69270 Federal Register / Vol. 71, No. 230 / Thursday, November 30, 2006 / Rules and Regulations 

1The trade organizations were: the American 

Bankers Association, the Independent Community 

Bankers of America, the Association for Financial 

Professionals, the New York Bankers Association, 

and America’s Community Bankers; the depository 

institution was Capital One Financial Corp. 

2Federal Deposit Insurance Reform Act of 2005, 

Public Law 109–171, 120 Stat. 9; Federal Deposit 

Insurance Conforming Amendments Act of 2005, 

Public Law 109–173, 119 Stat. 3601. 

3Pursuant to the Section 2109 of the Reform Act, 

current assessment regulations remain in effect 

until the effective date of new regulations. Section 

2109(a)(5) of the Reform Act requires the FDIC, 

within 270 days of enactment, to prescribe final 

regulations, after notice and opportunity for 

comment, providing for assessments under section 

7(b) of the Federal Deposit Insurance Act. Section 

2109 also requires the FDIC to prescribe, within 270 

days, rules on the designated reserve ratio, changes 

to deposit insurance coverage, the one-time 

assessment credit, and dividends. A final rule on 

deposit insurance coverage was published on 

September 12, 2006. 71 FR 53547. Final rules on 

the one-time assessment credit and dividends were 

published on October 18, 2006. 71 FR 61374 and 

71 FR 61385. The FDIC is publishing final 

rulemakings on the designated reserve ratio and on 

risk based assessments in the same issue of the 

Federal Register as this final rule. 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 327 

RIN–3064–AD03 

Assessments 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC). 

ACTION: Final rule. 

SUMMARY: The FDIC is improving and 

modernizing its operational systems for 

deposit insurance assessments in 12 

CFR Part 327 to make the deposit 

insurance assessment system react more 

quickly and more accurately to changes 

in institutions’ risk profiles and to 

ameliorate several causes for complaint 

by insured depository institutions. 

Under the amendments set out in this 

final rule, deposit insurance 

assessments will be collected after each 

quarter ends—which will allow for 

consideration of more current 

information than under the prior rule. 

Ratings changes will become effective 

when the rating change is transmitted to 

the institution. Although the FDIC will 

retain the existing assessment base as 

applied in practice with only minor 

modifications, the computation of 

institutions’ assessment bases will 

change in the following significant 

ways: institutions with $1 billion or 

more in assets will determine their 

assessment bases using average daily 

deposit balances; existing smaller 

institutions will have the option of 

using average daily deposits to 

determine their assessment bases; and 

the float deductions used to determine 

the assessment base will be eliminated. 

In addition, the rules governing 

assessments of institutions that go out of 

business will be simpler; newly insured 

institutions will be assessed for the 

assessment period in which they 

become insured; prepayment and 

double payment options will be 

eliminated; institutions will have 90 

days from each quarterly certified 

statement invoice to file requests for 

review of their risk assignment and 

requests for revision of the computation 

of their quarterly assessment payment; 

and the rules governing quarterly 

certified statement invoices will be 

adjusted for a quarterly assessment 

system and for a three-year retention 

period rather than the former five-year 

period. 

DATES: This final rule will become 

effective on January 1, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Munsell W. St. Clair, Senior Policy 

Analyst, Division of Insurance and 

Research, (202) 898–8967; Donna M. 

Saulnier, Senior Assessment Policy 

Specialist, Division of Finance, (703) 

562–6167; or Christopher Bellotto, 

Counsel, Legal Division, (202) 898– 

3801. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On May 18, 2006, the FDIC published 

in the Federal Register, for a 60-day 

comment period, a notice of proposed 

rulemaking and request for comment on 

proposed amendments to 12 CFR 327 

(71 FR 28790). The comment period was 

extended for 30 additional days (71 FR 

36718) and expired on August 16, 2006. 

The FDIC received six comment 

letters—five from trade organizations 

and one from a depository institution.1

Four of the commenters generally 

supported all of the FDIC’s proposals; of 

those four, three suggested 

modifications to the provisions 

governing the use of average daily 

balances in determining assessment 

bases. Two commenters opposed 

elimination of the float deductions; 

three others opposed eliminating the 

deductions, but only where deposit 

bases are calculated using quarter-end 

balances. The following is a discussion 

of the amendments to §§ 327.1 through 

327.8 and the comments received. 

Prior to passage of the Federal Deposit 

Insurance Reform Act of 2005 and the 

Federal Deposit Insurance Reform 

Conforming Amendments Act of 2005 

(collectively, the Reform Act),2 the FDIC 

was statutorily required to set 

assessments semiannually. The FDIC 

did so by setting assessment rates and 

assigning institutions to risk classes 

prior to each semiannual assessment 

period. The semiannual assessment was 

collected in two installments, one near 

the start of the semiannual period and 

the other three months into the period, 

so that, in practice, assessment 

collection was accomplished 

prospectively every quarter. 

Provisions in the Reform Act removed 

longstanding constraints on the deposit 

insurance assessment system and 

granted the FDIC discretion to revamp 

and improve the manner in which 

assessments are determined and 

collected from insured depository 

institutions. The FDIC was vested with 

discretion to set assessment rates, 

classify institutions for risk-based 

assessment purposes and collect 

assessments within a system and on a 

schedule designed to track more 

accurately the degree of risk to the 

deposit insurance fund posed by 

depository institutions. The Reform Act 

also eliminated any requirement that the 

assessment system be semiannual. 

The FDIC’s experience with the riskbased system over the past 13 years, and 

with approaches and arguments made 

by institutions that have filed requests 

for review with the FDIC’s Division of 

Insurance and Research (DIR) and 

subsequent appeals to the FDIC’s 

Assessment Appeals Committee (AAC), 

prompted some of the proposed 

revisions made to the FDIC’s deposit 

insurance assessment system. For 

example, many appeals to the AAC 

involved assertions by insured 

institutions that the FDIC’s system did 

not take into account their improved 

condition quickly enough. The final 

rules will ensure that assessment rates 

reflect changes in an institution’s risk 

profile much nearer to the time the 

changes occur. The standard float 

deductions will be eliminated because 

they appear to be obsolete and arbitrary, 

and because actual float appears to be 

small and decreasing as the result of 

legal, technological, and payment 

system changes. The revisions will 

enhance the assessment process for 

institutions and should eliminate many 

of the bases for requests and appeals. 

The amendments to the FDIC’s 

operational processes governing 

assessments affect 12 CFR 327.1 through 

12 CFR 327.8.3 These sections detail the 

procedures governing deposit insurance 

assessment and collection as well as 

calculation of the assessment base. 


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4 In December of 1994, the FDIC modified the 

procedure for collecting deposit insurance 

assessments, changing from semiannual to quarterly 

collection. 

5Adjustments to prior period invoices will 

continue to be reflected in invoices for later 

periods. 

6Pursuant to statute and a memorandum of 

understanding with the Financing Corporation, the 

FDIC collects FICO assessments from insured 

depository institutions based upon quarterly report 

dates. See 12 U.S.C. 1441(f)(2). FICO payments 

represent funds remitted to FICO to ensure 

sufficient funding to distribute interest payments 

for the outstanding FICO obligations. 

7The existing regulations refer to an institution’s 

‘‘risk classification,’’ that is, one of the nine 

classifications in the nine-cell matrix, 1A, 2A, and 

so forth. Under the final rule, an institution’s ‘‘risk 

assignment’’ (see 12 CFR 327.4(a)) includes 

assignment to Risk Category I, II, III, or IV, and, 

within Risk Category I, assignment to an assessment 

rate or rates. 

II. The Final Rule 

A. Assessments Collected After Each 

Quarterly Assessment Period 

Under the existing system, 

assessments are collected from insured 

institutions on a semiannual basis in 

two installments. The first collection is 

made at the beginning of the semiannual 

period; the second collection is made in 

the middle of the semiannual period.4

Under the final rule, assessments will be 

collected after each quarterly period 

being insured. The assessment for each 

quarter will be due approximately at the 

end of the following quarter, on the 

specified payment date.5 The chart 

below shows the new assessment 

process. 

Calendar year quarter Date of capital evaluation * Assessment base * Invoice date Payment date 

1 ......................................... March 31, 2007 ................. March 31, 2007 ................. June 15, 2007 ................... June 30, 2007. 

2 ......................................... June 30, 2007 ................... June 30, 2007 ................... September 15, 2007 ......... September 30, 2007. 

3 ......................................... September 30, 2007 ......... September 30, 2007 ......... December 15, 2007 .......... December 30, 2007. 

4 ......................................... December 31, 2007 .......... December 31, 2007 .......... March 15, 2008 ................. March 30, 2008. 

* That is, the date of the report of condition on which the capital evaluation and assessment base are determined. 

Collecting quarterly assessments after 

each assessment period was expressly 

supported by five commenters and 

opposed by none. One commenter, a 

trade group, stated ‘‘[t]his should help 

banks better manage their risk positions 

and expected premiums during the 

quarter for which they will be 

assessed.’’ Similarly, another trade 

group observed that ‘‘banks should be 

able to predict at the end of each quarter 

what their assessment will be for that 

quarter.’’ In line with the comments 

received, the FDIC believes quarterly 

assessment collection after the period 

being insured will markedly improve 

the responsiveness and accuracy of the 

assessment system. 

The final rule will take effect January 

1, 2007. The last deposit insurance 

collection under the existing system 

(made on September 30, 2006, in the 

middle of the semiannual period before 

the new system becomes effective) 

represents payment for insurance 

coverage through December 31, 2006. 

The first deposit insurance collection 

under the new system (made on June 30, 

2007, at the end of the second quarter 

under the new system) will represent 

payment for insurance coverage from 

January 1 through March 31, 2007. No 

deposit insurance assessments will be 

based upon September 30 or December 

31, 2006 reported assessment bases. 

However, institutions will continue to 

make the scheduled quarterly Financing 

Corporation (‘‘FICO’’) payments on 

January 2, 2007 (or on the alternate 

payment date, December 30, 2006) and 

March 30, 2007, using, respectively, 

these two reported assessment bases. No 

changes to the way FICO payments are 

charged or collected are being made.6

FICO collections will continue during 

the transition period to the new 

assessment system and will not be 

affected by the FDIC’s new rules, except 

to the extent that the definition and 

computation of assessment bases has 

changed. Language has been added to 

the regulatory text to make this clear (12 

CFR 327.3(a)(3)). The date of the 

assessment base on which FICO 

payments are based will not change. 

