in revising assessment calculations subsequently rendered
erroneous because of corrections in report-of-condition data.
It is possible that some commenters' opposition to quarterly
payments is based on a perception that because institutions will be
making an assessment payment earlier than they do now, they will lose
interest income on the funds used for the earlier payment. However,
this view ignores the fact that only a portion of an institution's
semiannual assessment will be paid earlier; approximately one-half will
be paid later. At present, the two due dates for assessment payments
are January 31 and July 31. Under the new system, the first-quarterly
payment dates will be December 30 and June 30, one month earlier. Thus,
institutions will lose interest income for one month on approximately
one-half of their semiannual assessments. However, the second-quarterly
payment dates--March 30 and September 30--are two months later than the
existing payment dates. Therefore, in contrast to a one-month loss of
income on the accelerated portion, institutions will gain two months of
income on the delayed portion. This would seem to balance out in
institutions' favor, rather than to their detriment.2
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\2\Several commenters suggested that the purpose of quarterly
collection, with an accelerated payment, is to increase the FDIC's
cash flow. However, when one considers that the accelerated payment
is due only one month earlier than the existing payment date, while
the delayed payment date comes two months after the existing payment
date, the flaw in this suggestion is clear.
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Another possible concern for some institutions might be that basing
assessments on only one quarterly report of condition rather than on an
average of the two previous reports could increase their
assessments.3 Although elimination of averaging should not affect
the actual amount of semiannual assessments paid by an institution,
some institutions might have higher or lower cost-of-funds expenses
than they would if averaging were retained. Institutions whose deposits
are increasing might pay slightly less in assessment payments in the
first quarter of a semiannual assessment period and slightly more in
the second quarter, while the converse would apply to institutions
whose assessable deposits decline through the period. However, on both
an institution-by-institution and industry-wide basis, elimination of
averaging is expected to simplify the assessment process without
affecting the actual amount of semiannual assessments paid.4
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\3\One institution cited loss of averaging as the sole basis for
its opposition to the proposal. Yet in the example given in its
comment letter (receipt of a deposit of $2 million on the last day
of June, which was transferred out a few days later), the retention
of two-quarter report-of-condition averaging would not eliminate the
problem described. Assuming that the institution has deposits of $28
million (including the $2 million just received) at the end of June
30, and $26 million on the previous March 31 (the companion quarter-
end for the same semiannual period), its ``average'' deposits across
the semiannual period would be $27 million. Whether its average
deposits of $27 million is multiplied by one-half its annual
assessment rate (as under the existing system) or March's $26
million and June's $28 million are each multiplied by one-quarter of
the rate (as under the new system) and then added together to
determine the amount across the two quarters, the result is the
same.
\4\A national bankers association noted in its comments that
most bankers believe that, while there will be more volatility in
the payment amount for each quarter under the proposed system than
under the existing system, the total annual payment should remain
about the same.
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2. ACH Direct Debit by the FDIC
Another key element of the collection improvement plan is the use
of ACH direct debits originated by the FDIC as the method of
collection. Of the 28 comment letters addressing this component, 17
were in favor and 11 were opposed. The supporters included ten
individual institutions, two national bankers associations, two bank
holding companies, and three ACH associations. The opposing commenters
were 11 individual institutions. The Board has decided to adopt this
element as proposed.
Increased efficiency over the existing paper-based collection
process was the reason cited most often by supporters of electronic
payment. The principal concern among the opponents seemed to be a loss
of payment flexibility. Also mentioned was the difficulty of correcting
errors in an electronic environment.
The FDIC believes that the existing assessment collection process
will be improved substantially by utilizing an electronic payment
process, to the benefit of insured depository institutions and the
federal deposit insurance funds. Because the existing process is paper-
based, it is more time consuming and less efficient, both for the
industry and for the FDIC, than an improved collection process making
fuller use of advanced payment technology.
It was not clear from the comment letters how the use of an
electronic collection procedure might reduce payment flexibility for
institutions. At present, institutions can submit their assessment
payment by check at any time after they know the amount due, up until
the payment deadline. This covers a maximum period of one month, from
the last day of the latter quarter on which the assessment calculations
are based (December 30 or June 30) through the payment due date
(January 31 or July 31). Under the electronic procedure, institutions
could fund the account designated for the assessment debit (the
equivalent of writing a check) at any time between receipt of the FDIC
invoice and the payment due date, again a period of approximately 30
days. There are also payment deadlines under both the existing and new
systems; for the former, it is the date by which the check must be
postmarked, and under the latter it is the debit date. In these
respects, both the existing and new systems appear to be equally
flexible.
One institution objected to having the FDIC in its ``electronic
back pocket'', which seems to reflect a concern that the FDIC might
originate unexpected debits. This would not be the case, but
institutions with that concern could readily address it by funding
accounts designated for assessment payments only for the exact
assessment amount due and only for the assessment due date.
Another possible concern might be the loss of float resulting from
a change away from paper checks to electronic payments. However, the
amount of cost-savings resulting from other elements of the new
procedure--such as the reduction in prepayment interest expense--should
more than compensate for the loss of float.
The other concern indicated by opponents of electronic collection
was an increased difficulty of error resolution in an electronic
environment. The FDIC believes that, to the contrary, error resolution
will be significantly more efficient under the new system than under
the existing system. Collection by ACH debits will allow the FDIC to
identify within approximately two days of the debit any discrepancies
between the amount due and the amount received, and the FDIC expects to
contact immediately any institutions for which discrepancies appear. At
present, identification of differences between the amounts due and the
amounts paid takes two to three months because the FDIC must await
reports and reconciliations of certified statement forms and paper
checks from lock-box processors.
The three ACH associations from which we received comment letters
on the proposal suggested that the FDIC permit institutions preferring
to pay by institution-initiated ACH credits the option of doing so.
While we recognize that providing such an option might benefit some
institutions, the FDIC's experience, based on live testing of ACH
assessments collection for the two semiannual assessment periods in
1994, is that the error rate for direct-debit collection is
significantly lower.5
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\5\ In January 1994, an ACH-credit test was conducted with 36
small institutions. Despite careful monitoring, significant input
errors occurred (incorrect certificate numbers, absence of bank
name). For the July 1994 payment, testing was expanded to include
183 institutions. Of this group, 19 elected to originate payment
themselves, while the remaining 164 paid by FDIC-initiated debits.
No errors occurred with the debit transactions, in contrast with
errors in six (approximately 30 percent) of the credit transactions
(failure to include certificate numbers).
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Three commenters recommended that, in using the ACH system, the
FDIC comply with the rules of the National Automated Clearing House
Association. It is, and has been, the FDIC's intent to do so.
3. Assessment Computation Review Procedure; Quarterly Adjustment
Under the proposal, the assessment-base data included on the
quarterly assessment invoice provided to the institution by the FDIC
would be taken directly from the institution's most recent report of
condition. Because of the source of the data and given the mechanical
nature of the assessment calculation, it was anticipated that there
would be only limited occasion for institutions to disagree with the
invoices. However, a procedure for resolving any such disagreements was
included in the proposal. With one exception, regarding the timing of
FDIC response, the Board has decided to adopt the proposed procedure.
The proposed procedure would apply only to disagreements identified
in Sec. 327.3(h) of the proposed regulation, such as where the
institution believes the rate multiplier applied by the FDIC is
inconsistent with the assessment risk classification assigned to the
institution for the semiannual period for which the payment is due. The
procedure would not apply to disputes regarding the appropriateness of
the assessment risk classification assigned to the institution; such
disputes would continue to be covered by the risk classification review
procedure in the existing regulations.6
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\6\ Under the final rule, as under the proposal, assessment risk
classifications will be assigned, and applied, semiannually. No
comments were received on this subject, although one commenter
supported the proposal to combine the semiannual risk classification
notice with the first-quarter invoice for the semiannual period.
