[Federal Register Volume 88, Number 228 (Wednesday, November 29, 2023)]
[Rules and Regulations]
[Pages 83329-83349]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25813]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 327

RIN 3064-AF93


Special Assessment Pursuant to Systemic Risk Determination

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule.

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SUMMARY: The FDIC is adopting a final rule to implement a special 
assessment to recover the loss to the Deposit Insurance Fund (DIF or 
Fund) arising from the protection of uninsured depositors following the 
closures of Silicon Valley Bank, Santa Clara, CA, and Signature Bank, 
New York, NY. The FDIC will collect the $16.3 billion special 
assessment at a quarterly rate of 3.36 basis points, multiplied by an 
insured depository institution's (IDI) estimated uninsured deposits, 
reported for the quarter that ended December 31, 2022, adjusted to 
exclude the first $5 billion in estimated uninsured deposits from the 
IDI, or for IDIs that are part of a holding company with one or more 
subsidiary IDIs, at the banking organization level. The FDIC will 
collect the special assessment over eight quarterly assessment periods, 
although the collection period may change due to updates to the 
estimated loss pursuant to the systemic risk determination or if 
assessments collected change due to corrective amendments to the amount 
of uninsured deposits reported for the December 31, 2022, reporting 
period.

DATES: The final rule is effective on April 1, 2024, with the first 
collection for the special assessment reflected on the invoice for the 
first quarterly assessment period of 2024 (i.e., January 1 through 
March 31, 2024), with a payment date of June 28, 2024.

FOR FURTHER INFORMATION CONTACT: Division of Insurance and Research:

[[Page 83330]]

Ashley Mihalik, Associate Director, Financial Risk Management, 202-898-
3793, <a href="/cdn-cgi/l/email-protection#2a4b4743424b4643416a4c4e4349044d455c"><span class="__cf_email__" data-cfemail="a4c5c9cdccc5c8cdcfe4c2c0cdc78ac3cbd2">[email protected]</span></a>; Kayla Shoemaker, Senior Policy Analyst, 202-
898-6962, <a href="/cdn-cgi/l/email-protection#600b0113080f050d010b051220060409034e070f16"><span class="__cf_email__" data-cfemail="6e050f1d06010b030f050b1c2e080a070d40090118">[email protected]</span></a>; Legal Division: Sheikha Kapoor, 
Assistant General Counsel, 202-898-3960, <a href="/cdn-cgi/l/email-protection#32415953425d5d407254565b511c555d44"><span class="__cf_email__" data-cfemail="44372f25342b2b360422202d276a232b32">[email protected]</span></a>; Ryan 
McCarthy, Counsel, 202-898-7301, <a href="/cdn-cgi/l/email-protection#45373c2826262437312d3c0523212c266b222a33"><span class="__cf_email__" data-cfemail="9ceee5f1fffffdeee8f4e5dcfaf8f5ffb2fbf3ea">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
    A. Silicon Valley Bank, Signature Bank, and the Systemic Risk 
Exception
    B. Legal Authority and Policy Objectives
    C. The Proposed Rule
II. The Final Rule
    A. Description of the Final Rule
    B. Estimated Special Assessment Amount
    C. Rate for the Special Assessment
    D. Assessment Base and Scope of Application for the Special 
Assessment
    1. Comments Received on the Calculation of the Special 
Assessment
    2. Comments on the Reporting Date of Uninsured Deposits for 
Special Assessment Base
    3. Comments Recommending Exclusions From Uninsured Deposits for 
Special Assessment Base
    4. Final Assessment Base for the Special Assessment
    E. Prior Period Amendments
    F. Initial Collection Period for the Special Assessment
    1. Comments Received on the Initial Collection Period
    2. Adjustments to the Loss Estimate, Amendments to the Reported 
Amount of Estimated Uninsured Deposits and the Initial Collection 
Period for the Special Assessment
    G. Extended Special Assessment Collection Period
    H. One-Time Final Shortfall Special Assessment
    I. Collection of Special Assessment and Any Shortfall Special 
Assessment
    J. Payment Mechanism for the Special Assessment and Any 
Shortfall Special Assessment
    K. Mergers, Consolidations, and Terminations of Deposit 
Insurance
    L. Accounting Treatment
    M. Request for Revisions
III. Analysis and Expected Effects
    A. Analysis of the Statutory Factors
    1. The Types of Entities That Benefit
    2. Effects on the Industry
    3. Capital and Earnings Analysis
    4. Economic Conditions
    B. Alternatives Considered
    C. Effective Date and Application Date of the Final Rule
IV. Administrative Law Matters
    A. Regulatory Flexibility Act
    B. Paperwork Reduction Act
    C. Riegle Community Development and Regulatory Improvement Act
    D. Plain Language
    E. Congressional Review Act

I. Background

A. Silicon Valley Bank, Signature Bank, and the Systemic Risk Exception

    On March 10, 2023, Silicon Valley Bank was closed by the California 
Department of Financial Protection and Innovation, followed by the 
closure of Signature Bank by the New York State Department of Financial 
Services. The FDIC was appointed as the receiver for both 
institutions.\1\
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    \1\ See FDIC PR-16-2023. ``FDIC Creates a Deposit Insurance 
National Bank of Santa Clara to Protect Insured Depositors of 
Silicon Valley Bank, Santa Clara, California.'' March 10, 2023. 
https://www.fdic.gov/news/press-releases/2023/pr23016.html. See also 
FDIC PR-18-2023. ``FDIC Establishes Signature Bridge Bank, N.A., as 
Successor to Signature Bank, New York, NY.'' March 12, 2023. https://www.fdic.gov/news/press-releases/2023/pr23018.html.
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    Section 13(c)(4)(G) of the FDI Act permits the FDIC to take action 
or provide assistance to an IDI for which the FDIC has been appointed 
receiver as necessary to avoid or mitigate adverse effects on economic 
conditions or financial stability, following a recommendation by the 
FDIC Board of Directors (Board), with the written concurrence of the 
Board of Governors of the Federal Reserve System (Board of Governors), 
and a determination of systemic risk by the Secretary of the U.S. 
Department of Treasury (Treasury) (in consultation with the 
President).\2\
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    \2\ 12 U.S.C. 1823(c)(4)(G). As used in this final rule, the 
term ``bank'' is synonymous with the term ``insured depository 
institution'' as it is used in section 3(c)(2) of the FDI Act, 12 
U.S.C. 1813(c)(2).
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    On March 12, 2023, the Secretary of the Treasury, acting on the 
recommendation of the Board and Board of Governors, and after 
consultation with the President, invoked the statutory systemic risk 
exception to allow the FDIC to complete its resolution of both Silicon 
Valley Bank and Signature Bank in a manner that fully protects 
depositors.\3\ The full protection of depositors, rather than imposing 
losses on uninsured depositors, was intended to strengthen public 
confidence in the nation's banking system.
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    \3\ 12 U.S.C. 1823(c)(4)(G). See also: FDIC PR-17-2023. ``Joint 
Statement by the Department of the Treasury, Federal Reserve, and 
FDIC.'' March 12, 2023. https://www.fdic.gov/news/press-releases/2023/pr23017.html. See also: ``Remarks by Chairman Martin J. 
Gruenberg on Recent Bank Failures and the Federal Regulatory 
Response before the Committee on Banking, Housing, and Urban 
Affairs, United States Senate.'' March 27, 2023. https://www.fdic.gov/news/speeches/2023/spmar2723.html.
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    On March 12 and 13, 2023, the FDIC transferred deposits--both 
insured and uninsured--and substantially all assets of these banks to 
newly created, full-service FDIC-operated bridge banks, Silicon Valley 
Bridge Bank, N.A. (Silicon Valley Bridge Bank) and Signature Bridge 
Bank, N.A. (Signature Bridge Bank), in an action designed to protect 
depositors of these banks.\4\ The transfer of deposits was completed 
under the systemic risk exception declared on March 12, 2023.
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    \4\ A bridge bank is a chartered national bank that operates 
under a board appointed by the FDIC. It assumes the deposits and 
certain other liabilities and purchases certain assets of a failed 
bank. The bridge bank structure is designed to ``bridge'' the gap 
between the failure of a bank and the time when the FDIC can 
stabilize the institution and implement an orderly resolution.
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    On March 19, 2023, the FDIC announced it entered into a purchase 
and assumption agreement for substantially all deposits and certain 
loan portfolios of Signature Bridge Bank.\5\ On March 27, 2023, the 
FDIC entered into a purchase and assumption agreement with First-
Citizens Bank & Trust Company (First Citizens), with loss-sharing 
provided on the commercial loans it purchased from Silicon Valley 
Bridge Bank.\6\
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    \5\ FDIC PR-21-2023. ``Subsidiary of New York Community Bancorp, 
Inc. to Assume Deposits of Signature Bridge Bank, N.A., From the 
FDIC.'' March 19, 2023. https://www.fdic.gov/news/press-releases/2023/pr23021.html. The purchase and assumption agreement did not 
include approximately $4 billion of deposits related to the former 
Signature Bank's digital-asset banking business. The FDIC announced 
that it would provide these deposits directly to customers whose 
accounts are associated with the digital-asset banking business.
    \6\ FDIC PR-23-2023. ``First-Citizens Bank & Trust Company, 
Raleigh, NC, to Assume All Deposits and Loans of Silicon Valley 
Bridge Bank, N.A., From the FDIC.'' March 26, 2023. https://www.fdic.gov/news/press-releases/2023/pr23023.html.
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B. Legal Authority and Policy Objectives

    Under section 13(c)(4)(G) of the FDI Act, the loss to the DIF 
arising from the use of a systemic risk exception must be recovered 
from one or more special assessments on IDIs, depository institution 
holding companies (with the concurrence of the Secretary of the 
Treasury with respect to holding companies), or both, as the FDIC 
determines to be appropriate.\7\ As required by the FDI Act, the 
special assessment, detailed below, is intended and designed to recover 
the losses to the DIF incurred as the result of the actions taken by 
the FDIC to protect the uninsured depositors of Silicon Valley Bank and 
Signature Bank following a determination of systemic risk.\8\
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    \7\ 12 U.S.C. 1823(c)(4)(G)(ii)(I).
    \8\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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    Section 13(c)(4)(G) of the FDI Act provides the FDIC with 
discretion in the design and timeframe for any special assessments to 
recover the losses to the DIF as a result of a systemic risk 
determination. As detailed in the

[[Page 83331]]

sections that follow, and as required by section 13(c)(4)(G) of the FDI 
Act, the FDIC considered the types of entities that benefit from any 
action taken or assistance provided under the determination of systemic 
risk, economic conditions, the effects on the industry, and such other 
factors as the FDIC deemed appropriate and relevant to the action taken 
or assistance provided.\9\
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    \9\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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C. The Proposed Rule