Any effect on the reserve ratio of 

transitioning to collecting assessments 

after each quarterly period will be 

minimal. Consistent with the concepts 

of generally accepted accounting 

principles, the FDIC will recognize 

assessment revenue in advance of 

receipt based on a reliable estimate. 

Invoices will continue to be presented 

using FDICconnect, and institutions will 

continue to be required to designate and 

fund deposit accounts from which the 

FDIC can make direct debits. Invoices 

will, as at present, be made available on 

FDICconnect no later than 15 days prior 

to the payment date. However, the 

payment dates themselves, in relation to 

the coverage period, will shift. 

Collections will be made at or near the 

end of the following quarter (i.e., June 

30, September 30, December 30, and 

March 30). In this way, the proposed 

assessment system will synchronize the 

insurance coverage period with the 

reporting dates and the institutions’ risk 

assignments.7

The FDIC will set assessment rates for 

each risk category no later than 30 days 

before the date of the invoice for the 

quarter, which will give the FDIC’s 

Board of Directors the option of setting 

rates before the beginning of a quarter or 

after its completion. The final rule will 

provide the FDIC with flexibility to set 

final rates for the first quarter of a year 

at any time up to May 16 of that year 

(30 days before the June 15 invoice 

date). However, the FDIC will not 

necessarily need to continually 

reconsider or update assessment rates. 

Once set, rates will remain in effect 

until changed by the FDIC’s Board. 

Institutions will have at least 45 days 

notice of the applicable rates before 

assessment payments are due. 

B. Ratings Changes Effective When 

Transmitted 

Under the present system, an insured 

institution retains its supervisory and 

capital group ratings throughout a 

semiannual period. Any change is 

reflected in the next semiannual period; 

in this way, an examination can remain 

the basis for an institution’s assessment 

rating long after newer information has 

become available. 

The FDIC proposed that changes to an 

institution’s supervisory rating be 

reflected as of the date the examination 

or targeted examination began; if no 

such date existed, then an institution’s 

supervisory rating would have changed 

as of the date the institution was 

notified of its rating change by its 

primary federal regulator (or state 

authority). In either case, if the FDIC, 

after taking into account other 

information that could affect the rating, 

did not agree with the classification 

implied by the examination, then the 

institution’s rating would change as of 

the date that the FDIC determined that 

the change in the supervisory rating 

occurred. 

Five commenters supported making 

ratings changes effective when they 

occur; no one opposed. One of the 


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69272 Federal Register / Vol. 71, No. 230 / Thursday, November 30, 2006 / Rules and Regulations 

8For example, while the Board of Governors of 

the Federal Reserve System and the Office of Thrift 

Supervision (OTS) define and record as the start 

date the date that an examiner arrives at an 

institution to begin the bulk of examination activity, 

the Office of the Comptroller of the Currency does 

not. Rather, for the OCC the start date represents the 

date that examination activity begins based on an 

activity plan. This date bears no consistent relation 

to the date that an examiner arrives at an 

institution. 

9The FDIC received no other comments 

specifically directed to this issue. 

10At present, 26 items are required in the Reports 

of Condition and Income (Call Reports) to 

determine a bank’s assessment base, and 11 items 

are required in the Thrift Financial Report (TFRs) 

to determine a thrift’s assessment base. Under the 

final rule, changes to the way the assessment base 

is reported should reduce these items to between 

two and six, depending, in part, on whether an 

institution reports average daily balances. 

Essentially, instead of starting with deposits as 

reported in the report of condition and making 

adjustments, banks will start with a balance that 

approximates the statutory definition of deposits. 

The FDIC believes that this balance is typically 

found within most insured institutions’ deposit 

systems. In this way, institutions will be required 

to track far fewer adjustments. In any case, no 

additional burden will result for insured 

institutions since the items required to be reported 

will remain essentially the same under the new 

regulatory definition. The changes to reporting 

requirements should also allow institutions to 

report daily average deposits more easily, since they 

will not have to track and average adjustment items 

separately. As now, the Call Report and TFR 

instructions will continue to specify the items 

required to meet the requirements of section 3(l) of 

the FDI Act for reporting purposes. The FDIC has 

proposed appropriate changes to reports of 

condition, to become effective March 31, 2007, and 

is coordinating with the Federal Financial 

Institutions Examination Council (FFIEC) on the 

necessary changes to the reports of condition. 

supporters, a trade group, suggested that 

in all cases the change be implemented 

‘‘when the bank is notified of a change, 

not the date an examination begins 

***.’’

The FDIC has decided to adopt the 

suggested approach. Under the final 

rule, changes to an institution’s 

supervisory rating will be reflected as of 

the date that the rating change is 

transmitted to the institution. However, 

if the FDIC disagrees with the CAMELS 

composite rating assigned by an 

institution’s primary federal regulator, 

and assigns a different composite rating, 

the supervisory change will be effective 

for assessment purposes as of the date 

that the FDIC assigns a rating. 

Disagreements of this type between the 

FDIC and the other federal regulators 

have been rare. 

Using the transmittal date as the 

effective date for supervisory changes 

has a number of benefits. First, 

additional research after publication of 

the NPR in May revealed that the federal 

banking agencies do not all define and 

record an examination start date the 

same way.8 If the start date were used 

to determine ratings changes for 

supervisory purposes, similarly situated 

institutions could be treated differently, 

simply because they have different 

primary federal regulators. This result 

could have been unfair to a large 

number of institutions. Second, using 

the start date would have potentially 

produced ratings changes in many prior 

quarters, with adjustments to prior 

assessments paid. By contrast, the final 

rule should result in far fewer 

alterations to earlier assessments, 

allowing greater finality in assessments 

and enabling institutions to better plan 

their finances. Several commenters 

recommended notifying institutions in 

advance of a ratings change. While the 

final rule does not provide for advance 

notification, institutions will receive 

notice contemporaneously with a 

change. Third, the final rule is simpler 

and more uniform than the proposed 

rule and produces a more cohesive 

system. The effective date of a ratings 

change will be defined in the same way 

for all institutions, large and small. This 

result comports with the opinions of 

several commenters who recommended 

that the risk differentiation and 

assessment system be made simpler and 

more cohesive. Fourth, as stated, the 

trade group specifically recommended 

that in all cases the effective date for 

recognition of a change in supervisory 

rating should be when the bank is 

notified of a change.9

Accordingly, under the final rule, 

supervisory ratings changes will become 

effective as of the date the institution is 

notified of its rating change by its 

primary federal regulator or state 

authority, assuming that the FDIC, after 

taking into account other information 

that could affect the rating, agrees with 

the assignment implied by the 

examination, or it will change as of the 

date that the FDIC determines that the 

change in the supervisory rating occurs. 

C. Modifications to the Assessment Base 

At present, an institution’s assessment 

base is principally derived from total 

domestic deposits. The current 

definition of the assessment base is 

detailed in 12 CFR 327.5. Generally, the 

definition is deposit liabilities as 

defined by section 3(l) of the Federal 

Deposit Insurance Act (FDI Act) (12 

U.S.C. 1813(l)) with some adjustments. 

However, because the total deposits that 

institutions report in their reports of 

condition do not coincide with the 

section 3(l) definition, institutions 

report several adjustments elsewhere in 

their reports of condition; these 

adjustments are used to determine the 

assessment base. 

For example, banks are specifically 

instructed to exclude uninvested trust 

funds from deposit liabilities as 

reported on Schedule RC–E of their 

Reports of Condition and Income (Call 

Reports). However, these funds are 

considered deposits as defined by 

section 3(l) of the FDI Act and are 

therefore included in the assessment 

base. Line item 3 on Schedule RC–O of 

the Call Report was included to 

facilitate reporting these funds. For this 

line item and for the many others, banks 

simply report the amount of each item 

that was excluded from the RC–E 

calculation. Other line items require the 

restoration of amounts that were netted 

for reporting purposes on Schedule RC–

E. For example, when banks were 

instructed to file Call Reports in 

accordance with Generally Accepted 

Accounting Principles, they were 

permitted to offset deposit liabilities 

against assets in certain circumstances. 

In order to comply with the statutory 

definition of deposits, lines 12a and 12b 

were added to Schedule RC–O to 

recapture those amounts. 

The final rule will retain the current 

assessment base as applied in practice 

with minor modifications. The 

reworded definition will operate in 

concert with a proposed simplification 

of the associated reporting requirements 

on insured institutions’ reports of 

condition.10 The assessment base 

definition will continue to be deposit 

liabilities as defined by section 3(l) of 

the FDI Act with enumerated allowable 

adjustments. These adjustments will 

include drafts drawn on other 

depository institutions that meet the 

definition of deposits per section 3(l) of 

the FDI Act, but are specifically 

excluded from reporting requirements 

in section 7(a)(4) of the FDI Act (12 

U.S.C. 1817(a)(4)). Similarly, although 

depository institution investment 

contracts meet the definition of deposits 

as defined by section 3(l) of the FDI Act, 

they are presently excluded from the 

assessment base under 12 CFR 327.5 

and will continue to be excluded, as 

will pass-through reserves. Certain 

reciprocal bank balances will also be 

excluded. In addition, hypothecated 

deposits will be excluded. 

Unposted debits will not reduce the 

assessment base and unposted credits 

will be excluded from the definition of 

the assessment base for institutions that 

report average daily balances because 

these debits and credits are captured in 

the next day’s deposits (and thus 

reflected in the averages). For 

consistency, and because they should 

not materially affect assessment bases, 

unposted debits will not reduce the 

assessment base and unposted credits 


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11 In fact, the regulatory definition has not kept 

pace with these reporting changes. In practice, 

however, the assessment base is calculated as if the 

regulatory definition had kept pace. 

12 In those instances where a parent bank or 

savings association files its Call Report or TFR on 

a consolidated basis by including a subsidiary 

bank(s) or savings association(s), the assessment 

bases for all institutions included in the 

consolidated reporting must be reported separately 

on an unconsolidated basis so that assessment bases 

can be determined separately for each institution. 

will also be excluded from the 

definition of the assessment base for 

institutions that report quarter-end 

balances. 