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Under the new procedure, the period within which an institution
could file a request for revision of an invoice would generally
terminate 60 days from the date of the invoice. However, where the
revision would result from an institution-initiated amendment to its
report of condition, the filing deadline for the request for revision
would be 60 days from the date on which such amendment is filed. The
amendment of the report of condition would not automatically trigger an
assessment adjustment. Instead, institutions would need to utilize the
new procedure to provide notice to the FDIC of the requested revision
resulting from the amendment.
This proposed procedure was specifically addressed by four
commenters, all of which were bankers associations. Each of these
commenters expressed some concern regarding the procedure. One
association indicated that the procedure seemed reasonable, but
recommended that it be revised to include a schedule for FDIC response
to requested revisions. Another association agreed with the need for a
deadline for FDIC response, and also urged the FDIC to reevaluate its
procedures for resolving disputes concerning assessment risk
classifications. According to the latter commenter, the resolution of
risk classification disputes can often be protracted and confusing.
A third bankers association urged the FDIC to establish clear
assessment computation review procedures so that institutions would
know who to contact. The remaining association reported that some of
its members had expressed doubt that the new system would result in
fewer errors and greater ease of error resolution. This association
recommended that, in order to increase the likelihood of these results,
the FDIC make a special effort to provide clear and complete
instructions and forms to institutions and to provide adequate staffing
in the initial stages of the new procedure to answer institutions'
questions.
Regarding the addition of a schedule for FDIC response to requested
revisions, the Board has decided to include in the final rule a
requirement that the FDIC respond in writing within 60 days of receipt
of the request (or, if additional information is sought by the FDIC
regarding the request, within 60 days of receipt of the additional
information). It is anticipated that in most cases, the response would
be in the form of a notice of the FDIC's decision on the request.
However, in instances in which decision within 60 days is not feasible,
the response is expected to consist of a status report.
The Board notes the suggestion that the FDIC reconsider the
existing procedure for institutions requesting review of their
assessment risk classifications. This is a matter to which the Board
has given its attention on several occasions, beginning with its
initial consideration of the risk-based assessment system in 1992. It
is also an area the FDIC continues to monitor, in order to identify
potential refinements.
Regarding the remaining two comments, the FDIC appreciates the
significance of the impact the new assessment collection procedures
will have on insured institutions, and fully intends to do its best to
make the change from the existing system as smooth as possible. This
will include staffing an FDIC telephone ``hotline'' for institutions
with questions concerning the new procedures, mailing relevant
information and guidance to each insured institution, and initiating
the formal collection from each institution of the data needed by the
FDIC to identify the accounts designated for the ACH debits.
A matter related to the error-resolution procedure concerns the
manner in which assessment payments are adjusted once an error has been
identified and corrected. The proposal included a ``rolling''
correction process in which necessary adjustments in the assessment
amount would be made on a quarterly basis. Thus, the FDIC would add to
or subtract from the amount that would otherwise be due for the next
quarterly payment the amount of any under- or over-payment from earlier
quarters, with interest to be paid to or by the FDIC determined on a
full-quarter basis. The Board has decided to adopt this procedure as
proposed, with one very limited modification.
One commenter specifically addressing the ``rolling'' adjustment
procedure (a national bankers association) opined that such a system is
reasonable, but requested that the FDIC initiate a special procedure
for large-dollar errors in the FDIC's favor (apparently referring to
assessment overpayments) to enable such errors to be resolved more
quickly, ideally before the payment due date. However, another
commenter applauded the symmetrical treatment given by the proposal to
overpayments and underpayments, in terms of quarterly adjustment and
the payment of interest. The latter commenter noted that the payment of
interest on a quarterly basis for both overpayments and underpayments
would minimize the incentive for the FDIC to delay recognition of
overpayments and reduce the incentive of institutions to delay
identification and reporting of underpayments. A third commenter
observed that it seems inappropriate to charge interest on
underpayments when the FDIC is calculating the assessments, and that
any error would seem to be that of the FDIC and not the institution.
Regarding the source of errors leading to either underpayments or
overpayments, the Board notes that the data used by the FDIC in
computing the assessments due is taken from reports filed by the
institutions. Thus, the FDIC is not the sole possible source of over-
or under-calculating the payments due. Similarly, while the FDIC
intends to try to resolve errors as quickly as possible--and, to the
extent possible, prior to the payment date--we do not consider it to be
the fairest approach to single out for special treatment large-dollar
errors in the FDIC's favor. Such treatment could be seen as giving
individual institutions priority over the interest of the deposit
insurance funds (and, thus, the industry as a whole) and could possibly
reduce the incentive of institutions to exercise care in reporting the
relevant data.
Under the proposal, as under the existing regulation, the amount of
the assessment payment due from an institution is determined by
multiplying its assessment base by its assessment rate (see
Secs. 327.3(c) and (d) of the final rule). These elements determine the
amount due, despite any miscalculations or other errors that, under the
existing rule, might now be made by the institution or, under the final
rule, might be made by either the institution or the FDIC. As discussed
above, under both the proposed and final rule, correction of such
errors would be made by adjustments to subsequent quarterly invoices,
with interest to be paid by the FDIC if the adjustment resulted in a
credit to the institution and by the institution if the adjustment
resulted in an additional payment. This is the procedure intended by
the FDIC in its proposal and, based on the comments received, the
procedure as understood by those addressing the adjustment process.
However, in order to avoid any confusion or misunderstanding that
might otherwise arise regarding this procedure, the final rule includes
additional language in Sec. 327.3(g), which addresses adjustments to
the quarterly invoices, more specifically indicating that such
adjustments can be necessitated by miscalculations or other similar
actions by either the FDIC or the institution.
4. Invoice/Payment Schedule
The final rule adopts the proposed invoice and payment schedule.
One favorable and two unfavorable comments were received on the
proposed schedule. The unfavorable comments concerned the December 30
payment date, which both commenters argued should be moved to January.
The basis for this request was that a December due-date would result in
assessment payments in 1995 covering five quarters (all four quarters
in 1995 and the first quarter of 1996). According to one of the
commenters objecting to this result, this would cause a 25 percent
increase in its 1995 assessment expenses.\7\
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\7\This commenter also questions whether the FDIC has the
authority to require payments in a single year in excess of the
total for two semiannual periods. The Board believes that section 7
of the Federal Deposit Insurance Act, 12 U.S.C. 1817, grants to the
FDIC the authority to establish the collection schedule provided for
in the final rule, including the December 30 payment date for the
quarterly installment for the first quarter of 1996. In particular,
section 7(c)(2)(B) provides that assessment payments are to be made
in such manner and at such time or times as the Board prescribes by
regulation.
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The Board appreciates that this could present a one-time problem
for some institutions. However, it should be noted that this is purely
a timing issue caused by the shift from semiannual to quarterly
collection; it does not involve an ``extra'' assessment payment. It
affects only institutions that use cash-basis accounting, rather than
accrual accounting, and has only a temporary impact (which would be
offset with the March 30, 1996, payment).
The solution recommended by the opposing commenters was to move the
December payment date to January. Because doing so only for the
December 1995 payment would not cure the problem, but merely delay it
until December 1996, a more permanent change in the payment date would
be needed. Such a change would have a continuing adverse cost-of-funds
impact on the deposit insurance funds, in contrast to the temporary
impact the December payment date would have on a limited number of
institutions. Accordingly, the final rule retains the December payment
date provided for in the proposal.
5. Other Comments
Under the proposal, the second quarterly invoice for each
semiannual period would include a statement showing both the first- and
second-quarter assessment data. Each institution would be required to
certify its agreement with the computation of its semiannual assessment
as shown on the invoice or, alternatively, its agreement with that
computation as amended in a manner specified by the institution. One
national bankers association suggested that the FDIC require such a
certified statement only on an annual basis, while two other commenters
suggested that such statements were unnecessary and burdensome and
should be eliminated.