    On May 11, 2023, the Board approved a notice of proposed rulemaking 
(the proposed rule, or proposal) to implement a special assessment, as 
required by the FDI Act, to recover the loss to the DIF arising from 
the protection of uninsured depositors following the closures of 
Silicon Valley Bank and Signature Bank.\10\ The FDIC proposed to 
collect a special assessment that would be approximately equal to the 
losses attributable to the protection of uninsured depositors at these 
two failed banks, which were estimated to total $15.8 billion.
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    \10\ See 88 FR 32694 (May 22, 2023).
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    The FDIC proposed an annual special assessment rate that would be 
derived by dividing the loss estimate attributable to the protection of 
uninsured depositors by the assessment base calculated for all IDIs 
subject to the special assessment. The proposed assessment base 
(special assessment base) was equal to an IDI's estimated uninsured 
deposits as reported in the Consolidated Reports of Condition and 
Income (Call Report) or Report of Assets and Liabilities of U.S. 
Branches and Agencies of Foreign Banks (FFIEC 002) as of December 31, 
2022, adjusted to exclude the first $5 billion of uninsured deposits at 
the banking organization level.\11\
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    \11\ As used in this final rule, the term ``banking 
organization'' includes IDIs that are not subsidiaries of a holding 
company as well as holding companies with one or more subsidiary 
IDIs.
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    In response to the proposal, the FDIC received 312 comment letters 
from depository institutions, depository institution holding companies, 
trade associations, members of Congress, and other interested 
parties.\12\ As further detailed below, the majority of commenters 
expressed support for the proposal and for the scope of application of 
the proposed rule, including the $5 billion deduction applied to the 
special assessment base. Other comment letters suggested the exclusion, 
or different treatment, of certain types of uninsured deposits included 
in the special assessment base, different reporting dates of estimated 
uninsured deposits used to calculate the assessment base, or adjustment 
of the $5 billion deduction from the special assessment base. 
Commenters additionally discussed a range of other matters that are 
addressed in the relevant sections below.
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    \12\ See comments on the proposal, available at https://www.fdic.gov/resources/regulations/federal-register-publications/2023/2023-special-assessments-systemic-risk-determination-3064-af93.html.
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II. The Final Rule

A. Description of the Final Rule

    After careful consideration of the comments received on the 
proposal and analysis of the applicable statutory factors, the FDIC is 
adopting, as final, the proposed special assessment, with 
clarifications to promote transparency and a modification to apply any 
corrective amendments to estimated uninsured deposits for the December 
31, 2022, reporting period to the calculation of the special 
assessment, following adoption of the final rule.
    The special assessment implemented through this final rule will 
recover the loss to the DIF arising from the protection of uninsured 
depositors following the closures of Silicon Valley Bank and Signature 
Bank. The total amount collected for the special assessment will be 
approximately equal to the estimated losses attributable to the 
protection of uninsured depositors at these two failed banks, which are 
currently estimated to total $16.3 billion.
    The majority of commenters expressed support for the proposal and 
for the scope of application, including the $5 billion deduction 
applied to the assessment base for the special assessment. While some 
commenters broadly objected to the collection of a special assessment, 
the FDIC is required by the FDI Act to take this action in connection 
with the systemic risk determination announced on March 12, 2023.\13\ 
In the FDIC's view, the final rule, consistent with the proposed rule, 
reflects an appropriate balancing of the goal of applying the special 
assessment to the types of entities that benefited the most from the 
protection of uninsured depositors provided under the determination of 
systemic risk while ensuring equitable, transparent, and consistent 
treatment. The final rule, consistent with the proposed rule, also 
allows for payments to be collected over an extended period of time in 
order to reduce the likelihood of overcollecting and to mitigate the 
liquidity effects of the special assessment by requiring smaller, 
consistent quarterly payments.
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    \13\ 12 U.S.C. 1823(c)(4)(G).
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B. Estimated Special Assessment Amount

    To determine the cost of the failures attributable to the cost of 
covering uninsured deposits pursuant to the determination of systemic 
risk, the FDIC determined the percentage of deposits that were 
uninsured at the time of failure and applied that percentage to the 
total cost of the failure for each bank.
    At Signature Bank, for which 67 percent of deposits were uninsured 
at the time of failure, the portion of the total estimated loss of $0.9 
billion that is attributable to the protection of uninsured depositors 
is $0.6 billion. The cost estimate for the sale of the Signature Bridge 
Bank to New York Community Bancorp decreased following the issuance of 
the proposal from $2.4 billion to approximately $0.9 billion. The 
decline in the cost estimate was primarily attributable to recoveries 
from assets in receivership that were higher than previously estimated 
offset, in part, by higher costs of liabilities assumed by the 
receivership.
    At Silicon Valley Bank, for which 88 percent of deposits were 
uninsured at the time of failure, the portion of the total estimated 
loss of $17.8 billion that is attributable to the protection of 
uninsured depositors is $15.7 billion. The cost estimate for the sale 
of the Silicon Valley Bridge Bank to First Citizens was revised 
following the issuance of the proposal from $16.1 billion to 
approximately $17.8 billion mainly due to recoveries from assets in 
receivership that were less than previously anticipated and higher 
costs of liabilities assumed by the receivership.
    The revised cost estimates form the basis for the current special 
assessment calculation in this final rule. In total, of the $18.7 
billion in estimated losses at the two banks and incurred by the DIF, 
the estimated loss attributable to the protection of uninsured 
depositors is $16.3 billion, an increase of approximately $500 million 
from the estimate of $15.8 billion described in the proposal.
    As with all failed bank receiverships, these loss estimates will be 
periodically adjusted as assets are sold, liabilities are satisfied, 
and receivership expenses are incurred. The exact amount of losses 
incurred will be determined when the FDIC terminates the receiverships. 
As noted below, the amount of the special assessment will be adjusted 
as the loss estimates change.

[[Page 83332]]

Comments Received on the Estimated Special Assessment Amount
    One commenter suggested that the special assessment should recover 
the entire amount of estimated losses. As proposed, and as required by 
statute, the FDIC will recover through the special assessment the $16.3 
billion estimated loss incurred as a result of the actions taken by the 
FDIC pursuant to the determination of systemic risk, which, in the case 
of the determination pursuant to the closures of Silicon Valley Bank 
and Signature Bank, was to protect uninsured depositors.

C. Rate for the Special Assessment

    The proposed special assessment rate was derived by dividing the 
loss estimate attributable to the protection of uninsured depositors by 
the assessment base calculated for all IDIs subject to the special 
assessment as of December 31, 2022. As described in detail below, the 
proposed assessment base was equal to estimated uninsured deposits 
reported for the quarter that ended December 31, 2022, after applying 
the $5 billion deduction.
    Under the final rule, the FDIC will impose a special assessment 
rate equal to approximately 13.4 basis points annually, an increase 
from the 12.5 basis point annual rate in the proposal.\14\ Amendments 
to reported estimated uninsured deposits filed since the adoption of 
the proposed rule have resulted in a lower total assessment base. The 
decline in the total assessment base combined with the increase in the 
cost estimate have resulted in a higher annual rate relative to the 
proposal.\15\ As of November 2, 2023, the total assessment base was 
$6.0 trillion. The special assessment rate will not change following 
the date of adoption of this final rule through the duration of the 
initial eight-quarter collection period.
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    \14\ The proposed rule noted that the special assessment rate in 
the proposal was subject to change prior to any final rule depending 
on any adjustments to the loss estimate, mergers or failures, or 
amendments to reported estimates of uninsured deposits. Estimates of 
the special assessment rate and expected effects in the proposed 
rule generally reflected any amendments to data reported through 
February 21, 2023, for the reporting period that ended December 31, 
2022, while estimates for this final rule reflect any amendments as 
of November 2, 2023. Given the closure of First Republic Bank, San 
Francisco, CA, announced on May 1, 2023, estimates in the proposed 
rule and this final rule exclude First Republic Bank in addition to 
Silicon Valley Bank and Signature Bank. See FDIC: PR-34-2023. 
``JPMorgan Chase Bank, National Association, Columbus, Ohio Assumes 
All the Deposits of First Republic Bank, San Francisco, 
California.'' May 1, 2023. https://www.fdic.gov/news/press-releases/2023/pr23034.html.
    \15\ The special assessment rate, base, and expected effects in 
this final rule reflect any amendments to data as of November 2, 
2023, for the reporting period that ended December 31, 2022.
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    The resulting quarterly rate is 3.36 basis points, or an annual 
rate of approximately 13.4 basis points. Over the initial eight-quarter 
collection period, the FDIC projects that it will collect an amount 
sufficient to recover estimated losses attributable to the protection 
of uninsured depositors of Silicon Valley Bank and Signature Bank, 
which are currently estimated to total $16.3 billion, totaling 
approximately $2.0 billion per quarter.

D. Assessment Base and Scope of Application for the Special Assessment

    Under the proposal, each IDI's assessment base for the special 
assessment would be equal to estimated uninsured deposits as reported 
in the Call Report or FFIEC 002 for the quarter that ended December 31, 
2022, after applying the $5 billion deduction.\16\ As a result of this 
deduction, most small IDIs and IDIs that are part of a small banking 
organization would not pay anything towards the special assessment. The 
special assessment would not be applicable to any banking organizations 
with total assets under $5 billion.
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    \16\ Estimated uninsured deposits are reported in Memoranda Item 
2 on Schedule RC-O, Other Data for Deposit Insurance Assessments of 
both the Call Report and FFIEC 002. IDIs with less than $1 billion 
in total assets as of June 30, 2021, were not required to report the 
estimated amount of uninsured deposits on the Call Report for 
December 31, 2022. Therefore, for IDIs that had less than $1 billion 
in total assets as of June 30, 2021, the amount and share of 
estimated uninsured deposits as of December 31, 2022, would be zero.
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1. Comments Received on the Calculation of the Special Assessment
    The majority of commenters stated that community banks should be 
exempt from the special assessment. The FDIC received 63 comments 
related to the calculation of the special assessment base and the scope 
of application for the special assessment, or the calculation of the 
special assessment rate. Some of these commenters stated that certain 
groups of banks should be exempt from or pay less of the special 
assessment, while one commenter recommended that all banks be subject 
to the special assessment.\17\ One commenter said that U.S. global 
systemically important banks (GSIBs) did not benefit from the actions 
taken under the determination of systemic risk and that although GSIBs 
served as a source of strength to the banking sector, they are 
responsible for a disproportionate share of the special assessment.
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    \17\ Among the groups of banks commenters stated should be 
exempt from the special assessment were: banks under a range of 
other asset or uninsured deposit thresholds, banks not considered 
systemically important financial institutions, Community Development 
Financial Institutions (CDFIs), Minority Depository Institutions 
(MDIs), rural banks, and mutual banks.
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    One commenter noted that given that the FDIC is required by statute 
to recover the estimated amount of loss attributable to the protection 
of uninsured depositors following the determination of systemic risk, 
any changes to the proposed special assessment base will necessarily 
redistribute the obligation among banking organizations subject to the 
special assessment.
    Several commenters recommended alternative measures for the special 
assessment base, including total assets, total deposits, uninsured 
deposits as a percentage of total deposits, an institution's regular 
risk-based deposit insurance assessment base, or to otherwise take a 
more risk-based approach to calculating the special assessment base. 
One commenter recommended a more detailed approach, stating that the 
special assessment base should be the entire deposit base, or 
alternatively the entire assessment base applied for regular quarterly 
deposit insurance assessments, for the largest institutions and 
uninsured deposits for all other banks, and that the rate for the 
special assessment should incorporate an adjusted tangible equity 
capital ratio and a scalar to factor in interest rate risk.
    With the rapid collapse of Silicon Valley Bank and Signature Bank 
in the space of 48 hours, concerns arose that risk could spread more 
widely to other institutions and that the financial system as a whole 
could be placed at risk. Shortly after Silicon Valley Bank was closed 
on March 10, 2023, a number of institutions with large amounts of 
uninsured deposits reported that depositors had begun to withdraw their 
funds.
    The extent to which IDIs rely on uninsured deposits for funding 
varies significantly. Uninsured deposits were used to fund nearly 
three-quarters of assets at Silicon Valley Bank and Signature Bank. On 
average, the largest banking organizations by asset size fund a larger 
share of assets with uninsured deposits, as depicted in Table 1 below, 
based on data as of December 31, 2022, the most recently available date 
reflecting the amount of uninsured deposits in each institution near or 
at the time the determination of systemic risk was made. Among banking 
organizations that report uninsured deposits, those with total assets 
between

[[Page 83333]]

$1 billion and $5 billion are generally the least reliant on uninsured 
deposits for funding, with uninsured deposits averaging 27.9 percent of 
assets, compared with the largest banking organizations with total 
assets greater than $250 billion, which had uninsured deposits that 
averaged 35.1 percent of assets.