The current definition of the 

assessment base, in 12 CFR 327.5, has 

been driven by reporting requirements 

that have evolved over time. These 

requirements have changed because of 

the evolving reporting needs of all of the 

federal regulators. As a result, the 

FDIC’s regulatory definition of the 

assessment base has required periodic 

updates when reporting requirements in 

reports of condition are changed for 

other purposes.11 By rewording the 

definition of the assessment base to 

deposit liabilities as defined by section 

3(l) of the FDI Act with allowable 

exclusions, the FDIC will no longer be 

required to update its regulation 

periodically in response to outside 

factors. Two commenters generally 

supported the minor modifications the 

FDIC is making to the definition of 

assessment base; no commenters 

opposed them. 

D. Average Daily Deposit Balance for 

Institutions With Assets of $1 Billion or 

More 

Currently, an insured institution’s 

assessment base is computed using 

quarter-end deposit balances. Most 

schedules of the Call Report and the 

TFR are based on quarter-end data, but 

there are drawbacks to using quarterend balances for assessment 

determinations. Under the current 

system, deposits at quarter-end are used 

as a proxy for deposits for an entire 

quarter, but balances on a single day in 

a quarter may not accurately reflect an 

institution’s typical deposit level. For 

example, if an institution receives an 

unusually large deposit at the end of a 

quarter and holds it only briefly, the 

institution’s assessment base and 

deposit insurance assessment may 

increase disproportionately to the 

amount of deposits it typically holds. A 

misdirected wire transfer received at the 

end of a quarter can create a similar 

result. Using quarter-end balances 

creates incentives to temporarily reduce 

deposit levels at the end of a quarter for 

the sole purpose of avoiding 

assessments. Institutions of various 

sizes have raised these issues with the 

FDIC. 

Under the final rule, instead of using 

quarter-end deposits, certain 

institutions will use average daily 

balances over the quarter, which will 

give a more accurate depiction of an 

institution’s deposits. When combined 

with other operational changes to the 

assessment system, the use of average 

daily balances will provide a more 

realistic and timely depiction of actual 

events. The FDIC’s proposal to use 

average daily balances was supported by 

all six commenters; however, three of 

those six suggested that the use of 

average daily balances be mandatory 

only for institutions of $1 billion or 

more in assets rather than $300 million 

as proposed. For example, one trade 

group suggested the higher cutoff 

because ‘‘the FDIC and other federal 

bank regulators use $1 billion in assets 

as the cutoff in other Call Report 

requirements and for other regulatory 

purposes.’’ Similarly, another trade 

group urged the higher cutoff because 

‘‘[t]his increase would be consistent 

with other FDIC regulations and 

reporting requirements * * * and 

would affect only a very small 

proportion of insured deposits.’’ In 

addition, a third trade group urged the 

$1 billion cutoff ‘‘to not impose 

unnecessary paperwork burden on 

smaller institutions and to be consistent 

with the $1 billion threshold for other 

FDIC regulations * * *.’’ After 

consideration of these comments, the 

FDIC has changed the final rule to 

incorporate the higher cutoff amount. 

Institutions do not at present report 

average daily balances on Call Reports 

and TFRs. Reporting average assessment 

bases will therefore necessitate changes 

to Call Reports and TFRs requiring the 

approval of the FFIEC and time to 

implement. Until these changes to the 

Call Report and TFR are made, 

institutions will continue to determine 

assessment bases using quarter-end 

balances. 

Under the final rule, for one year after 

the necessary changes to the Call Report 

and TFR have been made, each existing 

institution will have the option of 

continuing to use quarter-end balances 

to determine its assessment base. 

Thereafter, institutions with $1 billion 

or more in assets will be required to 

report average daily balances. To avoid 

burdening smaller institutions, which 

might have to modify their accounting 

and reporting systems, existing 

institutions with less than $1 billion in 

assets will have the option of continuing 

to use quarter-end balances to determine 

their assessment bases.12

If its assessment base is growing, an 

institution will pay smaller assessments 

if it reports daily averages rather than 

quarter-end balances, all else equal. 

Nevertheless, a smaller institution that 

elects to report quarter-end balances 

may continue to do so, so long as its 

assets, as reported in its Call Report or 

TFR, do not equal or exceed $1 billion 

in two consecutive reports. Otherwise, 

the institution will be required to begin 

reporting average daily balances for the 

quarter that begins six months after the 

end of the quarter in which the 

institution reported that its assets 

equaled or exceeded $1 billion for the 

second consecutive time. An institution 

with less than $1 billion in assets may 

switch from reporting quarter-end 

balances to reporting average daily 

balances for an upcoming quarter. Any 

institution, once having begun to report 

average daily balances, either 

voluntarily or because required to, may 

not switch back to reporting quarter-end 

balances. 

Finally, one commenter, a trade 

group, urged that the $1 billion cutoff 

apply to newly insured institutions 

because those institutions ‘‘should not 

be treated differently in the assessment 

base calculation’’ and because ‘‘having 

the option to file using quarter-end 

balances is important as some banks 

believe the cost of the more involved 

General Ledger systems is excessive.’’

The FDIC believes that systems likely to 

be in place in newly insured institutions 

can generate average daily balances and 

will therefore impose no additional 

costs in doing so. In addition, this 

approach will encourage the transition 

to average daily balances throughout the 

industry, which will improve the 

accuracy of institutions’ assessment 

base calculations. Accordingly, under 

the final rule, any institution that 

becomes insured after the necessary 

modifications to the Call Report and 

TFR have been made will be required to 

report average daily balances for 

assessment purposes. 

E. Float Deductions Eliminated 

The largest overall adjustments to the 

current assessment base are deductions 

for float, deposits reported as such for 

assessment purposes that were created 

by deposits of cash items (checks) for 

which the institution has not itself 

received credit or payment. The current 

float deductions are 162⁄3 percent for 

demand deposits and 1 percent for time 

and savings deposits. Under the final 

rule, the float deductions will be 

eliminated. 


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69274 Federal Register / Vol. 71, No. 230 / Thursday, November 30, 2006 / Rules and Regulations 

13Since FDICIA, the FDIC’s regulations alone 

defined the assessment base. The current definition, 

at 12 CFR 327.5, generally tracks the former 

statutory definition. 

14Congress enacted Public Law 108–100, the 

Check Clearing for the 21st Century Act (Check 21), 

on October 28, 2004. Check 21 allows banks to 

electronically transfer check images instead of 

physically transferring paper checks. The Federal 

Reserve Board, What You Should Know About Your 

Checks, http://www.federalreserve.gov/pubs/ 

check21/shouldknow.htm (updated Feb. 16, 2005). 

As a result, the transmission and processing of 

electronic checks can be done faster than 

transferring paper checks through the clearing 

process. A recent Federal Reserve payment survey 

indicates that, for the first time, bank-to-bank 

electronic payments have exceeded payments by 

check. Treasury and Risk Management, Just 

Another Step Along the Way to a Checkless 

Economy, www.treasuryandrisk.com, September 

2005. With Check 21, the volume of paper checks 

processed is expected to continue to decline with 

more payments processed electronically resulting in 

a smaller float. 

15 Despite one commenter’s suggestion, the Call 

Report item ‘‘Cash items in process of collection’’

could not be used to determine the actual float 

deduction for individual institutions. Because 

‘‘Cash items in process of collection’’ contains items 

other than float, it may overstate actual float. For 

a few institutions, ‘‘Cash items in process of 

collection,’’ exceeds the institutions’ assessment 

bases. (These institutions’ ‘‘Cash items’’ are not 

included in the approximation of actual float in the 

text.) Conversely, given the small size of the ‘‘Cash 

items in process of collection’’ reported by many 

institutions, this item may understate float at some 

institutions. 

Two basic rationales existed for 

allowing institutions to deduct float. 

First, without float deductions, 

institutions would be assessed for 

balances created by deposits of checks 

for which they had not actually been 

paid. Second, crediting an uncollected 

cash item (a check) to a deposit account 

can temporarily create double counting 

in the aggregate assessment base—once 

at the insured institution that credited 

the cash item to the deposit account, 

and again at the payee insured 

institution on which the cash item is 

drawn. Deducting float from deposits 

when calculating the assessment base 

reduced this double counting. 

Before 1960, institutions computed 

actual float and deducted it from 

deposits when computing their 

assessment bases. This proved to be 

onerous at the time. In 1960, Congress 

by statute established the standardized 

float deductions in an effort to simplify 

and streamline the assessment base 

calculation. Section 7(b) of the FDI Act 

defined the deposit insurance 

assessment base until passage of the 

Federal Deposit Insurance Corporation 

Improvement Act of 1991 (FDICIA), 

which removed the statutory 

definition.13 In its proposal, the FDIC 

sought comment on whether to 

eliminate the float deductions, whether 

to allow the deduction of actual float, or 

whether to retain the present 

standardized float deductions. 

All six commenters addressed the 

float issue. Two opposed elimination of 

the float deductions. One supported 

retaining the standard float deductions 

and ‘‘if necessary, modifying them to 

recognize reduction in float due to 

technology advances’’ but opposed 

requiring banks to deduct actual float. 

Another urged the adoption of ‘‘rules 

that allow for the deduction of actual 

float—base assessments on collected 

balances’’ and opposed eliminating the 

standard float deductions because that 

would ‘‘increase in the premiums that 

corporate depositors pay.’’ Three other 

commenters generally supported 

elimination of the float deductions, but 

urged retention of the deductions for 

quarter-end filers, as opposed to 

institutions reporting average daily 

balances. A trade group noted that while 

float has declined, it has not gone away, 

and without the float deductions for 

quarter-end filers ‘‘the assessment base 

using quarter-end balances would be 

greater than appropriate and, therefore, 

the premium assessed would be higher 

than appropriate.’’ Two of the trade 

groups suggested revising the current 

float deductions for quarter-end filers 

and allowing such institutions to 

continue their use. 

The FDIC has decided to eliminate the 

float deductions for all institutions on 

the grounds that, based on available 

information, the standard float 

deductions appear to be obsolete. Actual 

float appears to be small and decreasing 

as the result of legal, technological, and 

payment systems changes. The basis for 

the percentages in the standardized 

deductions chosen by Congress is not 

clear. However, even if the percentages 

were a realistic approximation of 

average bank float when they were 

selected over 40 years ago, legal, 

technological, and payment systems 

changes—such as Check 21—that have 

accelerated check clearing should have 

reduced float, everything else being 

equal, and made the existing standard 

float deductions obsolete.14

Consequently, the current standardized 

float deductions probably do not reflect 

real float for most institutions. In 

addition, cash items in the process of 

collection as a percent of domestic 

deposits for commercial banks with 

total assets greater than or equal to $300 

million has been decreasing. Over the 

long term, the ratio of cash items in the 

process of collection to total domestic 

deposits has fallen significantly. Cash 

items in the process of collection can be 

viewed as a rough approximation of 

actual float. 