Section 7(c)(1) of the FDI Act requires that each insured
depository institution file with the FDIC a certified statement
containing such information as the FDIC may require for determining the
institution's semiannual assessment. The FDIC agrees that, as a
practical matter, the significance of such statements may be reduced
substantially under the collection system established by the final
rule. However, in light of the statutory language, the Board has
decided to retain the regulatory requirement for a semiannual certified
statement. The FDIC plans to explore the question of whether the
requirement can or should be modified.
Comment letters were received from two federal agencies, the
Financing Corporation (FICO) and the Federal Housing Finance Board
(FICO's regulator). Both of these letters addressed a specific
provision in the existing assessments regulation that was eliminated by
the proposed rule. That provision, at 12 CFR 327.23, deals with the use
of an intermediary ``collection agent'' by the FDIC to receive
assessment payments for the Savings Association Insurance Fund (SAIF)
from savings associations. According to the Federal Housing Finance
Board's comments (presumably with reference to the use of a collection
agent), Sec. 327.23 is critical to FICO's operations because it
establishes the process through which FICO assessments are paid. The
letter opines that, without Sec. 327.23, the proposal is silent as to
how FICO will obtain its SAIF assessments.
According to FICO's comment letter, it believes that the existing
provision regarding the collection agent ``is essential for the
distribution of SAIF premiums between FICO and the FDIC''. FICO states
that there is no provision in law that expressly grants to the FDIC the
power to collect assessments on behalf of FICO or to pay funds over to
FICO. It further asserts that the presence of a third-party collection
agent provides FICO bondholders with greater assurance that the SAIF
premiums will be available for interest payments, and that the absence
of reference to the collection agent in the proposed regulation creates
some risk to FICO bondholders that their claim to assessments collected
by the FDIC will be subject to competing claims of the FDIC's other
creditors.
It is not clear to the FDIC how the collection-agent provision in
Sec. 327.23(a) has the significance the Federal Housing Finance Board
and FICO attribute to it. It does not establish--or even address--the
process through which FICO receives assessment payments or the
distribution of SAIF payments between FICO and the FDIC. Even if
Sec. 327.23(a) is retained, the assessments regulation will still be
silent as to how FICO obtains its assessment payments. In addition,
Sec. 327.23 does not appear to affect the priority of claims on SAIF
assessments. The source of obligations and authorities regarding the
distribution of SAIF assessments between FICO and the FDIC, as well as
FICO's prior claim to SAIF assessments, is the FICO statute, codified
at 12 U.S.C. 1441. The collection-agent provision of 12 CFR 327.23
neither adds to nor subtracts from those statutory obligations and
authorities. The statute clearly indicates that FICO has first priority
to make SAIF assessments, and that, with the approval of the FDIC, it
can make such assessments.
Accordingly, the FDIC does not share the concerns expressed by FICO
and the Federal Housing Finance Board. However, it does not appear that
retention of a SAIF collection-agent provision in the final rule would
have any meaningful impact on the new system. In issuing its proposal,
the FDIC had already anticipated that, were the proposal adopted, the
Federal Reserve Bank of Richmond would participate in a capacity that
meets the description of a ``collection agent'' in the existing
regulation. Thus, in order to accommodate the concerns expressed by
FICO and the Federal Housing Finance Board, the final rule retains the
SAIF collection-agent provision from Sec. 327.23(a).
II. Mergers Resulting in the Termination of Business of the Merged
Institution
A. Background
The proposed rule set forth special rules for adjusting the
assessment base of an institution (buyer) that acquires deposits in
bulk (deposit-transfer) from another institution (seller).8 The
final rule adopts these rules substantially as proposed, with minor
revisions as described below.
---------------------------------------------------------------------------
\8\ Deposit-transfers can take many forms, including statutory
mergers, consolidations, statutory assumptions, and contractual
arrangements in which a buyer purchases assets and assumes deposits
from a seller. Furthermore, a seller may transfer its deposits to a
single buyer or to several buyers, and may do so either in a single
transaction or in a series of transactions. Section 327.6(a)'s
special rules cover all such cases.
---------------------------------------------------------------------------
As proposed, the special rules would come into play only when the
following two conditions are satisfied:
(1) The seller goes out of business (or otherwise ceases to be
obliged to pay subsequent assessments) by or at the end of the
semiannual period in which the deposit-transfer takes place; and
(2) The deposit-transfer occurs during the second half of a
semiannual assessment period (April 1 through June 30, or October 1
through December 31).
The special rules would have the effect of increasing the buyer's
June 30 (or December 30) assessment payment. This payment represents
the first installment on the assessment due from the buyer for the
following semiannual period. Under the proposal, the increase in the
buyer's payment was intended to provide compensation to the FDIC for
accepting the insurance risk attributable to the deposits assumed by
the buyer.
The special rules would accomplish this goal by providing for an
adjustment of a buyer's March (or September) assessment base. When a
deposit-transfer occurs during the second half of an assessment period,
the buyer does not assume the deposits in question until after it has
filed its March (or September) report of condition. Absent the
adjustment, the buyer's March (or September) assessment base would not
include these deposits, and the buyer's June 30 (or December 30)
payment would not fully compensate the FDIC for insuring the deposits
in the upcoming semiannual period. The adjustment augments the buyer's
March (or September) assessment base by an amount reflecting the
deposits that the buyer has assumed.
In addition, the proposal eliminated the requirement that the
transferring institution file a final certified statement. Such filings
are not needed under the new assessment collection system. In
connection with this change, the proposal eliminated form FDIC 6420/11
(``Final Certified Statement'') from part 304 of the FDIC's
regulations, pertaining to forms.
B. Discussion of Comments Received
The FDIC received three comments that addressed the topic of
assessment-base adjustments. One commenter said it approved of the
FDIC's proposal in general, without remarking on any particular aspect.
The other two commenters made substantive comments. Both opposed the
proposal.
One of the opposing commenters, a bank holding company, said there
was no need to adjust a buyer's assessment base to reflect the risk
presented by the transferred deposits, because the buyer's Federal
banking supervisor would not approve a merger or acquisition unless the
buyer's risk of default is low. The FDIC considers, however, that the
transferred deposits present an insurance risk to the FDIC, just as the
buyer's other deposits do.
This commenter also questioned the rationale offered by the FDIC
for proposing to adjust buyers' assessment bases. When proposing this
rule, the FDIC said that adjustments of this kind are needed in
connection with the conversion from a semiannual payment schedule to a
quarterly one: absent such adjustments, the FDIC would not be
compensated for insuring the transferred deposits under the new
quarterly payment schedule. The commenter asserted that the prior
payment procedures, which required two semiannual payments, suffered
from this same defect.
The FDIC does not agree that its prior procedures were defective in
this regard. But in any event, it remains true that adjustments of this
kind are necessary to provide appropriate compensation to the FDIC with
respect to transferred deposits in the context of a quarterly payment
schedule. When a deposit-transfer occurs during the second half of an
assessment period, the buyer does not assume the deposits in question
until after it has filed its March (or September) report of condition.
Absent the adjustment, the buyer's March (or September) assessment base
would not include these deposits, and the buyer's June 30 (or December
30) payment would not fully compensate the FDIC for insuring the
deposits in the upcoming semiannual period. To avoid this circumstance,
the adjustment augments the buyer's March (or September) assessment
base by an amount reflecting the deposits that the buyer has assumed.