    Table 1--Average Share of Assets Funded by Uninsured Deposits, by
   Banking Organization Asset Size, Based on Data for the December 31,
                       2022, Reporting Period \1\
                                [Percent]
------------------------------------------------------------------------
                                                      Average share of
                                                      assets funded by
        Asset size of banking organization           uninsured deposits
                                                          [percent]
------------------------------------------------------------------------
$1 to $5 Billion..................................                  27.9
$5 to $10 Billion.................................                  28.9
$10 to $50 Billion................................                  32.4
$50 to $250 Billion...............................                  33.3
Greater than $250 Billion.........................                  35.1
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\1\ Table reflects data for the December 31, 2022, reporting period, and
  incorporates amendments, mergers, acquisitions and failures through
  November 2, 2023.

    Uninsured deposit concentrations of IDIs, meaning the percentage of 
domestic deposits that are uninsured, also vary significantly. At 
Silicon Valley Bank, 88 percent of deposits were uninsured at the point 
of failure compared to 67 percent at Signature Bank. On average, the 
largest banking organizations by asset size reported significantly 
greater uninsured deposit concentrations relative to smaller banking 
organizations, as illustrated in Table 2 below, based on data as of 
December 31, 2022. Banking organizations with total assets between $1 
billion and $5 billion generally reported the lowest percentage of 
uninsured deposits to total domestic deposits, averaging 33.0 percent, 
compared with the largest banking organizations with total assets 
greater than $250 billion, which averaged 50.4 percent.

 Table 2--Uninsured Deposits as a Percentage of Total Domestic Deposits,
 by Banking Organization Asset Size, Based on Data for the December 31,
                       2022, Reporting Period \1\
                                [Percent]
------------------------------------------------------------------------
                                                     Ratio of uninsured
                                                      deposits to total
        Asset Size of banking organization            domestic deposits
                                                          [percent]
------------------------------------------------------------------------
$1 to $5 Billion..................................                  33.0
$5 to $10 Billion.................................                  35.0
$10 to $50 Billion................................                  40.3
$50 to $250 Billion...............................                  42.8
Greater than $250 Billion.........................                  50.4
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\1\ Reflects reporting amendments to estimated uninsured deposits,
  mergers, acquisitions, and failures through November 2, 2023.

    Following the announcement of the systemic risk determination, the 
FDIC observed a significant slowdown in uninsured deposits leaving 
certain institutions, evidence that the systemic risk determination 
helped stem the outflow of these deposits while providing stability to 
the banking industry.
    As of March 31, 2023, banks in all asset size groups experienced 
quarterly declines in uninsured deposit balances, but these declines 
were particularly severe and widespread among banks between $50 billion 
and $250 billion in total assets. In addition, between December 31, 
2022, and March 31, 2023, the eight U.S. GSIBs reported a weighted 
average decline in uninsured deposits of 2.1 percent, albeit slower 
than the industry average of approximately eight percent. However, 
changes in uninsured deposit balances over this time period varied 
widely for the GSIBs. Two of the eight GSIBs experienced growth in 
uninsured deposits of 2.6 percent and 2.0 percent over this period 
while the other six GSIBs experienced declines, some significant, 
ranging between less than two percent to nearly 17 percent.
    Defining the assessment base for the special assessment as 
estimated uninsured deposits reported as of December 31, 2022, and 
deducting $5 billion from a banking organization's assessment base, 
serves several purposes. First, banking organizations that reported $5 
billion or less in estimated uninsured deposits as of December 31, 
2022, would not be subject to the special assessment. Banking 
organizations that reported more than $5 billion in estimated uninsured 
deposits would pay based on the marginal amounts of uninsured deposits 
they reported, helping to mitigate a ``cliff effect'' that might 
otherwise apply if a different method, such as applying an asset size 
threshold, were used to determine applicability, and thereby ensuring 
more equitable treatment. Otherwise, a situation may arise in which a 
banking organization just over a particular size threshold would pay a 
special assessment, while a banking organization just below such size 
threshold would pay none.
    In general, large banks and regional banks, and particularly those 
with large amounts of uninsured deposits, were the banks most exposed 
to and likely would have been the most affected by uninsured deposit 
runs but for the determination of systemic risk. Indeed, shortly after 
Silicon Valley Bank was

[[Page 83334]]

closed, a number of institutions with large amounts of uninsured 
deposits reported that depositors had begun to withdraw their funds. 
The failure of Silicon Valley Bank and the impending failure of 
Signature Bank raised concerns that, absent immediate assistance for 
uninsured depositors, there could be negative knock-on consequences for 
similarly situated institutions, depositors and the financial system 
more broadly. Generally speaking, larger banks benefited the most from 
the stability provided to the banking industry under the systemic risk 
determination. With the $5 billion deduction from the assessment base, 
the banks that benefited the most--banks of larger asset sizes and that 
hold greater amounts of uninsured deposits--will be responsible for 
paying the special assessment.
    Second, the $5 billion deduction from the assessment base results 
in most small IDIs and IDIs that are part of a small banking 
organization not paying anything towards the special assessment. The 
special assessment is not applicable to any banking organizations with 
total assets under $5 billion.\18\
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    \18\ Some IDIs that report less than $5 billion in estimated 
uninsured deposits will be subject to the special assessment if they 
are part of banking organizations with multiple IDIs that report a 
combined total of estimated uninsured deposits in excess of $5 
billion.
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    Finally, deducting $5 billion from the assessment base of estimated 
uninsured deposits at the banking organization level rather than at the 
IDI level for banking organizations with more than one subsidiary IDI 
ensures that banking organizations with similar amounts of estimated 
uninsured deposits pay a similar special assessment, regardless of 
banking organization structure. For example, a banking organization 
with multiple IDIs with large amounts of estimated uninsured deposits 
will not have an advantage over other banking organizations with only 
one subsidiary IDI with a similarly large amount of estimated uninsured 
deposits because instead of excluding $5 billion of estimated uninsured 
deposits for each IDI in one banking organization, the $5 billion 
deduction will be distributed across multiple affiliated IDIs.
    In implementing special assessments, the FDI Act requires the FDIC 
to consider the types of entities that benefit from any action taken or 
assistance provided pursuant to the determination of systemic risk.\19\ 
The assessment base of estimated uninsured deposits with the $5 billion 
deduction ensures that the banks that benefited most from the 
assistance provided under the systemic risk determination will be 
charged a special assessment to recover losses to the DIF resulting 
from the protection of uninsured depositors, with banks of larger asset 
sizes and that hold greater amounts of uninsured deposits paying a 
higher special assessment. For these reasons, the FDIC is adopting the 
proposed exclusion of the first $5 billion from estimated uninsured 
deposits from the assessment base for the special assessment, without 
change.
---------------------------------------------------------------------------

    \19\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
---------------------------------------------------------------------------

2. Comments on the Reporting Date of Uninsured Deposits for Special 
Assessment Base
    Under the proposal, each IDI's assessment base for the special 
assessment would be equal to estimated uninsured deposits as reported 
in the Call Report or FFIEC 002 for the December 31, 2022, reporting 
period, after applying the $5 billion deduction. The FDIC sought 
comment on whether the special assessment base should be equal to 
estimated uninsured deposits reported as of December 31, 2022, or 
reported as of some other date, and the reasons for using a different 
date.
    Two commenters expressed support for the proposed December 31, 
2022, reporting date for uninsured deposits to determine the special 
assessment base. Thirteen commenters, including two trade associations 
and three letters from members of Congress, requested that estimated 
uninsured deposits reported as of a more recent date than December 31, 
2022, be used to calculate the assessment base for the special 
assessment. Most of these commenters suggested an alternative date, 
such as March 31, 2023, or June 30, 2023, while others suggested that 
the assessment base should reference the estimated uninsured deposits 
reported as of each quarter-end during the collection period or did not 
specify a date. Some commenters that supported a later reporting date 
said that institutions, particularly mid-sized and regional banks, that 
reported declines in uninsured deposit balances after December 31, 
2022, should not be charged a special assessment on uninsured deposit 
balances that they no longer hold or that are now insured.
    In the FDIC's view, estimated uninsured deposits as of December 31, 
2022, most closely approximate an institution's vulnerability to 
significant deposit withdrawals in the absence of the determination of 
systemic risk, and therefore reflect the institutions that most 
benefited from such determination. An assessment base that is 
calculated using the amount of uninsured deposits as of December 31, 
2022, would result in transparent and consistent payments, best 
approximate an institution's vulnerability to deposit withdrawals, and 
would result in a more simplified framework for calculating the special 
assessment. For these reasons, the FDIC is adopting as final the 
proposed special assessment base of estimated uninsured deposits as of 
December 31, 2022.
3. Comments Recommending Exclusions From Uninsured Deposits for Special 
Assessment Base
    Under the proposed rule, the assessment base for the special 
assessment would be adjusted to exclude the first $5 billion from 
estimated uninsured deposits reported as of December 31, 2022, 
applicable either to the IDI, if an IDI is not a subsidiary of a 
holding company, or at the banking organization level, to the extent 
that an IDI is part of a holding company with one or more subsidiary 
IDIs. The FDIC sought comment on whether it should consider an 
exemption for specific types of deposits from the special assessment 
base, and on what basis.
    Multiple commenters supported the exclusion of, or different 
treatment for, certain types of uninsured deposits included in the 
proposed assessment base for the special assessment of estimated 
uninsured deposits reported as of December 31, 2022, less the $5 
billion deduction.
a. Collateralized Deposits
    The FDIC received 25 comments requesting that the FDIC either 
exclude, or provide a different treatment for, collateralized deposits 
in the calculation of the special assessment base. In particular, 
commenters requested such treatment for the uninsured portion of public 
deposits, or deposits of states and political subdivisions that are 
secured or collateralized as required under state law (also referred to 
as preferred deposits). These commenters reasoned that collateralized 
deposits are more stable than other uninsured deposits because they are 
secured, and therefore pose little risk to the DIF. Seven of these 
commenters requested the exclusion of additional types of 
collateralized deposits, including collateralized operational deposits 
or trust-related deposits that are required to be collateralized under 
federal or state law (e.g., fiduciary funds awaiting investment or 
distribution), from the special assessment base.
    Banks report preferred deposits annually for the December 31 Call 
Report date, but they do not report other