Eliminating the float deductions will 

favor some institutions over others. 

Institutions with larger percentages of 

time and savings deposits will see 

smaller increases in their assessment 

bases; conversely, those with larger 

percentages of demand deposits will see 

greater increases in their assessment 

bases. However, eliminating the float 

deductions will only minimally affect 

the relative distribution of the aggregate 

assessment base among institutions of 

different asset sizes and between banks 

and thrifts (although it will have a 

greater effect on the assessment bases of 

some individual institutions). While 

eliminating the float deductions will 

increase assessment bases and affect the 

distribution of the assessment burden 

among institutions, it should not, in 

itself, increase assessments. The 

assessment rates that the FDIC will set 

in the new pricing system will take into 

account the elimination of the float 

deductions. 

The FDIC has decided not to deduct 

actual float to arrive at the assessment 

base for a number of reasons. Deducting 

actual float would require that 

institutions report actual float; and 

institutions that determine their 

assessment base using average daily 

balances would be required to report 

average daily float. This would 

necessitate a new information 

requirement for float data.15 Before 

1960, institutions computed actual float 

and deducted it from deposits when 

computing their assessment bases. 

Because this proved to be onerous at 

one time, Congress established the 

standardized float deductions by statute. 

Asking institutions again to report 

actual float could create significant 

regulatory burden, which the FDIC has 

decided to avoid. 

Finally, the FDIC does not agree with 

the suggestion that the float deductions 

(or revised or adjusted float deductions) 

be retained for institutions reporting 

quarter-end balances, as three 

commenters urged. It is not clear that 

reporting quarter-end balances would 

result in a larger than appropriate 

assessment than reporting average daily 

balances, as one commenter suggested. 

Moreover, allowing standardized 

deductions for institutions that report 

quarter-end balances could provide 

institutions with incentives for retaining 

the quarter-end balance method. The 

FDIC believes that institutions will 

generally benefit from reporting average 

daily balances and believes the 

assessment system should generally be 

structured to encourage the bulk of 

institutions with less than $1 billion in 

assets to opt to use average daily 


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16 Generally speaking, a terminating transfer 

occurs when an institution assumes another 

institution’s liability for deposits—often through 

merger or consolidation—when the terminating 

institution essentially goes out of business. Neither 

the assumption of liability for deposits from the 

estate of a failed institution nor a transaction in 

which the FDIC contributes its own resources in 

order to induce a surviving institution to assume 

liabilities of a terminating institution is a 

terminating transfer. 

17 12 CFR 327.9(d)(6) and (7). See the FDIC’s final 

rulemaking regarding risk based assessments 

published in this issue of the Federal Register. 

balances in reporting their assessment 

bases. 

F. Terminating Transfer Rule Modified 

At present, complex rules apply to 

terminating transfers 16 to ensure that 

the assessment of a terminating 

institution is paid. Determining and 

collecting assessments after the end of 

each quarter and using average daily 

assessment bases make these complex 

rules largely obsolete. An acquiring 

institution (or institutions) will remain 

liable for the quarterly assessment(s) 

owed by a terminating institution; the 

assessment base of the terminating 

institution will be zero for the 

remainder of the quarter after the 

terminating transfer. 

The terminating transfer provision in 

the final rule will deal with a few 

remaining situations. If the terminating 

institution does not file a report of 

condition for the quarter prior to the 

quarter in which the terminating 

transfer occurred, calculation of its 

quarterly certified statement invoices for 

those quarters will be based on its 

assessment base from its most recently 

filed report of condition. For the quarter 

before the terminating transfer occurs, 

the terminating institution’s assessment 

will be determined using its most recent 

rate; for the quarter in which the 

terminating transfer occurs, the 

acquirer’s rate will apply, but the 

calculation will be different depending 

upon whether the acquiring institution 

reports its assessment base using 

average daily balances or quarter-end 

balances. 

Under the final rule, once institutions 

begin reporting average daily deposits, 

the average assessment base of the 

acquiring institution will properly 

reflect the terminating transfer and will 

increase after the terminating transfer. 

When this happens, the terminating 

institution’s assessment for the quarter 

in which the terminating transfer occurs 

will be reduced by the percentage of the 

quarter remaining after the terminating 

transfer and calculated at the acquirer’s 

rate. 

Three of the six commenters generally 

supported these changes to the 

terminating transfer rule, and none 

opposed them. 

Under the final rule, an acquiring 

institution that reports quarter-end 

balances will have its assessment for the 

quarter in which the terminating 

transfer occurred calculated slightly 

differently from the language in the 

proposal. Because the acquiring 

institution is not averaging its 

assessment base, its assessment for the 

quarter in which the terminating 

transfer occurs will be its assessment 

base (which will include the acquired 

deposits) calculated at its assessment 

rate. Thus, for example, an institution 

that reports quarter-end balances might 

acquire another institution by merger 

one month (one-third of the way) into a 

quarter. Since the acquiring institution’s 

assessment base for that quarter will 

include the acquired deposits, 

application of the acquirer’s rate to that 

base will obviate the need to assess the 

terminating institution separately for 

that quarter. The final rule has been 

revised from the proposed rule to reflect 

this simpler calculation for acquiring 

institutions that use quarter-end 

balances. 

G. Newly Insured Institutions Assessed 

for the Quarter in Which They Become 

Insured 

At present, a newly insured 

institution is not liable for assessments 

for the semiannual period in which it 

becomes insured, but is liable for 

assessments for the following 

semiannual period. The institution’s 

assessment base as of the day before the 

following semiannual period begins is 

deemed to be its assessment base for the 

entire semiannual period. These special 

rules were needed because assessments 

were based upon assessment bases that 

an institution reported in the past. 

Under the existing rules, a newly 

insured institution reports an 

assessment base at the end of the quarter 

in which it becomes insured but that 

assessment base is not used to calculate 

its assessment until the following 

semiannual period. Further, if an 

institution becomes insured in the 

second half of a semiannual period, it 

has no reported assessment base on 

which to calculate the first installment 

of its premium for the next semiannual 

period. 

Under the final rules, each quarterly 

assessment will be based upon the 

assessment base that an institution 

reports at the end of that quarter. Since 

a newly insured institution will have 

reported an assessment base (using 

average daily balances) for the quarter in 

which it becomes insured, its 

assessment will be computed in the 

same manner as all other institutions. 

Three commenters generally supported 

elimination of the special rules for 

newly insured institutions, and none 

opposed it. 

H. Ninety Days Each Quarter To File a 

Request for Review or Request for 

Revision 

The current deadline for an 

institution to request a review of its 

assessment risk classification is 90 days 

from the invoice date for the first 

quarterly installment of a semiannual 

period. Under the final rule, each 

quarterly assessment will be separately 

computed. Consequently, the final rule 

will provide institutions with 90 days 

from the date of each quarterly certified 

statement invoice to file a request for 

review from its risk assignment. 

Institutions will also have 90 days from 

the date of any subsequent invoice that 

adjusted the assessment of an earlier 

assessment period to request a review. 

The final rule clarifies that an 

institution with between $5 billion and 

$10 billion in assets may request review 

if the FDIC denies its request to be 

assessed as a large bank; in addition, 

institutions may request review of an 

FDIC determination that they are new.17

A parallel amendment will allow 

requests for revision of an institution’s 

quarterly assessment payment 

computation to be filed within 90 days 

of the quarterly assessment invoice for 

which revision is requested (rather than 

the present 60 days). Three commenters 

generally supported these changes to the 

rules; none opposed them. 

I. Conforming Changes to the Certified 

Statement Rules 

The Reform Act eliminated the 

requirement that the deposit insurance 

assessment system be semiannual and 

provided a new three-year statute of 

limitations for assessments. 

Accordingly, the FDIC has revised the 

provisions of 12 CFR 327.2 to clarify 

that the certified statement is the 

quarterly certified statement invoice and 

to provide for the retention of the 

quarterly certified statement invoice by 

insured institutions for three years, 

rather than five years under the prior 

law. Three commenters generally 

supported these changes; none opposed 

them. 

J. Prepayment and Double Payment 

Options Eliminated 

When the present assessment system 

was proposed more than 10 years ago, 

the original quarterly dates for payment 

of assessments were: March 30; June 30; 


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18The allowance for payment on the following 

business day—should January 2 fall on a nonbusiness day—is eliminated as well. 

19Of the 8,832 insured depository institutions, 

there were 5,362 small insured depository 

institutions (i.e., those with $165 million or less in 

assets) as of December 31, 2005. 

September 30; and December 30. The 

FDIC recognized that the December 

1995 collection date could present a 

one-time problem for institutions using 

cash-basis accounting, since these 

institutions would, in effect, be paying 

assessments for five quarters in 1995. 

The FDIC believed that few institutions 

would be adversely affected. Soon after 

the new system was adopted, however, 

the FDIC began to receive information 

that more institutions than had 

originally been identified would be 

adversely affected by the December 

collection date. As a result, the FDIC 

amended the regulation in 1995 to move 

the collection date to January 2, but 

allowed institutions to elect to pay on 

December 30, thus establishing the 

prepayment date. 

The prepayment option is eliminated 

under the final rule. With 

implementation of the new assessment 

system, a transition period will be 

created in which institutions will not be 

subject to collection of deposit 

insurance assessments after the 

September 30, 2006 payment date until 

June 30, 2007. Consequently, 

reestablishing the original December 30 

payment date should have no adverse 

consequences for institutions that use 

cash-basis accounting. No institution 

would make more than four insurance 

payments in calendar year 2006; those 

using the December 30, 2005 payment 

date would make only three payments 

in 2006. All institutions would make 

four payments annually thereafter. This 

change will keep all assessment 

payments within each calendar year.18

In addition, insured institutions 

presently have the regulatory option of 

making double payments on any 

payment date except January 2. Under 

the final rule, this option is also 

eliminated. The double payment option 

originated in the 1995 amendment, 

when the payment date was modified 

from December 30, 1995 to January 2, 

1996. The double payment option was 

adopted to provide cash-basis 

institutions the opportunity to pay the 

full amount of their semiannual 

assessment premium on December 30 so 

as to have the complete benefit of this 

modification. The transition period from 

September 30, 2006 to June 30, 2007 

and four payments annually beginning 

in 2007 should eliminate the need for 

the double payment option, since the 

FDIC will no longer be charging 

semiannual premiums. 