The FDIC has chosen this approach in order to carry out the
directive set forth in section 7(b)(1) of the FDI Act. Section 7(b)(1)
calls for the FDIC to establish an assessment system in which an
institution's assessment is based on the probability that the
appropriate deposit insurance fund will incur a loss with respect to
the institution, and on the likely amount of any such loss. See 12
U.S.C. 1817(b)(1). The FDIC considers that the buyer presents a
continuing insurance risk to the FDIC with respect to the transferred
deposits, and that accordingly the buyer's assessment payment should
reflect the additional risk that flows from its increase in deposits.
The other commenter, a trade association, first said that it
opposed the proposal, but then declared:
If healthy institutions merge in either quarter of the
semiannual period, the resulting institution's assessment for the
next payment date should be based on the combined deposits of the
merged institutions on the date of the previous quarter-end report
of condition.
This, in substance, was the effect of the proposal--and now, of the
final rule--although these are somewhat more generous to buyers than
the commenter's suggestion. The new rule, both as proposed and adopted,
says that if the seller's volume of deposits declines between the
seller's report-date and the date of the deposit-transfer transaction,
the buyer's next payment will be based on the seller's lower
transaction-date deposits, not on the seller's report-date deposits.
The same commenter also suggested that, if the seller were a
troubled institution, the buyer's assessment liability would ordinarily
be taken into account in the course of the negotiations surrounding the
acquisition. The FDIC believes that this point is well taken, and has
incorporated it into the final rule. Under the proposal, the
assessment-base adjustment provisions would not come into play if the
seller is a failed institution; under the final rule these provisions
would also not be triggered if the FDIC contributes its own resources
to induce the buyer to assume the seller's liabilities. The FDIC
considers that, in such cases, the net price paid by the buyer
implicitly includes compensation to the FDIC for accepting, in its
corporate capacity, the insurance risk with respect to the deposits
assumed by the buyer.
Somewhat contradictorily, however, the same commenter continued as
follows:
If, on the other hand, an institution acquires the deposits of
an independent, unaffiliated institution that fails during the same
quarter, but after the deposit transfer, the institution acquiring
the deposits should not be liable for the increase in the deposits
at the next assessment payment date. Rather, the acquired deposits
should be reflected in the aquirer's [sic] next quarterly report of
condition, the same as internal deposit growth would be treated. The
FDIC should be responsible for collecting the assessments due from
failed institutions via a claim on the receivership.
The FDIC does not agree. For the reasons given above, the FDIC
considers that, when the seller goes out of business (or otherwise
ceases to be obliged to pay assessments) prior to the end of the
semiannual period, the buyer's payment should reflect the risk
presented by the transferred deposits.
No comments were received on the proposed elimination of the final
certified statement. These provisions are adopted as proposed.
C. Other Changes to the Proposed Rule
In addition to the change already referred to regarding troubled
institutions, the final rule modifies the proposed rule in minor
respects. The proposed rule said that the seller's March (or September)
assessment base would be reduced in amounts corresponding to the amount
by which the buyers' assessment bases were increased. The final rule
eliminates this provision. There is no need for it: A seller is not
required to make an assessment payment based on its March or September
report of condition (and if a seller does so anyway, the buyer is given
credit for the payment). The final rule also eliminates an improper
reference, and renumbers certain paragraphs.
The final rule clarifies and simplifies the terminology that was
originally used in the proposed rule. The final rule makes it clear
that the term ``deposit-transfer transaction'' refers to any deposit-
transfer that occurs during a semiannual assessment period if the
seller goes out of business (or otherwise ceases to be obligated to pay
assessments) by the end of that assessment period. The final rule does
not use or define the term ``transfer period''.
The final rule also clarifies the intent of the proposed rule,
which spoke of applying the special rules when the seller's ``status as
an insured institution has terminated or is expected to terminate''. A
seller that transfers some of its deposits and then voluntarily
terminates its insurance may still remain in business, however, and may
still be obliged to pay assessments to the FDIC for some period after
termination. The FDIC considers that in such a case the seller's
regular June 30 (or December 30) payment will compensate the FDIC for
the risk presented by the transferred deposits during the following
semiannual period. Accordingly, the final rule specifies that
Sec. 327.6(a)'s special rules come into play when the seller goes out
of business, or otherwise ceases to be obliged to pay subsequent
assessments.
III. Deletion of References to Experience Factors
The FDIC's assessment regulations currently permit the use of
``experience factors'' in the computation of an institution's
assessment base, for the purpose of quantifying unposted debits and
credits. However, under the existing regulations, the use of experience
factors will no longer be permitted for assessments due for assessment
periods beginning after 1994. Accordingly, the FDIC proposed to delete
all references to experience factors from the regulations. No comments
were received on the proposal, and the Board is amending the
regulations to delete experience factors.
IV. Paperwork Reduction Act
The final rule contains a revision to an existing collection of
information. The revision has been reviewed and approved by the Office
of Management and Budget (OMB) in accordance with the requirements of
the Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.) Comments
regarding the accuracy of the burden estimate, and suggestions for
reducing the burden, should be addressed to the Office of Management
and Budget, Paperwork Reduction Project (3064-0057), Washington, D.C.
20503, with copies to Steven F. Hanft, Assistant Executive Secretary
(Administration), Federal Deposit Insurance Corporation, Room F-400,
550 17th St, NW, Washington, D.C. 20429.
At present, each insured depository institution is required to
compute its own semiannual assessment. Under the final rule,
assessments will be computed by the FDIC using information reported by
the institution in its quarterly reports of condition. The institution
will be required to certify its agreement with the computation shown on
the certified statement form as received from the FDIC or,
alternatively, its agreement with that computation as amended in a
manner specified by the institution. It is expected that, prior to
certification, an institution will compare the information on the form
with its own records--which it collects and maintains for purposes of
filing its reports of condition--and, if necessary, indicate any
amendments. This process should constitute a substantially smaller
burden for the institution than preparing and reporting its own
assessment computation. The requirements concerning the certified
statement are found in Sec. 327.2 of the final rule.
The annual reporting burden for the collection of information under
the final rule, as approved by OMB on August 12, 1994, is estimated as
follows:
Approximate number of respondents: 13,400
Number of responses per respondent: 2
Total approximate annual responses: 26,800
Average time per response: 30 minutes
Total average annual burden hours: 13,400
V. Regulatory Flexibility Act
The Board hereby certifies that the final rule will 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.).
Under the rule, as adopted, the FDIC will compute the assessment
payments due from each insured depository institution, a task currently
required of the institution. Thus, the rule would reduce an existing
burden. Moreover, to the extent any burden would remain, the FDIC
believes that it would be proportionate to the size of the institution
and, accordingly, that the proposal would not have a disparate impact
of the nature contemplated by the Regulatory Flexibility Act.
List of Subjects
12 CFR Part 304
Bank deposit insurance, Banks, banking, Freedom of information,
Reporting and recordkeeping requirements.
12 CFR Part 327
Assessments, Bank deposit insurance, Financing Corporation, Savings
associations.
For the reasons stated in the preamble, the Board amends 12 CFR
parts 304 and 327 as follows:
PART 304--FORMS, INSTRUCTIONS AND REPORTS
1. The authority citation for part 304 continues to read as
follows:
Authority: 5 U.S.C. 552; 12 U.S.C. 1817, 1818, 1819, 1820;
Public Law 102-242, 105 Stat. 2251 (12 U.S.C. 1817 note).
2. Section 304.3 is revised to read as follows:
Sec. 304.3 Certified statements.
The certified statements required to be filed by insured depository
institutions under the provisions of section 7 of the Federal Deposit
Insurance Act as amended (12 U.S.C. 1817) shall be filed in accordance
with part 327 of this chapter. The applicable forms are as follows:
(a) Form 6420/07: Certified Statement. Form 6420/07 shows the
computation of the semiannual assessment due to the Corporation from an
insured depository institution. As provided for in part 327 of this
chapter, the form will be furnished to insured depository institutions
by the Corporation twice each calendar year and the completed statement
must be returned to the Corporation by each institution, except that
newly insured institutions must submit their first certified statement
on Form 6420/10.