[[Page 83335]]

types of collateralized deposits such as those mentioned by the 
commenters.\20\ Given that preferred deposits represent only a subset 
of collateralized deposits, providing an exclusion or different 
treatment for this subset of deposits would result in preferential 
treatment for this subset of collateralized deposits on the sole basis 
that these are the only type of collateralized deposits for which data 
were collected.
---------------------------------------------------------------------------

    \20\ Call Report Schedule RC-E, Part I, Memorandum item 1.e. 
requires reporting of preferred deposits (uninsured deposits of 
states and political subdivisions in the U.S. which are secured or 
collateralized as required under state law).
---------------------------------------------------------------------------

    Moreover, even if banks reported data on all collateralized 
deposits, in the FDIC's view, the presence of collateral does not fully 
mitigate run risk. Collateral may not always be sufficient to cover the 
full amount of such a deposit, depending on the economic environment, 
and particularly in the event of a liquidity crisis during which loss 
in value may need to be realized. Further, in certain types of 
resolutions, collateralized deposits reduce the assets available to the 
FDIC as receiver to satisfy claims, including the FDIC's subrogated 
claim as deposit insurer, and result in a higher loss to the DIF in the 
event of a bank failure compared to a bank holding the same level of 
deposits that are not collateralized.
b. Custody Bank Adjustments
    The FDIC received one joint comment from three custody banks 
stating that the special assessment base should be adjusted to mitigate 
the disproportionate and unwarranted impact on the custody bank 
business model and on sound asset-liability and risk management 
practices. The commenters proposed various adjustments: that the FDIC 
should allow custody banks to exclude domestic deposit balances placed 
with the Federal Reserve from the measure of estimated uninsured 
deposits used to calculate the assessment base for the special 
assessment; that the FDIC should allow custody banks to deduct 75 
percent of the domestic operational deposits \21\ from the assessment 
base for the special assessment; or that the FDIC should retain the 
regular risk-based assessment methodology for the special assessment 
while maintaining the exclusion of the first $5 billion in estimated 
uninsured deposits.
---------------------------------------------------------------------------

    \21\ The commenter defined operational deposits as residual cash 
custody banks hold for their clients in deposit accounts to 
facilitate day-to-day transactional activities related to client 
investment assets.
---------------------------------------------------------------------------

    The FDIC disagrees. The banks that benefited most from the 
assistance provided under the systemic risk determination were large 
banks and those that held greater amounts of uninsured deposits, 
regardless of the assets that those deposits were used to fund. Custody 
banks, especially those whose primary business is fiduciary and 
custodial and safekeeping, hold large amounts of uninsured deposits and 
many of those uninsured deposits are from depositors with large deposit 
balances. Further, while certain deposits held by custody banks, such 
as operational deposits, may be more stable than non-operational 
funding, in the event of idiosyncratic stress, counterparties likely 
would reduce the amount of their operational deposits.\22\ The 
adjustments proposed in the joint comment letter would result in 
custody banks paying significantly lower amounts of the special 
assessment despite holding significant amounts of uninsured deposits.
---------------------------------------------------------------------------

    \22\ See 79 FR at 61502 (Oct. 10, 2014).
---------------------------------------------------------------------------

c. Intercompany Deposits
    The FDIC received 12 comments requesting the exclusion of, or 
different treatment for, intercompany deposits in the calculation of 
the special assessment base. Commenters argued that intercompany 
deposits, such as the deposits of subsidiaries that are not IDIs, 
deposits of other affiliates such as sister companies that are not 
IDIs, or deposits of a parent holding company of the IDI, are stable 
and present minimal run risk because entities within the banking 
organization's structure are unlikely to withdraw funds in a crisis. 
Further, some commenters argued that intercompany deposits would not 
result in a loss to the DIF because they would not be provided deposit 
insurance coverage or would not need deposit insurance coverage in the 
event of the bank's failure. Some commenters noted that the methodology 
for including intercompany deposits in the assessment base for the 
special assessment may lead to double-counting certain deposits at the 
banking organization level for banking organizations with multiple 
IDIs, to the extent an IDI's deposits with its affiliates are funded 
with uninsured deposits it has taken from a depositor.
    There is no clear evidence that intercompany deposits are more 
stable relative to other deposits. Organizational structures, board 
members, governance, and decision making can differ between entities 
within the same banking organization. Likewise, the behavior of 
creditors, including uninsured depositors, of each entity can differ. 
Further, an affiliated entity's deposits at a bank are insured to the 
same extent as an unaffiliated entity's deposits in the event of the 
bank's failure. Each depositor is entitled to deposit insurance as 
permitted by law, and to pro rata receivership distribution on the 
remaining, uninsured balances. Additionally, it is not possible to 
accurately estimate the portion of uninsured deposits that are 
intercompany deposits using existing items on the Call Report.
    Deposits are the most common funding source for many banks. 
Depositors and other creditors are often differentiated by their 
stability and customer profile characteristics. While some uninsured 
deposit relationships remain stable when a bank is in good condition, 
such relationships might become less stable due to their uninsured 
status if a bank experiences financial problems or if the banking 
industry experiences stress events.
    Any revisions to the methodology for calculating the special 
assessment base, such as excluding or adjusting for certain types of 
uninsured deposits, would change the allocation of the special 
assessment, but the FDIC is required by statute to recover the full 
amount of the losses to the DIF incurred as the result of the systemic 
risk determination. As a result, any exclusion for a type of uninsured 
deposits from the special assessment base would reduce the amount of 
the special assessment for banking organizations that hold those 
excluded, uninsured deposits, and increase the assessment burden for 
all other banks holding other types of uninsured deposits. For this 
reason, and for the reasons described above, and consistent with the 
proposal, the FDIC is not excluding any particular type of uninsured 
deposits from the assessment base for the special assessment.
4. Final Assessment Base for the Special Assessment
    Following careful consideration of the comments, and for the 
reasons described above, the FDIC is adopting as final the proposed 
assessment base for the special assessment, while applying any 
corrective amendments to estimated uninsured deposits reported for the 
December 31, 2022, reporting period in calculating the assessment base. 
The methodology adopted in this final rule ensures that the banks that 
benefited most from the assistance provided under the systemic risk 
determination will be charged a special assessment to recover losses to 
the DIF resulting from the protection of uninsured depositors, with 
banks of larger asset sizes and that hold greater amounts of uninsured

[[Page 83336]]

deposits paying a higher special assessment.
    Consistent with the proposal, each IDI's assessment base for the 
special assessment will be equal to estimated uninsured deposits as 
reported in the Call Report or FFIEC 002 as of December 31, 2022, after 
applying the $5 billion deduction. The deduction of the first $5 
billion from estimated uninsured deposits in the assessment base for 
the special assessment is applicable either to the IDI, if an IDI is 
not a subsidiary of a holding company, or at the banking organization 
level, to the extent that an IDI is part of a holding company with one 
or more subsidiary IDIs.\23\
---------------------------------------------------------------------------

    \23\ IDIs with less than $1 billion in total assets as of June 
30, 2021, are not required to report the estimated amount of 
uninsured deposits on the Call Report for December 31, 2022. 
Therefore, for IDIs that had less than $1 billion in total assets as 
of June 30, 2021, the amount and share of estimated uninsured 
deposits as of December 31, 2022, is zero.
---------------------------------------------------------------------------

    For a banking organization that has more than one subsidiary IDI, 
the assessment base for the special assessment is equal to the IDI's 
total estimated uninsured deposits reported for the quarter that ended 
December 31, 2022, less its share of the $5 billion deduction, which is 
based on its share of total estimated uninsured deposits held by all 
IDI affiliates in the banking organization.\24\ Table 3 provides an 
example of the calculation of the special assessment for a banking 
organization with three subsidiary IDIs.
---------------------------------------------------------------------------

    \24\ As used in this final rule, the term ``affiliate'' has the 
same meaning as defined in section 3 of the FDI Act, 12 U.S.C. 
1813(w)(6), which references the Bank Holding Company Act (``any 
company that controls, is controlled by, or is under common control 
with another company''). See 12 U.S.C. 1841(k).
---------------------------------------------------------------------------




        Table 3--Calculation of the Special Assessment Within a Banking Organization With More Than One Insured Depository Institution Subsidiary
                                                              [Dollar amounts in millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                           Column A             Column B           Column C        Column D             Column E
                                                    ----------------------------------------------------------------------------------------------------
                                                                                                                  Assessment
                                                     Estimated uninsured  IDI share of banking   IDI Share of      base for       IDI share of special
                                                         deposits as          organization        $5 billion        special      assessment (Column D *
                                                        reported as of     estimated uninsured     deduction      assessment       26.9 basis points)/
                                                      December 31, 2022    deposits [percent]   (Column B * $5    (Column A -     current loss estimate
                                                                                                   billion)        Column C)            [percent]
--------------------------------------------------------------------------------------------------------------------------------------------------------
IDI A..............................................              $50,000                    50          $2,500         $47,500                      0.79
IDI B..............................................               40,000                    40           2,000          38,000                      0.63
IDI C..............................................               10,000                    10             500           9,500                      0.16
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Based on data reported for the quarter that ended December 31, 
2022, and as illustrated in Table 4 below, the FDIC estimates that 114 
banking organizations, which include IDIs that are not subsidiaries of 
a holding company and holding companies with one or more subsidiary 
IDIs and which comprise 81.3 percent of industry assets, will be 
subject to the special assessment, including 48 banking organizations 
with total assets over $50 billion and 66 banking organizations with 
total assets between $5 and $50 billion. No banking organizations with 
total assets under $5 billion would pay the special assessment, based 
on data for the December 31, 2022, reporting period.\25\
---------------------------------------------------------------------------

    \25\ The special assessment rate, base, and expected effects in 
this final rule reflect any amendments to data as of November 2, 
2023, for the reporting period that ended December 31, 2022. These 
estimates may change depending on any subsequent amendments to 
reported estimates of uninsured deposits.

 Table 4--Banking Organizations Required To Pay Special Assessment, Based on Data Reported for the December 31,
                                           2022, Reporting Period \1\
----------------------------------------------------------------------------------------------------------------
                                                                        Percentage of
                                                                         all banking
                                                         Number of      organizations
                                                          banking       in asset size     Share of     Share of
         Asset size of banking organization            organizations       category       special      industry
                                                      required to pay  required to pay   assessment     assets
                                                          special          special       [percent]    [percent]
                                                         assessment       assessment
                                                                          [percent]
----------------------------------------------------------------------------------------------------------------
Greater than $50 billion............................               48              1.1         95.3         74.5
Between $5 and $50 billion..........................               66              1.5          4.7          6.8
Under $5 billion....................................                0              0.0          0.0          0.0
                                                     -----------------------------------------------------------
    Total...........................................              114              2.6        100.0         81.3
----------------------------------------------------------------------------------------------------------------
\1\ Reflects reporting amendments to estimated uninsured deposits, mergers, acquisitions, and failures through
  November 2, 2023.