The final rule also makes clear that 

scheduled quarterly FICO payments will 

be collected from all institutions on 

January 2, 2007, and March 30, 2007, 

based upon, respectively, their 

September 30, 2006 and December 31, 

2006 reported assessment bases (see 12 

CFR 327.3(a)(3)). Institutions that elect 

to do so, however, will still be able to 

make prepayment of their first quarter 

2007 FICO payment on December 30, 

2006, as provided for under the existing 

rules at 12 CFR 327.3(c)(3). Institutions 

that do not choose this prepayment 

option will make their first quarter 2007 

FICO payment on January 2, 2007, as 

the final rule will provide. 

III. Regulatory Analysis and Procedure 

A. Solicitation of Comments on Use of 

Plain Language 

Section 722 of the Gramm-LeachBliley Act (GLBA), Public Law 106–102, 

113 Stat. 1338, 1471 (Nov. 12, 1999), 

requires the Federal banking agencies to 

use plain language in all proposed and 

final rules published after January 1, 

2000. The proposed rules requested 

comments on how the rules might be 

changed to reflect the requirements of 

GLBA. No GLBA comments were 

received. 

B. Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

requires that each Federal agency either 

certify that a proposed rule would not, 

if adopted in final form, have a 

significant economic impact on a 

substantial number of small entities or 

prepare an initial regulatory flexibility 

analysis of the proposal and publish the 

analysis for comment. See 5 U.S.C. 603, 

604, 605. Certain types of rules, such as 

rules of particular applicability relating 

to rates or corporate or financial 

structures, or practices relating to such 

rates or structures, are expressly 

excluded from the definition of ‘‘rule’’

for purposes of the RFA. 5 U.S.C. 601. 

The final rule provides operational 

procedures governing assessments and 

relates directly to the rates imposed on 

insured depository institutions for 

deposit insurance, by providing for the 

determination of assessment bases to 

which the rates will apply and 

providing the operational processes 

required for deposit insurance 

assessments. Consequently, no 

regulatory flexibility analysis is 

required. Nonetheless, the FDIC is 

voluntarily undertaking a regulatory 

flexibility analysis of the final rule. 

The provisions dealing with 

determining assessment bases using 

average daily balances include an optout for insured institutions with assets 

of less than $1 billion, which would 

permit small institutions under the RFA 

(i.e., those with $165 million or less in 

assets) to continue (as they do now) 

reporting quarter-end balances. Newly 

insured institutions with $165 million 

or less in assets, however, will be 

required to report average daily 

balances. For the period from 2001 

through 2005, the average number of 

small institutions that became insured 

each year was approximately 126. Most 

small, newly insured institutions will 

ordinarily implement systems 

permitting calculation of average daily 

balances and, therefore, will not be 

significantly burdened by this 

requirement. 

Similarly, elimination of the float 

deduction in calculating assessment 

bases will not have a significant 

economic impact on a substantial 

number of small ($165 million in assets 

or less) insured depository institutions 

within the meaning of the RFA. Based 

on December 31, 2005 reports of 

condition, small institutions 

represented 5.09 percent of the total 

assessment base, with large institutions 

(i.e., those with more than $165 million 

in assets) representing 94.91 percent. 

Without the existing float deduction, 

those percentages would have been 5.14 

and 94.86, respectively, a change of only 

0.05 percent. By way of example, if a 

flat 2 basis point annual charge had 

been assessed on the December 31, 2005 

assessment base without the float 

deduction (i.e., with the float deduction 

added back to the assessment base), the 

amount collected would have been 

approximately $1.267 billion. To collect 

the same amount from the industry on 

the same assessment base, but allowing 

the float deduction, approximately a 

2.05 basis point charge would have been 

required, since the assessment base 

would have been smaller. The average 

difference in assessment charged a small 

institution for one year if the float 

deduction were eliminated (charging 2 

basis points) versus allowing the float 

deduction (charging 2.05 basis points) 

would be about $110. The actual 

increase in assessments charged small 

institutions for one year if the float 

deduction were eliminated (charging 2 

basis points) versus allowing the float 

deduction (charging 2.05 basis points) 

would be greater than or equal to $1,000 

for only 38 out of 5,362 small 

institutions as of December 31, 2005.19

The largest resulting increase for any 

small institution would be about $2,500. 

Moreover, the final rule will not have 

a significant economic impact on a 


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substantial number of small institutions 

within the meaning of those terms as 

used in the RFA. The final rule sets out 

the operational format for the FDIC’s 

assessment system for the collection of 

deposit insurance assessments. Most of 

the processes within this proposed 

regulation are analogous to existing 

FDIC assessment processes; variances 

occur largely in timing, not in the 

processes themselves; no additional 

reporting requirements or record 

retention requirements are created by 

the proposed rules. 

Comments were sought regarding any 

information about the likely quantitative 

effects of the proposal on small insured 

depository institutions; no comments 

were received. 

C. Paperwork Reduction Act 

No collections of information 

pursuant to the Paperwork Reduction 

Act (44 U.S.C. 3501 et seq.) are 

contained in the final rule. Any 

paperwork created as the result of the 

conversion to reporting average daily 

assessment balances will be submitted 

to the Office of Management and Budget 

(OMB) for review and approval as an 

adjustment to the Consolidated Reports 

of Condition and Income (Call Reports), 

an existing collection of information 

approved by OMB under Control No. 

3064–0052. 

D. The Treasury and General 

Government Appropriations Act, 1999— 

Assessment of Federal Regulations and 

Policies on Families 

The FDIC has determined that the 

final rule will not affect family wellbeing within the meaning of section 654 

of the Treasury and General 

Government Appropriations Act, 

enacted as part of the Omnibus 

Consolidated and Emergency 

Supplemental Appropriations Act of 

1999 (Public Law 105–277, 112 Stat. 

2681). 

E. Small Business Regulatory 

Enforcement Fairness Act 

The Office of Management and Budget 

has determined that the final rule is not 

a ‘‘major rule’’ within the meaning of 

the relevant sections of the Small 

Business Regulatory Enforcement 

Fairness Act of 1996 (SBREFA) (5 U.S.C. 

801 et seq.). As required by SBREFA, 

the FDIC will file the appropriate 

reports with Congress and the 

Government Accountability Office so 

that the final rule may be reviewed. 

List of Subjects in 12 CFR Part 327 

Bank deposit insurance, Banks, 

banking, Savings associations. 

■ For the reasons set forth in the 

preamble, the FDIC hereby amends part 

327 of chapter III of title 12 of the Code 

of Federal Regulations as follows: 

PART 327—ASSESSMENTS 

■ 1. The authority citation for part 327 

is revised to read as follows: 

Authority: 12 U.S.C. 1441, 1813, 1815, 

1817–1819, 1821; Sec. 2101–2109, Pub. L. 

109–171, 120 Stat. 9–21, and Sec. 3, Pub. L. 

109–173, 119 Stat. 3605. 

■ 2. Revise §§ 327.1 through 327.8 of 

Subpart A to read as follows: 

§ 327.1 Purpose and scope. 

(a) Scope. This part 327 applies to any 

insured depository institution, 

including any insured branch of a 

foreign bank. 

(b) Purpose. (1) Except as specified in 

paragraph (b)(2) of this section, this part 

327 sets forth the rules for: 

(i) The time and manner of filing 

certified statements by insured 

depository institutions; 

(ii) The time and manner of payment 

of assessments by such institutions; 

(iii) The payment of assessments by 

depository institutions whose insured 

status has terminated; 

(iv) The classification of depository 

institutions for risk; and 

(v) The processes for review of 

assessments. 

(2) Deductions from the assessment 

base of an insured branch of a foreign 

bank are stated in subpart B part 347 of 

this chapter. 

§ 327.2 Certified statements. 

(a) Required. (1) The certified 

statement shall also be known as the 

quarterly certified statement invoice. 

Each insured depository institution 

shall file and certify its quarterly 

certified statement invoice in the 

manner and form set forth in this 

section. 

(2) The quarterly certified statement 

invoice shall reflect the institution’s risk 

assignment, assessment base, 

assessment computation, and 

assessment amount, for each quarterly 

assessment period. 

(b) Availability and access. (1) The 

Corporation shall make available to each 

insured depository institution via the 

FDIC’s e-business Web site FDICconnect 

a quarterly certified statement invoice 

each assessment period. 

(2) Insured depository institutions 

shall access their quarterly certified 

statement invoices via FDICconnect, 

unless the FDIC provides notice to 

insured depository institutions of a 

successor system. In the event of a 

contingency, the FDIC may employ an 

alternative means of delivering the 

quarterly certified statement invoices. A 

quarterly certified statement invoice 

delivered by any alternative means will 

be treated as if it had been downloaded 

from FDICconnect. 

(3) Institutions that do not have 

Internet access may request a renewable 

one-year exemption from the 

requirement that quarterly certified 

statement invoices be accessed through 

FDICconnect. Any exemption request 

must be submitted in writing to the 

Manager of the Assessments Section. 

(4) Each assessment period, the FDIC 

will provide courtesy e-mail notification 

to insured depository institutions 

indicating that new quarterly certified 

statement invoices are available and 

may be accessed on FDICconnect. Email notification will be sent to all 

individuals with FDICconnect access to 

quarterly certified statement invoices. 

(5) E-mail notification may be used by 

the FDIC to communicate with insured 

depository institutions regarding 

quarterly certified statement invoices 

and other assessment-related matters. 

(c) Review by institution. The 

president of each insured depository 

institution, or such other officer as the 

institution’s president or board of 

directors or trustees may designate, 

shall review the information shown on 

each quarterly certified statement 

invoice. 

(d) Retention by institution. If the 

appropriate officer of the insured 

depository institution agrees that, to the 

best of his or her knowledge and belief, 

the information shown on the quarterly 

certified statement invoice is true, 

correct, and complete and in accordance 

with the Federal Deposit Insurance Act 

and the regulations issued under it, the 

institution shall pay the amount 

specified on the quarterly certified 

statement invoice and shall retain it in 

the institution’s files for three years as 

specified in section 7(b)(4) of the 

Federal Deposit Insurance Act. 