(b) Form 6420/10: First Certified Statement. Form 6420/10 shows the
computation of the semiannual assessment due to the Corporation from an
institution in the first semiannual period after the semiannual period
during which the institution becomes an insured depository institution,
as provided for in part 327 of this chapter.
Appendix A to Part 304--[Amended]
3. Appendix A to part 304 is amended by removing the entries for
FDIC 6400/01, Consolidated Statement Amending Certified Statements, and
FDIC 6420/11, Final Certified Statement.
PART 327--ASSESSMENTS
1. The table of contents for part 327 is revised to read as
follows:
Subpart A--In General
Sec.
327.1 Purpose and scope.
327.2 Certified statements.
327.3 Payment of semiannual assessments.
327.4 Annual assessment rate.
327.5 Assessment base.
327.6 Deposit-transfer transactions; other terminations of
insurance.
327.7 Payment of interest on assessment underpayments and
overpayments.
327.8 Definitions.
327.9 Assessment rate schedules.
Subpart B--Insured Depository Institutions Participating in Section
5(d)(3) Transactions
327.31 Scope.
327.32 Computation and payment of assessment.
2. The authority citation for part 327 continues to read as
follows:
Authority: 12 U.S.C. 1441, 1441b, 1817-1819.
3. Section 327.2 is revised to read as follows:
Sec. 327.2 Certified statements.
(a) Required. Each insured depository institution shall file a
certified statement during each semiannual period.
(b) Time of filing. Certified statements for any semiannual period
must be filed no later than the second-quarterly payment date specified
in Sec. 327.3(d)(2). Certified statements postmarked on or before such
date are deemed to be timely filed.
(c) Form. The Corporation will provide to each insured depository
institution a certified statement form showing the amount and
computation of the institution's semiannual assessment. The president
of the insured depository institution, or such other officer as the
institution's board of directors or trustees may designate, shall
review the information shown on the form.
(d) Certification--(1) Form accepted. If such officer agrees that
to the best of his or her knowledge and belief the information shown on
the certified statement form is true, correct and complete and in
accordance with the Federal Deposit Insurance Act and the regulations
issued thereunder, the officer shall so certify.
(2) Form amended--(i) In general. If such officer determines that
to the best of his or her knowledge and belief the information shown on
the certified statement form is not true, correct and complete and in
accordance with the Federal Deposit Insurance Act and the regulations
issued thereunder, the officer shall make such amendments to the
information as he or she believes necessary. The officer shall certify
that to the best of his or her knowledge and belief the information
shown on the form, as so amended, is true, correct and complete and in
accordance with the Federal Deposit Insurance Act and the regulations
issued thereunder.
(ii) Request for revision. The certification and filing of an
amended form under paragraph (d)(2) of this section does not constitute
a request for revision by the Corporation of the information shown on
the form. Any such request to the Corporation for revision of the
information shown on the form shall be submitted separately from the
certified statement and in accordance with the provisions of
Sec. 327.3(h).
(iii) Rate multiplier. The rate multiplier shown on the certified
statement form shall be amended only if it is inconsistent with the
assessment risk classification assigned to the institution in writing
by the Corporation for the current semiannual period pursuant to
Sec. 327.4(a). Agreement with the rate multiplier shall not be deemed
to constitute agreement with the assessment risk classification
assigned.
Sec. 327.5 [Removed]
4. Section 327.5 is removed.
Secs. 327.3 and 327.4 [Redesignated as Secs. 327.4 and 327.5]
5. Sections 327.3 and 327.4 are redesignated as Secs. 327.4 and
327.5, respectively, and a new Sec. 327.3 is added to read as follows:
Sec. 327.3 Payment of semiannual assessments.
(a) Required--(1) In general. Except as provided in paragraph (b)
of this section, each insured depository institution shall pay to the
Corporation, in two quarterly payments, a semiannual assessment
determined in accordance with this part 327.
(2) Notice of designated deposit account. For the purpose of making
such payments, each insured depository institution shall designate a
deposit account for direct debit by the Corporation. No later than 30
days prior to the next payment date specified in paragraphs (c)(2) and
(d)(2) of this section, each institution shall provide written notice
to the Corporation of the account designated, including all information
and authorizations needed by the Corporation for direct debit of the
account. After the initial notice of the designated account, no further
notice is required unless the institution designates a different
account for assessment debit by the Corporation, in which case the
requirements of the preceding sentence apply.
(b) Newly insured institutions. A newly insured institution shall
not be required to pay an assessment for the semiannual period during
which it becomes an insured institution. For the semiannual period
following the period during which it becomes an insured institution, it
shall pay its full semiannual assessment at the time and in the manner
provided for in paragraph (d) of this section, in an amount that is the
product of its assessment base for the prior semiannual period, as
provided for in Sec. 327.5(c), multiplied by one-half of the annual
assessment rate corresponding to the assessment risk classification
assigned to the institution pursuant to Sec. 327.4(a). For the purpose
of making such payment, the institution shall provide to the
Corporation no later than the payment date specified in paragraph
(d)(2) of this section the notice required by paragraph (a)(2) of this
section.
(c) First-quarterly payment--(1) Invoice. No later than 30 days
prior to the payment date specified in paragraph (c)(2) of this
section, the Corporation will provide to each insured depository
institution an invoice showing the amount of the assessment payment due
from the institution for the first quarter of the upcoming semiannual
period, and the computation of that amount. Subject to paragraph (g) of
this section and to subpart B of this part, the invoiced amount shall
be the product of the following: The assessment base of the institution
for the preceding September 30 (for the semiannual period beginning
January 1) or March 31 (for the semiannual period beginning July 1)
computed in accordance with Sec. 327.5; multiplied by one-quarter of
the annual assessment rate corresponding to the assessment risk
classification assigned to the institution pursuant to Sec. 327.4(a).
(2) Payment date and manner. On December 30 (for the semiannual
period beginning the following January 1) and on June 30 (for the
semiannual period beginning the following July 1), the Corporation will
cause the amount stated in the applicable invoice to be directly
debited from the deposit account designated by the insured depository
institution for that purpose.
(d) Second-quarterly payment--(1) Invoice. No later than 30 days
prior to the payment date specified in paragraph (d)(2) of this
section, the Corporation will provide to each insured depository
institution an invoice showing the amount of the assessment payment due
from the institution for the second quarter of that semiannual period,
and the computation of that amount. Subject to paragraph (g) of this
section and to subpart B of this part, the invoiced amount shall be the
product of the following: The assessment base of the institution for
the preceding December 31 (for the semiannual period beginning January
1) or June 30 (for the semiannual period beginning July 1) computed in
accordance with Sec. 327.5; multiplied by one-quarter of the annual
assessment rate corresponding to the assessment risk classification
assigned to the institution pursuant to Sec. 327.4(a).
(2) Payment date and manner. On March 30 (for the semiannual period
beginning the preceding January 1) and on September 30 (for the
semiannual period beginning the preceding July 1), the Corporation will
cause the amount stated in the applicable invoice to be directly
debited from the deposit account designated by the insured depository
institution for that purpose.
(e) Necessary action, sufficient funding by institution. Each
insured depository institution shall take all actions necessary to
allow the Corporation to debit assessments from the institution's
designated deposit account and, prior to each payment date indicated in
paragraphs (c)(2) and (d)(2) of this section, shall ensure that funds
in an amount at least equal to the invoiced amount are available in the
designated account for direct debit by the Corporation. Failure to take
any such action or to provide such funding of the account shall be
deemed to constitute nonpayment of the assessment.
(f) Business days. If a payment date specified in paragraph (c) or
(d) of this section falls on a day that is not a business day, the
applicable date shall be the previous business day.