E. Prior Period Amendments

    Under the proposal, amendments to an IDI's Call Report for the 
December 31, 2022, reporting period made after the date of adoption of 
any final rule would not have affected an institution's rate or base 
for the special assessment.
    The FDIC is finalizing this aspect of the rule, as proposed, but in 
calculating the special assessment, will apply any amendments made by 
IDIs to correct the reporting of estimated uninsured deposits that are 
confirmed through, or associated with the result of, the FDIC's

[[Page 83337]]

review of an institution's reporting methodology (as described below).
    Following the issuance of the proposed rule, the FDIC observed that 
some IDIs were reporting or filing amendments to the reporting of 
estimated uninsured deposits for the December 31, 2022, reporting 
period in a manner that is inconsistent with the instructions to the 
Call Report. For example, some institutions incorrectly reduced the 
reported amount of uninsured deposits to the extent that they are 
collateralized by pledged assets; this is incorrect because in and of 
itself, the existence of collateral has no bearing on the portion of a 
deposit that is covered by federal deposit insurance. Additionally, 
some institutions incorrectly reduced the amount of uninsured deposits 
reported on Schedule RC-O by excluding certain intercompany deposit 
balances.
    The FDIC did not receive any comments on the proposed treatment of 
prior period amendments. Some commenters, however, raised concerns 
about the accuracy of the amount of estimated uninsured deposits 
reported on the Call Report. The FDIC received two comment letters 
indicating that banks may be reporting uninsured deposits differently, 
or in an inconsistent manner, and one comment letter indicating that 
some banks were confused about whether to include collateralized 
deposits in the amount of estimated uninsured deposits reported on the 
Call Report.
    On July 24, 2023, the FDIC issued a Financial Institution Letter 
(FIL) on Estimated Uninsured Deposits Reporting Expectations, 
reiterating longstanding instructions and stating that each IDI is 
responsible for the accuracy of the data reported in its Call Report 
and for filing amendments as necessary to ensure Call Report 
accuracy.\26\ The FIL stated that, consistent with the requirement to 
file accurate Call Reports, IDIs that incorrectly reported uninsured 
deposits should amend their Call Reports by making the appropriate 
changes to the data and submitting the revised data file.
---------------------------------------------------------------------------

    \26\ FDIC Financial Institution Letter (FIL 37-2023), Estimated 
Uninsured Deposits Reporting Expectations. https://www.fdic.gov/news/financial-institution-letters/2023/fil23037.html.
---------------------------------------------------------------------------

    As a general matter, the amount of estimated uninsured deposits 
reported on the Call Report is monitored as one of many indicators of 
safety and soundness, and its accuracy, as with all items collected on 
the Call Report, is of the utmost importance. The reported amount of 
estimated uninsured deposits is also used to determine the amount of 
estimated insured deposits in calculating the DIF reserve ratio, which 
is the ratio of the DIF balance to all insured deposits.\27\
---------------------------------------------------------------------------

    \27\ See section 3(y)(3) of the FDI Act, 12 U.S.C. 1813(y)(3).
---------------------------------------------------------------------------

    The FDIC is conducting a review (Assessment Reporting Review) of 
the reporting methodology for estimated uninsured deposits and related 
items on the Call Report because of the importance of these items as 
indicators of safety and soundness.\28\ The Assessment Reporting Review 
may result in amendments to uninsured deposits and related items 
reported on the Call Report if the FDIC determines that an institution 
is not reporting these items in accordance with the instructions. Given 
the planned Assessment Reporting Review, in calculating this special 
assessment this final rule applies any amendments made by IDIs to 
correct the reporting of estimated uninsured deposits that are 
confirmed through, or associated with the result of, the FDIC's review 
of an institution's reporting methodology.
---------------------------------------------------------------------------

    \28\ Consistent with the FDIC's practice of conducting reviews 
under Section 7(b)(4) of the FDI Act to confirm the correctness of 
any assessment, the FDIC will review an institution's reporting 
methodology for estimated uninsured deposits and related items. See 
12 U.S.C. 1817(b)(4).
---------------------------------------------------------------------------

    Under the final rule, the special assessment rate and each banking 
organization's special assessment base has been calculated using 
estimated uninsured deposits for the December 31, 2022, reporting 
period as reported on November 2, 2023.\29\ Amendments made to an 
institution's December 31, 2022, Call Report through November 2, 2023, 
have been accounted for in the calculations, as proposed. In addition, 
under the final rule, certain amendments filed after November 2, 2023, 
will affect the calculation of an institution's special assessment 
base, as described below.
---------------------------------------------------------------------------

    \29\ As proposed, the assessment base and rate would be 
calculated as of the date the final rule is adopted; however, under 
the final rule, this is calculated on November 2, 2023, shortly 
before the date of adoption, for operational and administrative 
reasons.
---------------------------------------------------------------------------

    In particular, if, as part of the FDIC's Assessment Reporting 
Review of an institution's reporting methodology (described above), the 
FDIC finds that, as of November 2, 2023, an institution was not 
reporting uninsured deposits for the December 31, 2022, reporting 
period in accordance with the Call Report instructions, and the 
institution files a corrective amendment as a result of the FDIC's 
review after November 2, 2023, the FDIC will adjust the special 
assessment base based on such corrective amendment for such 
institution, and any affiliates, as applicable, for all collection 
periods. Additionally, if an institution files an amendment to the 
reporting of estimated uninsured deposits for the December 31, 2022, 
reporting period after November 2, 2023, and the FDIC finds that such 
amendment brings the reporting of uninsured deposits into compliance 
with the Call Report instructions, the FDIC will adjust the special 
assessment base based on such corrective amendment for such 
institution, and any affiliates, as applicable, for all collection 
periods. If such institution is part of a banking organization with 
multiple subsidiary IDIs, such corrective amendments will also affect 
the distribution of the $5 billion deduction from the banking 
organization's assessment base for all collection periods.
    Prior period amendments filed after November 2, 2023, that are not 
the result of corrections to errors or misreporting will not affect an 
institution's special assessment base. Modifications to an 
institution's special assessment base will take effect beginning the 
collection quarter following the date of amendment, and the FDIC will 
apply such modifications retroactively to the first quarterly 
collection period, as applicable.
    Any retroactive special assessment amount due will be included, in 
full, on the invoice for the quarter following the date of the 
amendment. If the amendment resulted in a downward revision of the 
assessment base for the special assessment, the banking organization 
will be credited the amount the institution overpaid, with interest, 
and such amount, including interest, will be applied to any remaining 
amount of the special assessment due from the banking organization 
beginning in the quarter following the date of the amendment. In the 
unlikely event a credit remains after the special assessment collection 
period has ended, the excess credit amount will be refunded to the 
banking organization, with interest. The FDIC will pay interest on 
credited amounts resulting from amendments to correct the reporting of 
estimated uninsured deposits that are confirmed through, or associated 
with the result of, the FDIC's Assessment Reporting Review of an 
institution's reporting methodology and will collect interest on any 
retroactive special assessment amounts due to the FDIC as a result of 
such amendments.\30\
---------------------------------------------------------------------------

    \30\ Interest payments collected will be applied to any 
remaining amount of the special assessment while the amount of 
interest paid by the FDIC will be added to the amount required to 
recover estimated losses.

---------------------------------------------------------------------------

[[Page 83338]]

F. Initial Collection Period for the Special Assessment

    Under the proposal, the special assessment would be collected 
beginning with the first quarterly assessment period of 2024 (i.e., 
January 1 through March 31, 2024), with an invoice payment date of June 
28, 2024. In order to mitigate the risk of overcollecting as the loss 
estimates for the failed banks are periodically adjusted, to preserve 
liquidity at IDIs, and in the interest of consistent and predictable 
assessments, the special assessment would be collected over eight 
quarters.
1. Comments Received on the Initial Collection Period
    The FDIC received three comments on the length of the initial 
collection period, with one commenter requesting a longer collection 
period to help with cash flow, one commenter requesting a shorter 
collection period given the ability of the banking industry to repay 
the DIF for the special assessment as quickly as possible, and one 
commenter suggesting that banks should have the option to fully fund 
obligations prior to the end of the proposed collection period.
    The FDIC is required by statute to place the excess funds collected 
through the special assessment in the DIF.\31\ By spreading out the 
collection period over eight quarters, a length of time that would 
enable the FDIC to develop a more accurate estimate of loss, and 
allowing for early cessation after the FDIC has collected enough to 
recover actual or estimated losses, the FDIC mitigates the risk of 
overcollecting. Reducing the length of the collection period could also 
adversely impact liquidity. Therefore, the FDIC is adopting the initial 
collection period of eight quarters as proposed, with a modification to 
allow corrective amendments to estimated uninsured deposits for the 
December 31, 2022, reporting period, following adoption of the final 
rule.
---------------------------------------------------------------------------

    \31\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
---------------------------------------------------------------------------

2. Adjustments to the Loss Estimate, Amendments to the Reported Amount 
of Estimated Uninsured Deposits and the Initial Collection Period for 
the Special Assessment
    The estimated loss attributable to the protection of uninsured 
depositors pursuant to the systemic risk determination is currently 
estimated to total $16.3 billion. However, loss estimates for failed 
banks are periodically adjusted as assets are sold, liabilities are 
satisfied, and receivership expenses are incurred. As proposed, under 
the final rule, the FDIC will review and consider any revisions to the 
loss estimate each quarter of the collection period. Given the planned 
review of the reporting methodology for estimated uninsured deposits, 
in calculating the special assessment, the final rule will additionally 
apply any amendments to correct the reporting of estimated uninsured 
deposits that are confirmed through, or associated with the result of, 
the FDIC's review of an institution's reporting methodology.
    If, prior to the end of the eight-quarter collection period, the 
FDIC expects the loss to be lower than the amount it expects to collect 
from the special assessment, due to revisions to the loss estimate or 
due to amendments applied to estimated uninsured deposits, the FDIC 
will cease collection of the special assessment before the end of the 
initial eight-quarter collection period, in the quarter after it has 
collected enough to recover actual or estimated losses.\32\ The FDIC 
will provide notice of any cessation of collections at least 30 days 
before the next payment is due.
---------------------------------------------------------------------------

    \32\ Amendments to the reporting of estimated uninsured deposits 
may result in a higher amount collected, but the increase may not be 
of a magnitude large enough to cease collection early.
---------------------------------------------------------------------------

G. Extended Special Assessment Collection Period

    Under the proposal, if, at the end of the eight-quarter collection 
period, the estimated or actual loss exceeds the amount collected, the 
FDIC would extend the collection period over one or more quarters as 
needed in order to collect the difference between the amount collected 
and the estimated or actual loss at the end of the eight-quarter 
collection period, (the shortfall amount), after providing notice of at 
least 30 days before the first payment of any extended special 
assessment is due.
    The FDIC did not receive any comments on the extended special 
assessment collection period, and is finalizing as proposed, while, in 
calculating the special assessment, applying any amendments to correct 
the reporting of estimated uninsured deposits that are confirmed 
through, or associated with the result of, the FDIC's review of an 
institution's reporting methodology.
    In the event that an extended collection period is needed, the FDIC 
will collect the shortfall amount on a quarterly basis. The assessment 
rate for any extended special assessment will equal the shortfall 
amount divided by the total amount of uninsured deposits less the $5 
billion deduction for each banking organization subject to the special 
assessment, adjusted for failures or amendments to correct the 
reporting of estimated uninsured deposits resulting from the FDIC's 
Assessment Reporting Review of an institution's reporting methodology 
that occurred before or during the initial eight-quarter collection 
period. In the interest of consistency and predictability, the 
quarterly rate will not exceed the 3.36 basis point quarterly special 
assessment rate applied during the initial eight-quarter collection 
period, and such extended special assessment will be collected for the 
minimum number of quarters needed to recover the shortfall amount at 
such quarterly rate.
    The assessment base for such extended special assessment will be as 
described above, based on estimated uninsured deposits reported as of 
November 2, 2023, for the December 31, 2022, reporting period, adjusted 
for amendments to correct reporting resulting from the FDIC's review of 
an institution's reporting methodology, with a $5 billion deduction for 
each banking organization.