(e) Amendment by institution. If the 

appropriate officer of the insured 

depository institution determines that, 

to the best of his or her knowledge and 

belief, the information shown on the 

quarterly certified statement invoice is 

not true, correct, and complete and in 

accordance with the Federal Deposit 

Insurance Act and the regulations 

issued under it, the institution shall pay 

the amount specified on the quarterly 

certified statement invoice, and may: 

(1) Amend its report of condition, or 

other similar report, to correct any data 

believed to be inaccurate on the 

quarterly certified statement invoice; 

amendments to such reports timely filed 

under section 7(g) of the Federal Deposit 


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69278 Federal Register / Vol. 71, No. 230 / Thursday, November 30, 2006 / Rules and Regulations 

Insurance Act but not permitted to be 

made by an institution’s primary federal 

regulator may be filed with the FDIC for 

consideration in determining deposit 

insurance assessments; or 

(2) Amend and sign its quarterly 

certified statement invoice to correct a 

calculation believed to be inaccurate 

and return it to the FDIC by the 

applicable payment date specified in 

§ 327.3(b)(2). 

(f) Certification. Data used by the 

Corporation to complete the quarterly 

certified statement invoice has been 

previously attested to by the institution 

in its reports of condition, or other 

similar reports, filed with the 

institution’s primary federal regulator. 

When an insured institution pays the 

amount shown on the quarterly certified 

statement invoice and does not correct 

that invoice as provided in paragraph (e) 

of this section, the information on that 

invoice shall be deemed true, correct, 

complete, and certified for purposes of 

paragraph (a) of this section and section 

7(c) of the Federal Deposit Insurance 

Act. 

(g) Requests for revision of assessment 

computation. (1) The timely filing of an 

amended report of condition or other 

similar report under paragraph (e)(1) of 

this section, or the timely filing of an 

amended quarterly certified statement 

invoice under paragraph (e)(2), that will 

result in a change to deposit insurance 

assessments owed or paid by an insured 

depository institution, shall be treated 

as a timely filed request for revision of 

computation of quarterly assessment 

payment under § 327.3(f). 

(2) The assessment rate on the 

quarterly certified statement invoice 

shall be amended only if it is 

inconsistent with the assessment risk 

assignment(s) provided to the 

institution by the Corporation for the 

assessment period in question pursuant 

to § 327.4(a). Agreement with the 

assessment rate shall not be deemed to 

constitute agreement with the 

assessment risk assignment. An 

institution may request review of an 

assessment risk assignment it believes to 

be incorrect pursuant to § 327.4(c). 

§ 327.3 Payment of assessments. 

(a) Required—(1) In general. Except as 

provided in paragraph (b) of this 

section, each insured depository 

institution shall pay to the Corporation 

for each assessment period an 

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 

paragraph (b)(2) of this section, each 

institution shall provide notice to the 

Corporation via FDICconnect 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. 

(3) Transition Rule for Financing 

Corporation (FICO) Payments. Quarterly 

FICO payments shall be collected by the 

FDIC without interruption during the 

assessment system transitional period in 

2007. All insured depository 

institutions shall make scheduled 

quarterly FICO payments on January 2, 

2007 (unless prepaid on December 30, 

2006), and March 30, 2007, based upon, 

respectively, their September 30, 2006, 

and December 31, 2006 reported 

assessment bases, which shall be the 

final assessment bases calculated 

pursuant to 12 CFR 327.5(a) and (b) 

(2006). Simultaneous collection of 

deposit insurance assessments and FICO 

assessments will resume in June of 

2007, based on the March 31, 2007 

reported assessment base. 

(b) Assessment payment—(1) 

Quarterly certified statement invoice. 

Starting with the first assessment period 

of 2007, no later than 15 days prior to 

the payment date specified in paragraph 

(b)(2) of this section, the Corporation 

will provide to each insured depository 

institution a quarterly certified 

statement invoice showing the amount 

of the assessment payment due from the 

institution for the prior quarter (net of 

credits or dividends, if any), and the 

computation of that amount. Subject to 

paragraph (e) of this section, the 

invoiced amount on the quarterly 

certified statement invoice shall be the 

product of the following: the assessment 

base of the institution for the prior 

quarter computed in accordance with 

§ 327.5 multiplied by the institution’s 

rate for that prior quarter as assigned to 

the institution pursuant to §§ 327.4(a) 

and 327.9. 

(2) Quarterly payment date and 

manner. The Corporation will cause the 

amount stated in the applicable 

quarterly certified statement invoice to 

be directly debited on the appropriate 

payment date from the deposit account 

designated by the insured depository 

institution for that purpose, as follows: 

(i) In the case of the assessment 

payment for the quarter that begins on 

January 1, the payment date is the 

following June 30; 

(ii) In the case of the assessment 

payment for the quarter that begins on 

April 1, the payment date is the 

following September 30; 

(iii) In the case of the assessment 

payment for the quarter that begins on 

July 1, the payment date is the following 

December 30; and 

(iv) In the case of the assessment 

payment for the quarter that begins on 

October 1, the payment date is the 

following March 30. 

(c) Necessary action, sufficient 

funding by institution. Each insured 

depository institution shall take all 

actions necessary to allow the 

Corporation to debit assessments from 

the insured depository institution’s 

designated deposit account. Each 

insured depository institution shall, 

prior to each payment date indicated in 

paragraph (b)(2) of this section, ensure 

that funds in an amount at least equal 

to the amount on the quarterly certified 

statement invoice 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. Penalties for failure to 

timely pay assessments are provided for 

at 12 CFR 308.132(c)(3)(v). 

(d) Business days. If a payment date 

specified in paragraph (b)(2) falls on a 

date that is not a business day, the 

applicable date shall be the previous 

business day. 

(e) Payment adjustments in 

succeeding quarters. Quarterly certified 

statement 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 

assignment, and revision of the 

Corporation’s assessment computations 

for prior quarters. 

(f) Request for revision of computation 

of quarterly assessment payment—(1) In 

general. An institution may submit a 

written request for revision of the 

computation of the institution’s 

quarterly assessment payment as shown 

on the quarterly certified statement 

invoice in the following circumstances: 

(i) The institution disagrees with the 

computation of the assessment base as 

stated on the quarterly certified 

statement invoice; 

(ii) The institution determines that the 

rate applied by the Corporation is 

inconsistent with the assessment risk 

assignment(s) provided to the 

institution in writing by the Corporation 


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for the assessment period for which the 

payment is due; or 

(iii) The institution believes that the 

quarterly certified statement invoice 

does not fully or accurately reflect 

adjustments provided for in paragraph 

(e) of this section. 

(2) Inapplicability. This paragraph (f) 

is not applicable to requests for review 

of an institution’s assessment risk 

assignment, which are covered by 

§ 327.4(c) of this part. 

(3) Requirements. Any such request 

for revision must be submitted within 

90 days from the date the computation 

being challenged appears on the 

institution’s quarterly certified 

statement invoice. The request for 

revision shall be submitted to the 

Manager of the Assessments Section and 

shall provide documentation sufficient 

to support the change 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 revision will receive written 

notice from the Corporation regarding 

the outcome of its request. Upon 

completion of a review, the DOF 

Director (or designee) shall promptly 

notify the institution in writing of his or 

her determination of whether revision is 

warranted. If the institution requesting 

revision disagrees with that 

determination, it may appeal to the 

FDIC’s Assessment Appeals Committee. 

Notice of the procedures applicable to 

appeals will be included with the 

written determination. 

(g) Quarterly certified statement 

invoice unavailable. Any institution 

whose quarterly certified statement 

invoice is unavailable on FDICconnect 

by the fifteenth day of the month in 

which the 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 quarterly 

certified statement invoice for the 

preceding assessment period, subject to 

subsequent correction. 

§ 327.4 Assessment rates. 

(a) Assessment risk assignment. For 

the purpose of determining the annual 

assessment rate for insured depository 

institutions under § 327.9, each insured 

depository institution will be provided 

an assessment risk assignment. Notice of 

an institution’s current assessment risk 

assignment will be provided to the 

institution with each quarterly certified 

statement invoice. Adjusted assessment 

risk assignments for prior periods may 

also be provided by the Corporation. 

Notice of the procedures applicable to 

reviews will be included with the notice 

of assessment risk assignment provided 

pursuant to paragraph (a) of this section. 

(b) Payment of assessment at rate 

assigned. Institutions shall make timely 

payment of assessments based on the 

assessment risk assignment 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 (c) of this section. 

Assessment risk assignments remain in 

effect for future assessment periods 

until changed. If the risk assignment 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 assessment payment after such 

subsequent assignment or change. 

Interest payable under this paragraph 

shall be determined in accordance with 

§ 327.7. 

(c) Requests for review. An institution 

that believes any assessment risk 

assignment provided by the Corporation 

pursuant to paragraph (a) of this section 

is incorrect and seeks to change it must 

submit a written request for review of 

that risk assignment. An institution 

cannot request review through this 

process of the CAMELS ratings assigned 

by its primary federal regulator; each 

federal regulator has established 

procedures for that purpose. An 

institution may also request review of a 

determination by the FDIC to assess the 

institution as a large or a small 

institution (12 CFR 327.9(d)(6)) or a 

determination by the FDIC that the 

institution is a new institution (12 CFR 

327.9(d)(7)). Any request for review 

must be submitted within 90 days from 

the date the assessment risk assignment 

being challenged pursuant to paragraph 

(a) of this section appears on the 

institution’s quarterly certified 

statement invoice. The request shall be 

submitted to the Corporation’s Director 

of the Division of Insurance and 

Research in Washington, DC, and shall 

include documentation sufficient to 

support the change 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 and Research 

(or designee) or the Director of the 

Division of Supervision and Consumer 

Protection (or designee), as appropriate, 

shall promptly notify the institution in 

writing of his or her determination of 

whether a change is warranted. If the 

institution requesting review disagrees 

with that determination, it may appeal 

to the FDIC’s Assessment Appeals 

Committee. Notice of the procedures 

applicable to appeals will be included 

with the written determination. 

(d) Disclosure restrictions. The 

portion of an assessment risk 

assignment provided to an institution by 

the Corporation pursuant to paragraph 

(a) of this section that reflects any 

supervisory evaluation or confidential 

information is deemed to be exempt 

information within the scope of 

§ 309.5(g)(8) of this chapter and, 

accordingly, is governed by the 

disclosure restrictions set out at § 309.6 

of this chapter. 