(g) Payment adjustments in succeeding quarters. The quarterly
assessment invoices provided by the Corporation may reflect
adjustments, initiated by the Corporation or an institution, resulting
from such factors as amendments to prior quarterly reports of
condition, retroactive revision of the institution's assessment risk
classification, and revision of the Corporation's assessment
computations for prior quarters.
(h) Request for revision of computation of quarterly assessment
payment--(1) In general. An institution may submit a request for
revision of the computation of the institution's quarterly assessment
payment as shown on the quarterly invoice. Such revision may be
requested in the following circumstances:
(i) The institution disagrees with the computation of the
assessment base as stated on the invoice;
(ii) The institution determines that the rate multiplier applied by
the Corporation is inconsistent with the assessment risk classification
assigned to the institution in writing by the Corporation for the
semiannual period for which the payment is due; or
(iii) The institution believes that the invoice does not fully or
accurately reflect adjustments provided for in paragraph (g) of this
section.
(2) Inapplicability. This paragraph (h) is not applicable to
requests for review of an institution's assessment risk classification,
which are covered by Sec. 327.4(d).
(3) Requirements. Any such request for revision must be submitted
within 60 days of the date of the quarterly assessment invoice for
which revision is requested, except that requests for revision
resulting from detection by the institution of an error or omission for
which the institution files an amendment to its quarterly report of
condition must be submitted within 60 days of the filing date of the
amendment to the quarterly report of condition. The request for
revision shall be submitted to the Chief of the Assessment Operations
Section and shall provide documentation sufficient to support the
revision 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 Corporation's request for
additional information. Any institution submitting a timely request for
revision will receive written response from the Corporations's Chief
Financial Officer (or his or her designee) within 60 days of receipt by
the Corporation of the request for revision or, if additional
information has been requested by the Corporation, within 60 days of
receipt of the additional information. Whenever feasible, the response
will notify the institution of the determination of the Chief Financial
Officer (or designee) as to whether the requested revision is
warranted. In all instances in which a timely request for revision is
submitted, the Chief Financial Officer (or designee) will make a
determination on the request as promptly as possible and notify the
institution in writing of the determination.
(i) Assessment notice not received. Any institution that has not
received an assessment invoice for any quarterly payment by the
fifteenth day of the month in which the quarterly payment is due shall
promptly notify the Corporation. Failure to provide prompt notice to
the Corporation shall not affect the institution's obligation to make
full and timely assessment payment. Unless otherwise directed by the
Corporation, the institution shall preliminarily pay the amount shown
on its assessment invoice for the preceding quarter, subject to
subsequent correction.
6. Newly designated Sec. 327.4 is revised to read as follows:
Sec. 327.4 Annual assessment rate.
(a) Assessment risk classification. For the purpose of determining
the annual assessment rate for BIF members under Sec. 327.9(a) and the
annual assessment rate for SAIF members under Sec. 327.9(c), each
insured depository institution will be assigned an ``assessment risk
classification''. Notice of the assessment risk classification
applicable to a particular semiannual period will be provided to the
institution with the first-quarterly invoice provided pursuant to
Sec. 327.3(c)(1). Each institution's assessment risk classification,
which will be composed of a group and a subgroup assignment, will be
based on the following capital and supervisory factors:
(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 Report of Income and Condition, Report of Assets and
Liabilities of U.S. Branches and Agencies of Foreign Banks, or Thrift
Financial Report containing the necessary capital data, for the report
date that is closest to the last day of the seventh month preceding the
current semiannual period.
(i) Well capitalized. For assessment risk classification purposes,
the short-form designation for this group is ``1''.
(A) Except as provided in paragraph (a)(1)(i)(B) of this section,
this group consists of institutions satisfying each of the following
capital ratio standards: Total risk-based ratio, 10.0 percent or
greater; Tier 1 risk-based ratio, 6.0 percent or greater; and Tier 1
leverage ratio, 5.0 percent or greater. New insured depository
institutions coming into existence after the report date specified in
paragraph (a)(1) of this section will be included in this group for the
first semiannual period for which they are required to pay assessments.
(B) For purposes of assessment risk classification, an insured
branch of a foreign bank will be deemed to be ``well capitalized'' if
the insured branch:
(1) Maintains the pledge of assets required under 12 CFR 346.19;
and
(2) Maintains the eligible assets prescribed under 12 CFR 346.20 at
108 percent or more of the average book value of the insured branch's
third-party liabilities for the quarter ending on the report date
specified in paragraph (a)(1) of this section.
(ii) Adequately capitalized. For assessment risk classification
purposes, the short-form designation for this group is ``2''.
(A) Except as provided in paragraph (a)(1)(ii)(B) of this section,
this group consists of institutions that do not satisfy the standards
of ``well capitalized'' under this paragraph but which satisfy each of
the following capital ratio standards: Total risk-based ratio, 8.0
percent or greater; Tier 1 risk-based ratio, 4.0 percent or greater;
and Tier 1 leverage ratio, 4.0 percent or greater.
(B) For purposes of assessment risk classification, an insured
branch of a foreign bank will be deemed to be ``adequately
capitalized'' if the insured branch:
(1) Maintains the pledge of assets required under 12 CFR 346.19;
(2) Maintains the eligible assets prescribed under 12 CFR 346.20 at
106 percent or more of the average book value of the insured branch's
third-party liabilities for the quarter ending on the report date
specified in paragraph (a)(1) of this section; and
(3) Does not meet the definition of a well capitalized insured
branch of a foreign bank.
(iii) Undercapitalized. For assessment risk classification
purposes, the short-form designation for this group is ``3''. This
group consists of institutions that do not qualify as either ``well
capitalized'' or ``adequately capitalized'' under paragraphs (a)(1) (i)
and (ii) of this section.
(2) Supervisory risk factors. Within its capital group, each
institution will be assigned to one of three subgroups based on the
Corporation's consideration of supervisory evaluations provided by the
institution's primary federal regulator. The supervisory evaluations
include the results of examination findings by the primary federal
regulator, as well as other information the primary federal regulator
determines to be relevant. In addition, the Corporation will take into
consideration such other information (such as state examination
findings, if appropriate) as it determines to be relevant to the
institution's financial condition and the risk posed to the BIF or
SAIF. Authority to set dates applicable to the determination of
supervisory subgroup assignments is delegated to the Corporation's
Director of the Division of Supervision (or his or her designee). The
three supervisory subgroups are:
(i) Subgroup ``A''. This subgroup consists of financially sound
institutions with only a few minor weaknesses;
(ii) Subgroup ``B''. This subgroup consists of institutions that
demonstrate weaknesses which, if not corrected, could result in
significant deterioration of the institution and increased risk of loss
to the BIF or SAIF; and
(iii) Subgroup ``C''. This subgroup consists of institutions that
pose a substantial probability of loss to the BIF or SAIF unless
effective corrective action is taken.
(b) Payment of assessment at rate assigned. Institutions shall make
timely payment of assessments based on the assessment risk
classification assigned in the notice provided to the institution
pursuant to paragraph (a) of this section. Timely payment is required
notwithstanding any request for review filed pursuant to paragraph (d)
of this section. An institution for which the assessment risk
classification cannot be determined prior to an invoice date specified
in Sec. 327.3(c)(1) or (d)(1) shall preliminarily pay on that invoice
at the assessment rate applicable to the classification designated
``2A'' in the appropriate rate schedule set forth in Sec. 327.9. If
such institution is subsequently assigned for that semiannual period an
assessment risk classification other than that designated as ``2A'', or
if the classification assigned to an institution in the notice is
subsequently changed, any excess assessment paid by the institution
will be credited by the Corporation, with interest, and any additional
assessment owed shall be paid by the institution, with interest, in the
next quarterly assessment payment after such subsequent assignment or
change. Interest payable under this paragraph shall be determined in
accordance with Sec. 327.7.