H. One-Time Final Shortfall Special Assessment

    The exact amount of losses will be determined when the FDIC 
terminates the receiverships. Receiverships are terminated once the 
FDIC has completed the disposition of the receivership's assets and has 
resolved all obligations, claims, and other impediments. The 
termination of the receiverships to which this special assessment 
applies may occur years after the initial eight-quarter collection 
period and any extended collection period.
    In the likely event that a final loss amount at the termination of 
the receiverships is not determined until after the initial collection 
period and any extended collection period, and if losses at the 
termination of the receiverships exceed the amount collected through 
such special assessment, the FDIC proposed to impose a one-time final 
shortfall special assessment to collect the final shortfall amount.
Comments Received on the One-Time Final Shortfall Special Assessment
    The FDIC received four comments on the one-time final shortfall 
special assessment. One supported the proposed calculation. One 
commenter recommended that if the amount collected exceeds the final 
loss estimate,

[[Page 83339]]

that the excess collected should be credited against future 
assessments. One commenter requested that the assessment base 
methodology be adjusted to incorporate a risk-based component. One 
commenter said that the one-time final shortfall special assessment 
should be calculated at the end of a recommended one-year payment 
period.
    The FDIC would only collect a one-time final shortfall special 
assessment if the final loss amount at the termination of the 
receiverships is not determined until after the initial collection 
period and any extended collection period, and if losses at the 
termination of the receiverships exceed the amount collected through 
such special assessment.
    For the reasons described above, the FDIC is adopting the one-time 
final shortfall special assessment as proposed, while, in calculating 
the special assessment, applying any amendments to correct the 
reporting of estimated uninsured deposits that are confirmed through, 
or associated with the result of, FDIC's review of an institution's 
reporting methodology.
    The assessment base for such one-time final shortfall special 
assessment will be as described above, based on estimated uninsured 
deposits reported as of November 2, 2023, for the December 31, 2022, 
reporting period, adjusted for amendments to correct reporting 
resulting from the FDIC's review of an institution's reporting 
methodology, with a $5 billion deduction for each banking organization.
    The FDIC will determine the assessment rate for the one-time final 
shortfall special assessment based on the amount needed to recover the 
final shortfall amount and the total amount of estimated uninsured 
deposits reported for the quarter that ended December 31, 2022, 
adjusted for amendments to correct reporting resulting from the FDIC's 
review of an institution's reporting methodology up to the 
determination of the shortfall amount, after applying the $5 billion 
deduction.
    The entire one-time final shortfall special assessment will be 
collected in one quarter so that there are no missed amounts due to 
amendments or failures and to streamline the operational impact on 
banking organizations. The FDIC will provide banking organizations 
notice of at least 45 days before payment of any one-time final 
shortfall special assessment is due and will consider the statutory 
factors, including economic conditions and the effects on the industry, 
in deciding on the timing of such payment.
    The FDIC will notify each IDI subject to a one-time final shortfall 
special assessment of the final shortfall special assessment rate and 
its share of the final shortfall assessment no later than 15 days 
before payment is due. The notice will be included in the IDI's invoice 
for its regular quarterly deposit insurance assessment.

I. Collection of Special Assessment and Any Shortfall Special 
Assessment

    The special assessment and any shortfall special assessment will be 
collected at the same time and in the same manner as an IDI's regular 
quarterly deposit insurance assessment. Invoices for an IDI's regular 
quarterly deposit insurance assessment will disclose the amount of any 
special assessment or shortfall special assessment due.
Comments Received on Communication of Loss Estimates
    Two commenters requested that the FDIC communicate any revisions to 
the loss estimate and updates on the collection of the special 
assessment. To increase transparency and in response to comments on the 
proposal, the FDIC is clarifying that it plans to communicate any 
changes to the loss estimate, as applicable, and to provide updates on 
the collection of the special assessment to banking organizations 
subject to the special assessment. Such updates will be communicated 
primarily through quarterly assessment invoices issued to institutions 
subject to the special assessment. The FDIC also publishes estimated 
losses and other data on bank failures and assistance on its publicly 
available website.\33\
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    \33\ See FDIC BankFind Suite: Bank Failures & Assistance Data, 
available at: https://banks.data.fdic.gov/explore/failures. See also 
FDIC Failed Bank List, available at: https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/.
---------------------------------------------------------------------------

J. Payment Mechanism for the Special Assessment and Any Shortfall 
Special Assessment

    Each IDI is required to take any actions necessary to allow the 
FDIC to debit its special assessment and any shortfall special 
assessment from the bank's designated deposit account used for payment 
of its regular assessment. Before the dates that payments are due, each 
IDI must ensure that sufficient U.S. dollar funds to pay its 
obligations are available in the designated account for direct debit by 
the FDIC. Failure to take any such action or to fund the account would 
constitute nonpayment of the special assessment. Penalties for 
nonpayment will be as provided for nonpayment of an IDI's regular 
assessment.\34\
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    \34\ See 12 CFR 327.3(c).
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K. Mergers, Consolidations, and Terminations of Deposit Insurance

    Under the proposed rule, if an IDI were to acquire--through merger 
or consolidation--another IDI following the adoption of this final rule 
or during any special assessment collection period, the acquiring IDI 
would be required to pay the acquired IDI's special assessment, if any, 
including any unpaid special assessment, in addition to its own special 
assessment, from the quarter of the acquisition through the remainder 
of all special assessment collection periods. Under the proposal, in 
the event that the FDIC extends the collection period or imposes a one-
time final shortfall assessment, each banking organization's assessment 
base would be adjusted for mergers or failures that occurred during the 
eight-quarter collection period.
    Under the proposed rule, when the insured status of an IDI is 
terminated and the deposit liabilities of the IDI are not assumed by 
another IDI, the IDI whose insured status is terminating must, among 
other things, continue to pay assessments, including the special 
assessment, for the assessment periods that its deposits are insured, 
but not thereafter.\35\
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    \35\ See 12 CFR 327.6(c).
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    When an IDI voluntarily terminates its deposit insurance under the 
FDI Act, under the proposal the IDI whose insured status is terminating 
must, among other things, continue to pay assessments for the 
assessment periods that its deposits are insured.\36\
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    \36\ See 12 CFR 327.6(c).
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Comments Received on Mergers, Consolidations, and Terminations of 
Deposit Insurance
    One commenter expressed concern that use of the December 31, 2022, 
reporting date ignores recent acquisition activity while another 
commenter requested clarification that the estimates in the proposed 
rule exclude the uninsured deposits that New York Community Bank 
assumed following its acquisition of Signature Bank in March 2023.\37\ 
One commenter requested clarification of the point at which obligation 
to pay the special assessment would end if a bank were to voluntarily 
terminate its insured status during the collection period, noting that 
this is

[[Page 83340]]

relevant to when the special assessment is reflected under 
International Financial Reporting Standards (IFRS) accounting 
principles.
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    \37\ FDIC PR-21-2023. ``Subsidiary of New York Community 
Bancorp, Inc. to Assume Deposits of Signature Bridge Bank, N.A., 
From the FDIC.'' March 19, 2023. https://www.fdic.gov/news/press-releases/2023/pr23021.html.
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    The FDIC is clarifying that the uninsured deposits of First 
Republic Bank, Silicon Valley Bank, and Signature Bank, which failed 
prior to the adoption of the proposed rule, were excluded from the 
proposed calculation of the assessment rate and base for the special 
assessment, and the estimated expected effects in the proposed rule and 
in this final rule, and is providing clarification that such exclusion 
will be adopted in the final rule. This exclusion was intended to 
prevent disincentivizing any potential future acquisition activity 
following the adoption of the proposed rule, particularly given the 
uncertainty in the banking sector at the time the proposal was adopted.
    The FDIC is adopting as final the proposed provisions related to 
mergers, acquisitions, and terminations of deposit insurance, with two 
adjustments. First, in the event that the FDIC extends the collection 
period or imposes a one-time final shortfall assessment, each banking 
organization's assessment base will not be adjusted for mergers or 
failures that occurred after the adoption of this final rule or during 
the eight-quarter collection period. In the FDIC's view, each banking 
organization's assessment base reflects its relative benefit from the 
assistance provided under the systemic risk determination. This 
treatment would ensure that an acquiring bank's special assessment, and 
any special assessment assumed for an acquired bank, continues to 
reflect each banking organization's relative benefit from the 
assistance provided under the systemic risk determination, and would 
have the result that a banking organization subject to the special 
assessment that acquires another banking organization also subject to 
the special assessment would derive benefit from the $5 billion 
deduction for both special assessment payments. The FDIC is also 
clarifying that the special assessment base of the acquiring bank in a 
merger or consolidation that occurred prior to the March 12, 2023, 
determination of systemic risk would be adjusted to include the 
uninsured deposits of the acquired bank and would derive benefit of a 
single $5 billion deduction. Calculating the assessment base in this 
manner best reflects the structure of the banking organization at the 
time the determination of systemic risk was made, and reflects the 
organization's relative benefit from the assistance provided.
    Second, in order to avoid incentivizing banks to voluntarily 
terminate their insured status to avoid paying the special assessment 
under the final rule, the FDIC will require any bank that voluntarily 
terminates its insured status after the adoption of this final rule or 
during any special assessment collection period to pay the entire 
remaining amount of its special assessment at the same time its 
obligation to pay regular deposit insurance assessments would end.\38\
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    \38\ See 12 CFR 327.6(c).
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L. Accounting Treatment

    Each institution should account for the special assessment in 
accordance with U.S. generally accepted accounting principles (GAAP). 
In accordance with Financial Accounting Standards Board Accounting 
Standards Codification Topic 450, Contingencies (FASB ASC Topic 450), 
an estimated loss from a loss contingency shall be accrued by a charge 
to income if information indicates that it is probable that a liability 
has been incurred and the amount of loss is reasonably estimable.\39\ 
Therefore, an institution will recognize in the Call Report and other 
financial statements the accrual of a liability and estimated loss 
(i.e., expense) from a loss contingency for the special assessment when 
the institution determines that the conditions for accrual under GAAP 
have been met. In addition, the General Instructions to the Call Report 
provide guidance on ASC Topic 855, Subsequent Events, which may be 
applicable.\40\
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    \39\ FASB ASC paragraph 450-20-25-2.
    \40\ See General Instructions to the Call Report, available at: 
https://www.fdic.gov/resources/bankers/call-reports/crinst-031-041/2022/2022-12-generalinstructions.pdf.
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    Similarly, each institution should account for any shortfall 
special assessment in accordance with FASB ASC Topic 450 when the 
conditions for accrual under GAAP have been met.
Comments Received on Accounting Treatment
    The FDIC received two comments that supported restructuring the 
special assessment as a prepaid expense that could be amortized over a 
multi-year period.
    Structuring the special assessment as a prepaid expense would 
reduce the one-time effect on income but would also reduce liquidity by 
the full amount of the special assessment at payment. In the FDIC's 
view, the proposed structure of the special assessment best promotes 
maintenance of liquidity, which will allow institutions to absorb any 
potential unexpected setbacks while continuing to meet the credit needs 
of the U.S. economy.
    For these reasons, the FDIC is declining to restructure the special 
assessment as a prepaid expense.