(e) Limited use of assessment risk 

assignment. Any assessment risk 

assignment provided to a depository 

institution under this part 327 is for 

purposes of implementing and operating 

the FDIC’s risk-based assessment 

system. Unless permitted by the 

Corporation or otherwise required by 

law, no institution may state in any 

advertisement or promotional material, 

or in any other public place or manner, 

the assessment risk assignment 

provided to it pursuant to this part. 

(f) Effective date for changes to risk 

assignment. (1) Changes to an insured 

institution’s risk assignment resulting 

from a supervisory ratings change 

become effective as of the date of 

written notification to the institution by 

its primary federal regulator or state 

authority of its supervisory rating (even 

when the CAMELS component ratings 

have not been disclosed to the 

institution), if the FDIC, after taking into 

account other information that could 

affect the rating, agrees with the rating. 

If the FDIC does not agree, changes to 

an insured institution’s risk assignment 

become effective as of the date that the 

FDIC determines that a change in the 

supervisory rating is warranted. 

(2) Changes to an insured institution’s 

risk assignment resulting from a change 

in a long-term debt issuer rating become 

effective as of the date the change is 

announced by the rating agency. 

§ 327.5 Assessment base. 

(a) Quarter-end balances and average 

daily balances. An insured depository 

institution shall determine its 

assessment base using quarter-end 


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balances until changes in the quarterly 

report of condition allow it to report 

average daily deposit balances on the 

quarterly report of condition, after 

which—

(1) An institution that becomes newly 

insured after the first report of condition 

allowing for average daily balances shall 

have its assessment base determined 

using average daily balances; 

(2) An insured depository institution 

(other than one covered in paragraph 

(a)(1) of this section) reporting assets of 

$1 billion or more on the first report of 

condition allowing for average daily 

balances, shall within one year after so 

reporting have its assessment base 

determined using average daily 

balances; 

(3) An insured depository institution 

(other than one covered in paragraph 

(a)(1) of this section) that was insured 

prior to the first report of condition 

allowing for average daily balances, 

reporting less than $1 billion in assets 

on the first report of condition allowing 

for average daily balances—

(i) May continue to have its 

assessment base determined using 

quarter end balances; or 

(ii) May opt permanently to have its 

assessment base determined using 

average daily balances after notice to the 

Corporation, but 

(iii) Shall have its assessment rate 

determined using average daily balances 

for any quarter beginning six months 

after the institution reported that its 

assets equaled or exceeded $1 billion for 

two consecutive quarters and thereafter; 

and 

(4) In any event, an insured 

depository institution that files its 

report of condition on a consolidated 

basis by including a subsidiary bank(s) 

or savings association(s) shall report its 

assessment base on an unconsolidated 

basis. 

(b) Computation of assessment base. 

Whether computed on a quarter-end 

balance or an average daily balance, the 

assessment base for any insured 

institution that is required to file a 

quarterly report of condition shall be 

computed by: 

(1) Adding all deposit liabilities as 

defined in section 3(l) of the Federal 

Deposit Insurance Act, to include 

deposits that are held in any insured 

branches of the institution that are 

located in the territories and 

possessions of the United States, but 

does not include unposted credits and 

is not reduced by unposted debits; and 

(2) Subtracting the following 

allowable exclusions, in the case of any 

institution that maintains such records 

as will readily permit verification of the 

correctness of its assessment base—

(i) Any demand deposit balance due 

from or cash item in the process of 

collection due from any depository 

institution (not including a private 

depository institution, a foreign 

depository institution, a foreign office of 

another U.S. depository institution, or a 

U.S. branch of a foreign depository 

institution) up to the total of the amount 

of deposit balances due to and cash 

items in the process of collection due to 

such depository institution that are 

included in paragraph (b)(1) of this 

section; 

(ii) Any outstanding drafts (including 

advices and authorization to charge 

deposit institution’s balance in another 

bank) drawn in the regular course of 

business; 

(iii) Any pass-through reserve 

balances; 

(iv) Liabilities arising from a 

depository institution investment 

contract that are not treated as insured 

deposits under section 11(a)(5) of the 

Federal Deposit Insurance Act (12 

U.S.C. 1821(a)(5)); and 

(v) Deposits accumulated for the 

payment of personal loans, which 

represent actual loan payments received 

by the depository institution from 

borrowers and accumulated by the 

depository institution in hypothecated 

deposit accounts for payment of the 

loans at maturity. Time and savings 

deposits that are pledged as collateral to 

secure loans are not ‘‘deposits 

accumulated for the payment of 

personal loans.’’

(c) Newly insured institutions. A 

newly insured institution shall pay an 

assessment for the assessment period 

during which it became an insured 

institution. 

§ 327.6 Terminating transfers; other 

terminations of insurance. 

(a) Terminating institution’s final two 

quarterly certified statement invoices. If 

a terminating institution does not file a 

report of condition for the quarter prior 

to the quarter in which the terminating 

transfer occurs, its assessment base for 

the quarterly certified statement invoice 

or invoices for which it failed to file a 

report of condition shall be deemed to 

be its assessment base for the last 

quarter for which the institution filed a 

report of condition. The acquiring 

institution in a terminating transfer is 

liable for paying the final invoices of the 

terminating institution. The terminating 

institution’s assessment for the quarter 

prior to the quarter in which the 

terminating transfer occurs shall be 

calculated at the terminating 

institution’s rate. 

(b) Assessment for quarter in which 

the terminating transfer occurs—(1) 

Acquirer using Average Daily Balances. 

If an acquiring institution’s assessment 

base is computed using average daily 

balances pursuant to § 327.5, the 

terminating institution’s assessment for 

the quarter in which the terminating 

transfer occurs shall be reduced by the 

percentage of the quarter remaining after 

the terminating transfer and calculated 

at the acquiring institution’s rate. 

(2) Acquirer using Quarter-end 

Balances. If an acquiring institution’s 

assessment base is computed as a 

quarter-end balance pursuant to § 327.5, 

its assessment for the quarter in which 

the terminating transfer occurs shall be 

the acquiring institution’s quarter-end 

balance calculated at the acquiring 

institution’s assessment rate, and the 

terminating institution shall not be 

assessed separately for that quarter. 

(c) Other terminations. When the 

insured status of an institution is 

terminated, and the deposit liabilities of 

such institution are not assumed by 

another insured depository institution—

(1) Payment of assessments; quarterly 

certified statement invoices. The 

terminating depository institution shall 

continue to file and certify its quarterly 

certified statement invoice and pay 

assessments for the assessment period 

its deposits are insured. Such 

terminating institution shall not be 

required to certify its quarterly certified 

statement invoice and pay further 

assessments after it has paid in full its 

deposit liabilities and the assessment to 

the Corporation required to be paid for 

the assessment period in which its 

deposit liabilities are paid in full, and 

after it, under applicable law, goes out 

of business or transfers all or 

substantially all of its assets and 

liabilities to other institutions or 

otherwise ceases to be obliged to pay 

subsequent assessments. 

(2) Payment of deposits; certification 

to Corporation. When the deposit 

liabilities of the depository institution 

have been paid in full, the depository 

institution shall certify to the 

Corporation that the deposit liabilities 

have been paid in full and give the date 

of the final payment. When the 

depository institution has unclaimed 

deposits, the certification shall further 

state the amount of the unclaimed 

deposits and the disposition made of the 

funds to be held to meet the claims. For 

assessment purposes, the following will 

be considered as payment of the 

unclaimed deposits: 

(i) The transfer of cash funds in an 

amount sufficient to pay the unclaimed 

and unpaid deposits to the public 

official authorized by law to receive the 

same; or 


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(ii) If no law provides for the transfer 

of funds to a public official, the transfer 

of cash funds or compensatory assets to 

an insured depository institution in an 

amount sufficient to pay the unclaimed 

and unpaid deposits in consideration 

for the assumption of the deposit 

obligations by the insured depository 

institution. 

(3) Notice to depositors. (i) The 

terminating depository institution shall 

give sufficient advance notice of the 

intended transfer to the owners of the 

unclaimed deposits to enable the 

depositors to obtain their deposits prior 

to the transfer. The notice shall be 

mailed to each depositor and shall be 

published in a local newspaper of 

general circulation. The notice shall 

advise the depositors of the liquidation 

of the depository institution, request 

them to call for and accept payment of 

their deposits, and state the disposition 

to be made of their deposits if they fail 

to promptly claim the deposits. 

(ii) If the unclaimed and unpaid 

deposits are disposed of as provided in 

paragraph (b)(2)(i) of this section, a 

certified copy of the public official’s 

receipt issued for the funds shall be 

furnished to the Corporation. 

(iii) If the unclaimed and unpaid 

deposits are disposed of as provided in 

paragraph (b)(2)(ii) of this section, an 

affidavit of the publication and of the 

mailing of the notice to the depositors, 

together with a copy of the notice and 

a certified copy of the contract of 

assumption, shall be furnished to the 

Corporation. 

(4) Notice to Corporation. The 

terminating depository institution shall 

advise the Corporation of the date on 

which it goes out of business or 

transfers all or substantially all of its 

assets and liabilities to other institutions 

or otherwise ceases to be obliged to pay 

subsequent assessments and the method 

whereby the termination has been 

effected. 

(d) Resumption of insured status 

before insurance of deposits ceases. If a 

depository institution whose insured 

status has been terminated is permitted 

by the Corporation to continue or 

resume its status as an insured 

depository institution before the 

insurance of its deposits has ceased, the 

institution will be deemed, for 

assessment purposes, to continue as an 

insured depository institution and must 

thereafter file and certify its quarterly 

certified statement invoices and pay 

assessments as though its insured status 

had not been terminated. The procedure 

for applying for the continuance or 

resumption of insured status is set forth 

in § 303.248 of this chapter. 

§ 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 on any 

overpayment by the institution of its 

assessment. 

(3) Accrual of interest. (i) Interest on 

an amount owed to or by the 

Corporation for the underpayment or 

overpayment of an assessment shall 

accrue interest at the relevant interest 

rate. 