(c) Classification for certain types of institutions. The annual
assessment rate applicable to institutions that are bridge banks under
12 U.S.C. 1821(n) and to institutions for which either the Corporation
or the Resolution Trust Corporation has been appointed conservator
shall in all cases be the rate applicable to the classification
designated as ``2A'' in the schedules set forth in Secs. 327.9(a) and
327.9(c).
(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 30 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 Supervision 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 the
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 Supervision (or his or her designee) shall promptly
notify the institution in writing of the FDIC's 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.
(e) Disclosure restrictions. The supervisory subgroup to which an
institution is assigned by the Corporation pursuant to paragraph (a) of
this section is deemed to be exempt information within the scope of
Sec. 309.5(c)(8) of this chapter and, accordingly, is governed by the
disclosure restrictions set out at Sec. 309.6 of this chapter.
(f) Limited use of assessment risk classification. The assignment
of a particular assessment risk classification to a depository
institution under this part 327 is for purposes of implementing and
operating a risk-based assessment system. Unless permitted by the
Corporation or otherwise required by law, no institution may state in
any advertisement or promotional material the assessment risk
classification assigned to it pursuant to this part.
(g) Lifeline accounts. Notwithstanding any other provision of this
part 327, the portion of an institution's assessment base that is
attributable to deposits in lifeline accounts pursuant to the Bank
Enterprise Act, 12 U.S.C. 1834, will be assessed at such rate as may be
established by the Corporation pursuant to 12 U.S.C. 1834 and section
7(b)(2)(H) of the Federal Deposit Insurance Act, as amended, 12 U.S.C.
1817(b)(2)(H).
7. Newly designated Sec. 327.5 is revised to read as follows:
Sec. 327.5 Assessment base.
(a) Computation of assessment base. Except as provided in paragraph
(c) of this section, the assessment base of an insured depository
institution for any date on which the institution is required to file a
quarterly report of condition shall be computed by:
(1) Adding--
(i) All demand deposits--
(A) That the institution reported as such in the quarterly report
of condition for that date;
(B) That belong to subsidiaries of the institution and were
eliminated in consolidation;
(C) That are held in any insured branches of the institution that
are located in the territories and possessions of the United States;
(D) That represent any uninvested trust funds required to be
separately stated in the quarterly report for that date;
(E) That represent any unposted credits to demand deposits, as
determined in accordance with the provisions of paragraph (b)(1) of
this section; and
(ii) All time and savings deposits, together with all interest
accrued and unpaid thereon--
(A) That the institution reported as such in the quarterly report
of condition for that date;
(B) That belong to subsidiaries of the institution and were
eliminated in consolidation;
(C) That are held in any insured branches of the institution that
are located in the territories and possessions of the United States;
(D) That represent any unposted credits to time and savings
deposits, as determined in accordance with the provisions of paragraph
(b)(1) of this section; then
(2) Subtracting, in the case of any institution that maintains such
records as will readily permit verification of the correctness of its
assessment base--
(i) Any unposted debits;
(ii) Any pass-through reserve balances;
(iii) 16\2/3\ percent of the amount computed by subtracting, from
the amount specified in paragraph (a)(1)(i) of this section, the sum
of:
(A) Unposted debits allocated to demand deposits pursuant to the
provisions of paragraph (b)(2) of this section; plus
(B) Pass-through reserve balances representing demand deposits;
(iv) 1 percent of the amount computed by subtracting, from the
amount specified in paragraph (a)(1)(ii) of this section, the sum of:
(A) Unposted debits allocated to time and savings deposits pursuant
to the provisions of paragraph (b)(2) of this section; plus
(B) Pass-through reserve balances representing time and savings
deposits;
(v) Liabilities arising from a depository institution investment
contract that are not treated as insured deposits under section
11(a)(8) of the Federal Deposit Insurance Act (12 U.S.C. 1821(a)(8)).
(b) Methods of reporting unposted credits and unposted debits--(1)
Unposted credits. Each insured depository institution shall report
unposted credits in quarterly reports of condition for addition to the
assessment base in the following manner:
(i) If the institution's records show the total actual amount of
unposted credits segregated into demand deposits and time and savings
deposits, the institution must report the segregated amounts for
addition to demand deposits and time and savings deposits,
respectively.
(ii) If the institution's records show the total actual amount of
unposted credits but do not segregate the amount as stated in paragraph
(b)(1)(i) of this section, the institution must report the total actual
amount of the unposted credits for addition to time and savings
deposits.
(2) Unposted debits. Unposted debits may be reported in the same
manner as stated in paragraph (b)(1) of this section for deduction from
the assessment base, except that unsegregated amounts may be reported
for deduction only from demand deposits.
(c) Newly insured institutions. In the case of a newly insured
institution, the assessment base for the last date for which insured
depository institutions are required to file quarterly reports of
condition within the semiannual period in which the newly insured
institution became an insured institution shall be deemed to be its
assessment base for that semiannual period. If the institution has not
filed such a report by the due date for such reports from insured
depository institutions, it shall promptly provide to the Corporation
such information as the Corporation may require to prepare the
certified statement form for the institution for the current semiannual
period.
8. Section 327.6 is amended by revising the section heading and
paragraph (a) to read as follows:
Sec. 327.6 Deposit-transfer transactions; other terminations of
insurance.
(a) Deposit transfers--(1) Assessment base computation. If a
deposit-transfer transaction occurs at any time in the second half of a
semiannual period, each acquiring institution's assessment base (as
computed pursuant to Sec. 327.5) for the first half of that semiannual
period shall be increased by an amount equal to such institution's pro
rata share of the transferring institution's assessment base for such
first half.
(2) Pro rata share. For purposes of paragraph (a)(1) of this
section, the phrase pro rata share means a fraction the numerator of
which is the deposits assumed by the acquiring institution from the
transferring institution during the second half of the semiannual
period during which the deposit-transfer transaction occurs, and the
denominator of which is the total deposits of the transferring
institution as required to be reported in the quarterly report of
condition for the first half of that semiannual period.
(3) Other assessment-base adjustments. The Corporation may in its
discretion make such adjustments to the assessment base of an
institution participating in a deposit-transfer transaction, or in a
related transaction, as may be necessary properly to reflect the likely
amount of the loss presented by the institution to its insurance fund.
(4) Limitation on aggregate adjustments. The total amount by which
the Corporation may increase the assessment bases of acquiring or other
institutions under this paragraph (a) shall not exceed, in the
aggregate, the transferring institution's assessment base as reported
in its quarterly report of condition for the first half of the
semiannual period during which the deposit-transfer transaction occurs.
* * * * *
9. Section 327.7 is amended by revising the section heading and
paragraph (a), to read as follows:
Sec. 327.7 Payment of interest on assessment underpayments and
overpayments.
(a) Payment of interest--(1) Payment by institutions. Each insured
depository institution shall pay interest to the Corporation on any
underpayment of the institution's assessment.
(2) Payment by Corporation. The Corporation will pay interest to an
insured depository institution on any overpayment by the institution of
its assessment.
(3) Accrual of interest. Interest shall accrue under this section
from the day following the due date, as provided for in Sec. 327.3 (c)
and (d), of the quarterly assessment amount that was overpaid or
underpaid, through the payment date applicable to the quarterly
assessment invoice on which adjustment is made by the Corporation for
the underpayment or overpayment, provided, however, that interest shall
not begin to accrue on any overpayment until the day following the date
such overpayment was received by the Corporation.
* * * * *
10. Section 327.8 is amended by revising paragraph (d)(2) and by
adding a new paragraph (h), to read as follows:
Sec. 327.8 Definitions.
* * * * *
(d) * * *
(2) Current semiannual period. The term current semiannual period
means, with respect to a certified statement or an assessment, the
semiannual period within which such certified statement is required to
be filed or for which such assessment is required to be paid.