M. Request for Revisions

    An IDI may submit a written request for revision of the computation 
of any special assessment or shortfall special assessment pursuant to 
existing regulation 12 CFR 327.3(f).\41\
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    \41\ Existing regulation 12 CFR 327.4(c) allows an IDI to submit 
a request for review of the IDI's risk assignment. Because the 
amount of an IDI's special assessment or shortfall special 
assessment is not determined based on the IDI's risk assignment, the 
request for review provision under 12 CFR 327.4(c) would not be 
applicable to an IDI's special assessment or shortfall special 
assessment.
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III. Analysis and Expected Effects

A. Analysis of the Statutory Factors

    Section 13(c)(4)(G) of the FDI Act provides the FDIC with 
discretion in the design and timeframe for any special assessments to 
recover the losses from the systemic risk determination. As detailed in 
the sections that follow, and as required by the FDI Act, the FDIC has 
considered the types of entities that benefit from any action taken or 
assistance provided under the determination of systemic risk, effects 
on the industry, economic conditions, and any such other factors as the 
FDIC deems appropriate and relevant to the action taken or the 
assistance provided.\42\
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    \42\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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1. The Types of Entities That Benefit
    In implementing special assessments under section 13(c)(4)(G) of 
the FDI Act, the FDIC is required to consider the types of entities 
that benefit from any action taken or assistance provided pursuant to 
determination of systemic risk.\43\
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    \43\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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    With the rapid collapse of Silicon Valley Bank and Signature Bank 
in the space of 48 hours, concerns arose that risk could spread more 
widely to other institutions and that the financial system as a whole 
could be placed at risk. Shortly after Silicon Valley Bank was closed 
on March 10, 2023, a number of institutions with large amounts of 
uninsured deposits reported that depositors had begun to withdraw their 
funds. The extent to which IDIs rely on uninsured deposits for funding 
varies significantly. Uninsured deposits were used to fund nearly 
three-quarters of the assets at Silicon Valley Bank and Signature Bank. 
On March 12, 2023, the Board and the Board of Governors voted 
unanimously to recommend, and the

[[Page 83341]]

Treasury Secretary, in consultation with the President, determined that 
the FDIC could use emergency systemic risk authorities under the FDI 
Act to complete its resolution of both Silicon Valley Bank and 
Signature Bank in a manner that fully protects depositors.\44\ The full 
protection of depositors, rather than imposing losses on uninsured 
depositors, was intended to strengthen public confidence in the 
nation's banking system.
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    \44\ 12 U.S.C. 1823(c)(4)(G). See also: FDIC PR-17-2023. ``Joint 
Statement by the Department of the Treasury, Federal Reserve, and 
FDIC.'' March 12, 2023. https://www.fdic.gov/news/press-releases/2023/pr23017.html.
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    In the weeks that followed the determination of systemic risk, 
efforts to stabilize the banking system and stem potential contagion 
from the failures of Silicon Valley Bank and Signature Bank ensured 
that depositors would continue to have access to their savings, that 
small businesses and other employers could continue to make payrolls, 
and that other banks could continue to extend credit to borrowers and 
serve as a source of support. In general, large banks and regional 
banks, and particularly those with large amounts of uninsured deposits, 
were the banks most exposed to and likely would have been the most 
affected by uninsured deposit runs. Indeed, shortly after Silicon 
Valley Bank was closed, a number of institutions with large amounts of 
uninsured deposits reported that depositors had begun to withdraw their 
funds. The failure of Silicon Valley Bank and the impending failure of 
Signature Bank raised concerns that, absent immediate assistance for 
uninsured depositors, there could be negative knock-on consequences for 
similarly situated institutions, depositors, and the financial system 
more broadly.
    Following the announcement of the systemic risk determination, the 
FDIC observed a significant slowdown in uninsured deposits leaving 
certain institutions, evidence that the systemic risk determination 
helped stem the outflow of these deposits while providing stability to 
the banking industry.
    Between December 31, 2022, and March 31, 2023, banks in all asset 
size groups experienced quarterly declines in uninsured deposit 
balances, but these declines were particularly severe and widespread 
among banks between $50 billion and $250 billion in total assets. 
Between December 31, 2022, and March 31, 2023, the eight U.S. GSIBs 
reported a weighted average decline in uninsured deposits of 2.1 
percent, but changes in uninsured deposit balances over this time 
period varied widely. Two of the eight GSIBs experienced growth in 
uninsured deposits of 2.6 percent and 2.0 percent over this period 
while the other six GSIBs experienced declines, some significant, 
ranging between less than two percent to nearly 17 percent.
    Generally speaking, larger banks benefited the most from the 
stability provided to the banking industry under the systemic risk 
determination. Under the final rule, the banks that benefited most from 
the assistance provided under the systemic risk determination will be 
charged a special assessment to recover losses to the DIF resulting 
from the protection of uninsured depositors, with banks of larger asset 
sizes and that hold greater amounts of uninsured deposits paying a 
higher special assessment.
2. Effects on the Industry
    In calculating the assessment base for the special assessment, the 
FDIC will deduct $5 billion from each IDI or banking organization's 
aggregate estimated uninsured deposits reported for the quarter that 
ended December 31, 2022. As a result, any institution that did not 
report any uninsured deposits as of December 31, 2022, will not be 
subject to the special assessment. Additionally, most small IDIs and 
IDIs that are part of a small banking organization will not pay 
anything towards the special assessment. Some small and mid-size IDIs 
will be subject to the special assessment if they are subsidiaries of a 
banking organization with more than $5 billion in uninsured deposits 
and such IDIs report positive amounts of uninsured deposits after 
application of the deduction, or if they directly hold more than $5 
billion in estimated uninsured deposits as of December 31, 2022, which 
for smaller institutions would constitute heavy reliance on uninsured 
deposits.
    Based on data reported for the quarter ended December 31, 2022, and 
as captured in Table 4 above, the FDIC estimates that 114 banking 
organizations will be subject to the special assessment, including 48 
banking organizations with total assets over $50 billion and 66 banking 
organizations with total assets between $5 and $50 billion. No banking 
organizations with total assets under $5 billion will pay a special 
assessment, based on data reported as of December 31, 
2022.<SUP>45 46</SUP> It is anticipated that the same banking 
organizations subject to the special assessment would also be subject 
to any extended special assessment or one-time final shortfall special 
assessment, absent the effects of any amendments to estimated uninsured 
deposits, mergers, consolidations, failures, or other terminations of 
deposit insurance that occur through the determination of such extended 
special assessment or one-time final shortfall special assessment.
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    \45\ The number of banking organizations subject to the special 
assessment may change after the publication of the final rule 
depending on any mergers, consolidations, failures, or other 
terminations of deposit insurance, or amendments to reported 
estimates of uninsured deposits.
    \46\ Some IDIs that report less than $5 billion in estimated 
uninsured deposits will be subject to the special assessment if they 
are part of banking organizations with multiple IDIs that report a 
combined total of estimated uninsured deposits in excess of $5 
billion.
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3. Capital and Earnings Analysis
    The FDIC has analyzed the effect of the special assessment on the 
capital and earnings of banking organizations, including IDIs that are 
not subsidiaries of a holding company. This analysis incorporates data 
on estimated uninsured deposits reported by banking organizations for 
the December 31, 2022, reporting period, including amendments filed 
through November 2, 2023, and assumes that pre-tax income for the 
quarter in which a banking organization will recognize the accrual of a 
liability and an estimated loss (i.e., expense) from a loss contingency 
for the special assessment, will equal the average of their pre-tax 
income from July 1, 2022, through June 30, 2023.\47\
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    \47\ All income statement items used in this analysis were 
adjusted for the effect of mergers. Institutions for which four 
quarters of non-zero earnings data were unavailable, including 
insured branches of foreign banks, were excluded from this analysis.
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    To avoid the possibility of underestimating effects on bank 
earnings and capital, the analysis also assumes that the effects of the 
special assessment are not transferred to customers in the form of 
changes in borrowing rates, deposit rates, or service fees. The 
analysis considers the effective pre-tax cost of the special assessment 
in calculating the effect on capital.<SUP>48 49</SUP>
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    \48\ The Tax Cuts and Jobs Act of 2017 placed a limitation on 
tax deductions for FDIC premiums for banks with total consolidated 
assets between $10 and $50 billion and disallowed the deduction 
entirely for banks with total assets of $50 billion or more. 
However, the definition of FDIC premiums under the Act is limited to 
any assessment imposed under section 7(b) of the FDI Act (12 U.S.C. 
1817(b)), and therefore does not include special assessments 
required under section 13(c)(4)(G) of the FDI Act. See the Tax Cuts 
and Jobs Act, Public Law 115-97 (Dec. 22, 2017).
    \49\ The analysis does not incorporate any tax effects from an 
operating loss carry forward or carry back.
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    A banking organization's earnings retention and dividend policies 
influence the extent to which the special assessment affects equity 
capital

[[Page 83342]]