(ii) Interest on an amount specified in 

paragraph (a)(3)(i) of this section shall 

begin to accrue on the day following the 

regular payment date, as provided for in 

§ 327.3(b)(2), for the amount so overpaid 

or underpaid, 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. Interest shall continue 

to accrue through the date on which the 

overpayment or underpayment (together 

with any interest thereon) is discharged. 

(iii) The relevant interest rate shall be 

redetermined for each quarterly 

assessment interval. A quarterly 

assessment interval begins on the day 

following a regular payment date, as 

specified in § 327.3(b)(2), and ends on 

the immediately following regular 

payment date. 

(b) Interest rates. (1) The relevant 

interest rate for a quarterly assessment 

interval that includes the month of 

January, April, July, and October, 

respectively, is the coupon equivalent 

yield of the average discount rate set on 

the 3-month Treasury bill at the last 

auction held by the United States 

Treasury Department during the 

preceding December, March, June, and 

September, respectively. 

(2) The relevant interest rate for a 

quarterly assessment interval will apply 

to any amounts overpaid or underpaid 

on the payment date immediately prior 

to the beginning of the quarterly 

assessment interval. The relevant 

interest rate will also apply to any 

amounts owed for previous 

overpayments or underpayments 

(including any interest thereon) that 

remain outstanding, after any 

adjustments to such overpayments or 

underpayments have been made 

thereon, at the end of the regular 

payment date immediately prior to the 

beginning of the quarterly assessment 

interval. Interest will be compounded 

daily. 

§ 327.8 Definitions. 

For the purpose of this part 327: 

(a) Deposits. The term deposit has the 

meaning specified in section 3(l) of the 

Federal Deposit Insurance Act. 

(b) Quarterly report of condition. The 

term quarterly report of condition means 

a report required to be filed pursuant to 

section 7(a)(3) of the Federal Deposit 

Insurance Act. 

(c) Assessment period—In general. 

The term assessment period means a 

period beginning on January 1 of any 

calendar year and ending on March 31 

of the same year, or a period beginning 

on April 1 of any calendar year and 

ending on June 30 of the same year; or 

a period beginning on July 1 of any 

calendar year and ending on September 

30 of the same year; or a period 

beginning on October 1 of any calendar 

year and ending on December 31 of the 

same year. 

(d) 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 

terminating transfer. 

(e) Terminating institution. The term 

terminating institution means an 

insured depository institution some or 

all of the deposits of which are assumed 

by another insured depository 

institution in a terminating transfer. 

(f) Terminating transfer. The term 

terminating transfer 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 terminating institution goes 

out of business or transfers all or 

substantially all its assets and liabilities 

to other institutions or otherwise ceases 

to be obliged to pay subsequent 

assessments by or at the end of the 

assessment period during which such 

assumption of liability for deposits 

occurs. The term terminating transfer 

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 a surviving 

institution to assume liabilities of a 

terminating institution. 

(g) Small Institution. An insured 

depository institution with assets of less 

than $10 billion as of December 31, 

2006 (other than an insured branch of a 

foreign bank) shall be classified as a 

small institution. If, after December 31, 

2006, an institution classified as large 

under paragraph (h) of this section 

reports assets of less than $10 billion in 

its reports of condition for four 


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69282 Federal Register / Vol. 71, No. 230 / Thursday, November 30, 2006 / Rules and Regulations 

1Federal Deposit Insurance Reform Act of 2005, 

Public Law 109–171, 120 Stat. 9; Federal Deposit 

Insurance Conforming Amendments Act of 2005, 

Public Law 109–173, 119 Stat. 3601. 

2Section 2109(a)(5) of the Reform Act. Pursuant 

to the Section 2109 of the Reform Act, current 

assessment regulations remain in effect until the 

effective date of new regulations. Section 2109(a)(5) 

of the Reform Act requires the FDIC, within 270 

days of enactment, to prescribe final regulations, 

after notice and opportunity for comment, 

providing for assessments under section 7(b) of the 

Federal Deposit Insurance Act. Section 2109 also 

requires the FDIC to prescribe, within 270 days, 

rules on the designated reserve ratio, changes to 

deposit insurance coverage, the one-time 

assessment credit, and dividends. A final rule on 

deposit insurance coverage was published on 

September 12, 2006. 71 FR 53547. Final rules on 

the one-time assessment credit and dividends were 

published on October 18, 2006. 71 FR 61374; 71 FR 

61385. The FDIC is publishing final rulemakings on 

the designated reserve ratio and on operational 

changes to part 327 elsewhere in this issue of the 

Federal Register. 

3The comment period expired on September 22, 

2006. The FDIC also received many comments 

relevant to this rulemaking in response to the other 

rulemakings discussed in footnote 2. All comments 

have been considered and are available on the 

FDIC’s Web site, http://www.fdic.gov/regulations/ 

laws/federal/propose.html. 4The trade associations included the American 

Bankers Association, the Independent Community 

Bankers of America, America’s Community 

Bankers, the Clearing House, the Financial Services 

Roundtable, the New York Bankers Association, the 

New Jersey League of Community Bankers, the 

Massachusetts Bankers Association, the Kansas 

Bankers Association, and the Association for 

Financial Professionals. 5The FDIC’s regulations refer to these risk 

categories as ‘‘assessment risk classifications.’’ 6The term ‘‘primary federal regulator’’ is 

synonymous with the statutory term ‘‘appropriate 

federal banking agency.’’ 12 U.S.C. 1813(q). 

consecutive quarters, the FDIC will 

reclassify the institution as small 

beginning the following quarter. 

(h) Large Institution. An insured 

depository institution with assets of $10 

billion or more as of December 31, 2006 

(other than an insured branch of a 

foreign bank) shall be classified as a 

large institution. If, after December 31, 

2006, an institution classified as small 

under paragraph (g) of this section 

reports assets of $10 billion or more in 

its reports of condition for four 

consecutive quarters, the FDIC will 

reclassify the institution as large 

beginning the following quarter. 

(i) Long-Term Debt Issuer Rating. A 

long-term debt issuer rating shall mean 

a current rating of an insured depository 

institution’s long-term debt obligations 

by Moody’s Investor Services, Standard 

& Poor’s, or Fitch Ratings. A long-term 

debt issuer rating does not include a 

rating of a company that controls an 

insured depository institution, or an 

affiliate or subsidiary of the institution. 

A current rating shall mean one that has 

been confirmed or assigned within 12 

months before the end of the quarter for 

which an assessment rate is being 

determined. If no current rating is 

available, the institution will be deemed 

to have no long-term debt issuer rating. 

(j) CAMELS composite and CAMELS 

component ratings. The terms CAMELS 

composite ratings and CAMELS 

component ratings shall have the same 

meaning as in the Uniform Financial 

Institutions Rating System as published 

by the Federal Financial Institutions 

Examination Council. 

(k) ROCA supervisory ratings. ROCA 

supervisory ratings rate risk 

management, operational controls, 

compliance, and asset quality. 

(l) New depository institution. A new 

insured depository institution is a bank 

or thrift that has not been chartered for 

at least five years as of the last day of 

any quarter for which it is being 

assessed. 

(m) Established depository institution. 

An established institution is a bank or 

thrift that has been chartered for at least 

five years as of the last day of any 

quarter for which it is being assessed. 

(n) Risk assignment. An institution’s 

risk assignment includes assignment to 

Risk Category I, II, III, or IV, and, within 

Risk Category I, assignment to an 

assessment rate or rates. 

By order of the Board of Directors. 

Dated at Washington, DC, this 2nd day of 

November, 2006. 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

[FR Doc. 06–9267 Filed 11–29–06; 8:45 am] 

BILLING CODE 6714–01–P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 327 

RIN 3064–AD09 

Assessments 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC). 

ACTION: Final rule. 

SUMMARY: The Federal Deposit 

Insurance Reform Act of 2005 requires 

that the Federal Deposit Insurance 

Corporation (the FDIC) prescribe final 

regulations, after notice and opportunity 

for comment, to provide for deposit 

insurance assessments under section 

7(b) of the Federal Deposit Insurance 

Act (the FDI Act). In this rulemaking, 

the FDIC is amending its regulations to 

create a new risk differentiation system, 

to establish a new base assessment rate 

schedule, and to set assessment rates 

effective January 1, 2007. 

DATES: Effective Date: January 1, 2007. 

FOR FURTHER INFORMATION CONTACT: 

Munsell W. St. Clair, Senior Policy 

Analyst, Division of Insurance and 

Research, (202) 898–8967; or 

Christopher Bellotto, Counsel, Legal 

Division, (202) 898–3801. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On February 8, 2006, the President 

signed the Federal Deposit Insurance 

Reform Act of 2005 into law; on 

February 15, 2006, he signed the Federal 

Deposit Insurance Reform Conforming 

Amendments Act of 2005 (collectively, 

the Reform Act).1 The Reform Act 

enacts the bulk of the recommendations 

made by the FDIC in 2001. The Reform 

Act, among other things, requires that 

the FDIC, within 270 days, ‘‘prescribe 

final regulations, after notice and 

opportunity for comment * * * 

providing for assessments under section 

7(b) of the Federal Deposit Insurance 

Act, as amended * * * ,’’ thus giving 

the FDIC, through its rulemaking 

authority, the opportunity to better price 

deposit insurance for risk.2

On July 24, 2006, the FDIC published 

in the Federal Register, for a 60-day 

comment period, a notice of proposed 

rulemaking providing for deposit 

insurance assessments (the NPR). 71 FR 

41910. The FDIC sought public 

comment on its proposal and received 

707 comment letters, including 

numerous comments from trade 

organizations.3 4 The comments and the 

final rule providing for assessments are 

discussed in later sections. 

A. The Current Risk-Differentiation 

Framework 

The Federal Deposit Insurance 

Corporation Improvement Act of 1991 

(FDICIA) required that the FDIC 

establish a risk-based assessment 

system. To implement this requirement, 

the FDIC adopted by regulation a system 

that places institutions into risk 

categories 5 based on two criteria: 

capital levels and supervisory ratings. 

Three capital groups—well capitalized, 

adequately capitalized, and 

undercapitalized, which are numbered 

1, 2 and 3, respectively—are based on 

leverage ratios and risk-based capital 

ratios for regulatory capital purposes. 

Three supervisory subgroups, termed A, 

B, and C, are based upon the FDIC’s 

consideration of evaluations provided 

by the institution’s primary federal 

regulator and other information the 

FDIC deems relevant.6 Subgroup A 


jlentini on PROD1PC65 with RULES2