* * * * *
(h) As used in Sec. 327.6, the following terms are given the
following meanings:
(1) Acquiring institution. The term acquiring institution means an
insured depository institution that assumes some or all of the deposits
of another insured depository institution in a deposit-transfer
transaction.
(2) Transferring institution. The term transferring institution
means an insured depository institution some or all of the deposits of
which are assumed by another insured depository institution in a
deposit-transfer transaction.
(3) Deposit-transfer transaction. The term deposit-transfer
transaction means the assumption by one insured depository institution
of another insured depository institution's liability for deposits,
whether by way of merger, consolidation, or other statutory assumption,
or pursuant to contract, when the transferring institution goes out of
business or otherwise ceases to be obliged to pay subsequent
assessments by or at the end of the semiannual period during which such
assumption of liability for deposits occurs. The term deposit-transfer
transaction does not refer to the assumption of liability for deposits
from the estate of a failed institution, or to a transaction in which
the FDIC contributes its own resources in order to induce an acquiring
institution to assume liabilities of a transferring institution.
(4) First half; second half--(i) First half. The term first half of
a semiannual period means the months of January, February, and March in
the case of a semiannual period that begins in January, and means the
months of July, August, and September in the case of a semiannual
period that begins in July.
(ii) Second half. The term second half of a semiannual period means
the months of April, May, and June in the case of a semiannual period
that begins in January, and means the months of October, November, and
December in the case of a semiannual period that begins in July.
Sec. 327.13 [Redesignated as Sec. 327.9]
11. Section 327.13 is redesignated as Sec. 327.9, transferred to
subpart A, and amended by revising the section heading, removing
paragraphs (a) and (b), redesignating paragraphs (c) and (d) as new
paragraphs (a) and (b), respectively, revising newly designated
paragraph (a), amending newly designated paragraph (b) by revising the
paragraph heading to read ``BIF recapitalization schedule'' and
removing the word ``assessment'' in the first sentence, and adding a
new paragraph (c) to read as follows:
Sec. 327.9 Assessment rate schedules.
(a) BIF members. Subject to Sec. 327.4(c), the annual assessment
rate for each BIF member other than a bank specified in Sec. 327.31(a)
shall be the rate designated in the following rate schedule applicable
to the assessment risk classification assigned by the Corporation under
Sec. 327.4(a) to that BIF member (the schedule utilizes the group and
subgroup designations specified in Sec. 327.4(a)):
Schedule
------------------------------------------------------------------------
Supervisory subgroup
Capital group --------------------------
A B C
------------------------------------------------------------------------
1............................................ 23 26 29
2............................................ 26 29 30
3............................................ 29 30 31
------------------------------------------------------------------------
* * * * *
(c) SAIF members. (1) Subject to Sec. 327.4(c), the annual
assessment rate for each SAIF member shall be the rate designated in
the following schedule applicable to the assessment risk classification
assigned by the Corporation under Sec. 327.4(a) to that SAIF member
(the schedule utilizes the group and subgroup designations specified in
Sec. 327.4(a)):
Schedule
------------------------------------------------------------------------
Supervisory subgroup
Capital group --------------------------
A B C
------------------------------------------------------------------------
1............................................ 23 26 29
2............................................ 26 29 30
3............................................ 29 30 31
------------------------------------------------------------------------
(2) Collection agent. The amounts required to be paid by SAIF
members pursuant to this part 327 shall be paid through a collection
agent, which shall be any person, corporation, governmental entity, or
any other entity that has been authorized by the Corporation to act as
its agent for collecting assessments.
12. Part 327 is amended by removing subparts B and C and
redesignating subpart D as new subpart B.
Sec. 327.31 [Amended]
13. Section 327.31 is amended by removing the reference ``subpart
D'' and replacing it with ``subpart B'' each place it appears.
Sec. 327.32 [Amended]
14. Section 327.32 is revised to read as follows:
Sec. 327.32 Computation and payment of assessment.
(a) Rate of assessment--(1) BIF and SAIF member rates. (i) Except
as provided in paragraphs (a)(2)(i) and (a)(2)(ii) of this section, and
consistent with the provisions of Sec. 327.4, the assessment to be paid
by a BIF member subject to this subpart B shall be computed at the rate
applicable to BIF members and the assessment to be paid by a SAIF
member subject to this subpart B shall be computed at the rate
applicable to SAIF members.
(ii) Such applicable rate shall be applied to the insured
depository institution's assessment base less that portion of the
assessment base which is equal to the institution's adjusted
attributable deposit amount.
(2) Rate applicable to the adjusted attributable deposit amount.
(i) Notwithstanding paragraph (a)(1)(i) of this section, that portion
of the assessment base of any acquiring, assuming, or resulting
institution that is a BIF member which is equal to the adjusted
attributable deposit amount of such institution shall:
(A) Be subject to assessment at the assessment rate applicable to
SAIF members pursuant to subpart A of this part; and
(B) Not be taken into account in computing the amount of any
assessment to be allocated to BIF.
(ii) Notwithstanding paragraph (a)(1)(i) of this section, that
portion of the assessment base of any acquiring, assuming, or resulting
institution that is a SAIF member which is equal to the adjusted
attributable deposit amount of such institution shall:
(A) Be subject to assessment at the assessment rate applicable to
BIF members pursuant to subpart A of this part; and
(B) Not be taken into account in computing the amount of any
assessment to be allocated to SAIF.
(3) Adjusted attributable deposit amount. An insured depository
institution's ``adjusted attributable deposit amount'' for any
semiannual period is equal to the sum of:
(i) The amount of any deposits acquired by the institution in
connection with the transaction (as determined at the time of such
transaction) described in Sec. 327.31(a);
(ii) The total of the amounts determined under paragraph
(a)(3)(iii) of this section for semiannual periods preceding the
semiannual period for which the determination is being made under this
section; and
(iii) The amount by which the sum of the amounts described in
paragraphs (a)(3)(i) and (a)(3)(ii) of this section would have
increased during the preceding semiannual period (other than any
semiannual period beginning before the date of such transaction) if
such increase occurred at a rate equal to the annual rate of growth of
deposits of the acquiring, assuming, or resulting depository
institution minus the amount of any deposits acquired through the
acquisition, in whole or in part, of another insured depository
institution.
(4) Deposits acquired by the institution. As used in paragraph
(a)(3)(i) of this section, the term ``deposits acquired by the
institution'' means all deposits that are held in the institution
acquired by such institution on the date of such transaction; provided,
that if the Corporation or the Resolution Trust Corporation (RTC) has
been appointed as conservator or receiver for the acquired institution,
such term:
(i) Does not include any deposit held in the acquired institution
on the date of such transaction which the acquired institution has
obtained, directly or indirectly, by or through any deposit broker;
(ii) Does not include that part of any remaining deposit held in
the acquired institution on the date of such transaction that is in
excess of $80,000; and
(iii) Is limited to 80 per centum of the remaining portion of the
aggregate of the deposits specified in paragraph (a)(4)(ii) of this
section.
(5) Deposit broker. As used in paragraph (a)(4) of this section,
the term ``deposit broker'' has the meaning specified in section 29 of
the Federal Deposit Insurance Act (12 U.S.C. 1831f).
(b) Procedures for computation and payment. An insured depository
institution subject to this subpart B shall follow the payment
procedure that is set forth in subpart A of this part.
Sec. 327.33 [Removed]
15. Sec. 327.33 is removed.
By order of the Board of Directors.
Dated at Washington, D.C., this 20th day of Dec., 1994.
Federal Deposit Insurance Corporation
Robert E. Feldman,
Acting Executive Secretary.
[FR Doc. 94-31662 Filed 12-28-94; 8:45 am]
BILLING CODE 6714-01-P