levels. A banking organization may reduce the effect of recognizing the 
accrual of a liability and an estimated loss (i.e., expense) from a 
loss contingency for the special assessment or shortfall special 
assessment, by adjusting downward the amount of dividends. This 
analysis instead assumes that a banking organization will maintain its 
dividend rate (that is, dividends as a percentage of net income) 
unchanged from the weighted average rate reported from July 1, 2022, 
through June 30, 2023. In the event that the ratio of Tier 1 capital to 
assets falls below four percent, however, this assumption is modified 
such that the banking organization retains the amount necessary to 
reach a four percent minimum and distributes any remaining funds 
according to the dividend payout rate.\50\
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    \50\ The analysis uses four percent as the threshold because 
IDIs generally need to maintain a Tier 1 leverage ratio of 4.0 
percent or greater to be considered ``adequately capitalized'' under 
Prompt Corrective Action Standards, in addition to the following 
requirements: (i) total risk-based capital ratio of 8.0 percent or 
greater; (ii) Tier 1 risk-based capital ratio of 6.0 percent or 
greater; (iii) common equity tier 1 capital ratio of 4.5 percent or 
greater; and (iv) does not meet the definition of ``well 
capitalized.'' Beginning January 1, 2018, an advanced approaches or 
Category III FDIC-supervised institution will be deemed to be 
``adequately capitalized'' if it satisfies the above criteria and 
has a supplementary leverage ratio of 3.0 percent or greater, as 
calculated in accordance with 12 CFR 324.10. See 12 CFR 
324.403(b)(2). Additionally, Federal Reserve Board-regulated 
institutions must generally maintain a Tier 1 leverage ratio of 4.0 
percent or greater to meet the minimum capital requirements, in 
addition to the following requirements: (i) total capital ratio of 
8.0 percent; (ii) Tier 1 capital ratio of 6.0; (iii) common equity 
tier 1 capital ratio of 4.5; and (iv) for advanced approaches 
Federal Reserve Board-regulated institutions, or for Category III 
Federal Reserve Board-regulated institutions, a supplementary 
leverage ratio of 3 percent. See 12 CFR 217.10(a)(1). For purposes 
of this analysis, Tier 1 capital to assets is used as the measure of 
capital adequacy.
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    The FDIC estimates that it will collect the estimated loss from 
protecting uninsured depositors at Silicon Valley Bank and Signature 
Bank of approximately $16.3 billion, over the initial eight-quarter 
collection period. Banking organizations will recognize the accrual of 
a liability and an estimated loss (i.e., expense) from a loss 
contingency for the special assessment when the institution determines 
that the conditions for accrual under GAAP have been met. This analysis 
assumes that the effects on capital and earnings of the entire amount 
of the special assessment to be collected over eight quarters would 
occur in one quarter only.
    Given the current loss estimate and the assumptions in the 
analysis, the FDIC estimates that, on average, the special assessment 
will decrease the dollar amount of Tier 1 capital of banking 
organizations required to pay the special assessment by an estimated 62 
basis points.\51\ No banking organizations are estimated to fall below 
the minimum capital requirement (a four percent Tier 1 capital-to-
assets ratio) as a result of the special assessment.
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    \51\ Estimated effects on capital are calculated based on data 
reported as of June 30, 2023, on the Call Report and the 
Consolidated Financial Statements for Holding Companies (FR Y-9C), 
respectively, for IDIs that are not subsidiaries of a holding 
company or that are part of a banking organization with only one 
subsidiary IDI required to pay special assessments, and for banking 
organizations, to the extent that an IDI is part of a holding 
company with more than one subsidiary IDI required to pay the 
special assessment.
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    For the four quarters that ended June 30, 2023, the banking 
industry reported net income of $290.5 billion, nearly 13 percent 
higher than for the four quarters that ended June 30, 2022, and above 
the pre-pandemic average. The effect of the special assessment on a 
banking organization's income is measured by calculating the amount of 
the special assessment as a percent of pre-tax income (hereafter 
referred to as ``income'').
    While the special assessment is allocated based on estimated 
uninsured deposits reported at the banking organization level, IDIs 
will be responsible for payment of the special assessment. The FDIC 
analyzed the effect of the special assessment on income reported at the 
IDI-level for IDIs subject to the special assessment that are not 
subsidiaries of a holding company or that are subsidiaries of a holding 
company with only one IDI subsidiary. For IDIs that are subsidiaries of 
a holding company with more than one IDI subsidiary, the FDIC analyzed 
the effect of the special assessment by aggregating the income reported 
by all IDIs subject to the special assessment within each banking 
organization since the IDIs will be responsible for payment. The FDIC 
analyzed the impact of the special assessment on banking organizations 
that were profitable based on their average quarterly income from July 
1, 2022, to June 30, 2023.\52\
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    \52\ There were two banking organizations that would be required 
to pay the special assessment that were unprofitable based on 
average quarterly income from July 1, 2022, to June 30, 2023.
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    The effects on income of the entire amount of the special 
assessment to be collected over eight quarters are assumed to occur in 
one quarter only. Given the assumptions and the estimated loss amount, 
the FDIC estimates that the special assessment would result in an 
average one-quarter reduction in income of 20.4 percent for banking 
organizations subject to the special assessment.\53\
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    \53\ Earnings or income are quarterly income before assessments 
and taxes. Quarterly income is assumed to equal average income from 
July 1, 2022, to June 30, 2023.
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Comments Received on the Effect of the Special Assessment on Capital 
and Earnings
    The FDIC received 13 comments, including three comments from trade 
associations, suggesting modifications to change the timing of, or 
otherwise mitigate the effect of the special assessment on capital, 
earnings, and regular deposit insurance assessments. Seven commenters 
supported an optional transition period or a similar approach to allow 
banking organizations to phase in the effects of the special assessment 
on their regulatory capital ratios over the eight-quarter collection 
period.
    One commenter said that for purposes of calculating requirements 
and guidance related to levels of dividends and stock repurchases, and 
for examination findings related to earnings, the reduction in earnings 
resulting from the payment of the special assessment should be 
disregarded, or at least be amortized over the collection period. The 
same commenter also requested an adjustment to eliminate the impact of 
the special assessment on regular quarterly deposit insurance 
assessments for large banks and highly complex banks.\54\
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    \54\ For regular deposit insurance assessment purposes, a large 
bank is generally defined as an institution with $10 billion or more 
in total assets, and a highly complex bank is generally defined as 
an institution that has $50 billion or more in total assets and is 
controlled by a parent holding company that has $500 billion or more 
in total assets, or is a processing bank or trust company. See 12 
CFR 327.8(f) and (g).
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    As described above, given the loss estimate and the assumptions 
applied in the analysis, the FDIC estimates that, on average, the 
special assessment will decrease the dollar amount of Tier 1 capital of 
banking organizations subject to the special assessment by an estimated 
62 basis points. No banking organizations are estimated to fall below 
the minimum capital requirement (a four percent Tier 1 capital-to-
assets ratio) as a result of the special assessment. As described 
above, the effect of the special assessment on Tier 1 capital is 
minimal and is not estimated to cause any institutions to fall below 
the minimum capital requirement; therefore, the FDIC is not adopting a 
transition period to phase in the special assessment's effect on 
regulatory capital.

[[Page 83343]]

    Table 5 shows that approximately 66 percent of profitable banking 
organizations subject to the proposal are projected to have a special 
assessment of less than 20 percent of one quarter's income, including 
23 percent with a special assessment of less than 5 percent of income. 
Another 34 percent of profitable banking organizations subject to the 
proposal are projected to have a special assessment equal to or 
exceeding 20 percent of one quarter's income.

    Table 5--Estimated One-Quarter Effect of Entire Amount of the Special Assessment on Income for Profitable
                           Banking Organizations Subject to the Special Assessment \1\
----------------------------------------------------------------------------------------------------------------
                                                                                       Assets of
                                                     Number of        Percent of        banking       Percent of
     Special assessment as percent of income          banking          banking       organizations      assets
                                                   organizations    organizations     [$ billions]
----------------------------------------------------------------------------------------------------------------
Over 30.........................................               15               14            5,838           30
20 to 30........................................               23               21            6,308           32
10 to 20........................................               28               25            5,504           28
5 to 10.........................................               20               18              805            4
Less than 5.....................................               25               23            1,034            5
                                                 ---------------------------------------------------------------
    Total.......................................              111              100           19,489          100
----------------------------------------------------------------------------------------------------------------
\1\ Income is defined as quarterly pre-tax income. Quarterly income is assumed to equal the average of income
  from July 1, 2022, through June 30, 2023. For purposes of this analysis, the effects on income of the entire
  amount of the special assessment to be collected over eight quarters are assumed to occur in one quarter only.
  The special assessment as a percent of income is an estimate of the one-time accrual of the full eight
  quarters of the special assessment as a percent of a single quarter's income. Profitable banking organizations
  are defined as those having positive average income for the 12 months ending June 30, 2023. Excludes two
  banking organizations that would be required to pay the special assessment that were unprofitable. Also
  excludes one foreign banking organization subject to the special assessment. Some columns do not add to total
  due to rounding. Special assessment estimates are based on uninsured deposits for the December 31, 2022,
  report date and incorporate amendments, mergers, acquisitions and failures through November 2, 2023.

    In order to preserve liquidity at IDIs, and in the interest of 
consistent and predictable assessments, the special assessment will be 
collected over eight quarters. The special assessments is applicable 
for the first quarterly assessment period of 2024. Given that the 
proposal was approved by the Board and published in the Federal 
Register in May 2023, institutions were provided time to prepare and 
plan for the special assessment.
4. Economic Conditions
    On September 7, 2023, the FDIC released the results of the 
Quarterly Banking Profile, which provided a comprehensive summary of 
financial results for all FDIC-insured institutions for the second 
quarter of 2023. Overall, key banking industry metrics remained 
favorable in the quarter.\55\
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    \55\ FDIC Quarterly Banking Profile, Second Quarter 2023. 
https://www.fdic.gov/analysis/quarterly-banking-profile/qbp/2023jun/.
---------------------------------------------------------------------------

    Net income declined from the previous quarter due to accounting 
gains on failed bank acquisitions that occurred in the first and the 
second quarter. However, excluding these nonrecurring gains, net income 
was relatively flat from the prior quarter. Net income remained 
relatively high by historical measures in the second quarter, although 
the banking industry reported a tighter net interest margin and funding 
pressures driven by increasing rates paid on deposits as well as high 
rates paid on non-deposit liabilities. Loan expansion continued, asset 
quality metrics were favorable, and the banking industry remained well-
capitalized.
    The banking industry continues to face significant downside risks 
from the effects of inflation, rising market interest rates, and 
geopolitical uncertainty. These risks could cause credit quality 
deterioration and weakness in profitability, which may lead to more 
stringent underwriting standards, a slowdown in loan growth, higher 
provision expenses, and liquidity constraints. Also, commercial real 
estate portfolios are under pressure from higher interest rates as 
loans mature and require refinancing, and office properties are 
experiencing weak demand for space and softening property values.
    Despite these challenges, the state of the U.S. banking system 
remains sound and institutions are well positioned to absorb a special 
assessment.\56\
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    \56\ Statement of Martin J. Gruenberg, Chairman of the FDIC on 
``Recent Bank Failures and the Federal Regulatory Response,'' before 
the United States Senate Committee on Banking, Housing, and Urban 
Affairs. March 28, 2023. https://www.banking.senate.gov/imo/media/doc/Gruenberg%20Testimony%203-28-23.pdf.
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B. Alternatives Considered

    While the FDIC is required by statute to recover the loss to the 
DIF arising from the use of a systemic risk determination through one 
or more special assessments, section 13(c)(4)(G) of the FDI Act 
provides the FDIC with discretion in the design and timeframe for any 
special assessments to recover the losses from the systemic risk 
determination.\57\ The FDIC considered several alternatives while 
developing this final rule, but believes, on balance, that the proposed 
special assessment is the most appropriate and straightforward manner 
in which to collect the special assessment. Accordingly, and after 
consideration of the statutory factors as described above, the FDIC is 
adopting as final the proposed special assessment, with changes to 
promote transparency and to apply any corrective amendments to the 
reporting of estimated uninsured deposits to the calculation of the 
special assessment. Brief descriptions of the alternatives, along with 
explanations of why the final rule is preferable to the alternatives, 
are as follows:
---------------------------------------------------------------------------

    \57\ 12 U.S.C. 1823(c)(4)(G)(ii)(I). In implementing special 
assessments, the FDIC is required to consider the types of entities 
that benefit from any action taken or assistance provided under the 
determination of systemic risk, effects on the industry, economic 
conditions, and any such other factors as the FDIC deems appropriate 
and relevant to the action taken or the assistance provided. See 12 
U.S.C. 1823(c)(4)(G)(ii)(III).
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Alternative 1: One-Time Special Assessment
    The first alternative the FDIC considered would have imposed a one-
time special assessment. Under this alternative, the FDIC would impose 
the one-time special assessment in the quarter ending March 31, 2024, 
and collect payment for such special assessment on June 28, 2024, at 
the same time and in the same manner as an IDI's regular quarterly 
deposit insurance assessment. The aggregate

[[Page 83344]]

amount of a one-time special assessment would equal the entire initial 
loss estimate. Calculation of the special assessment, including the 
special assessment rate, would be the same as proposed, but instead of 
collecting the amount over eight quarters, the FDIC would collect the 
entire amount in one quarter.
    Once actual losses are determined as of the termination of the 
receiverships, and if the actual losses exceeded the amount collected 
under the one-time special assessment, the FDIC would impose a 
shortfall special assessment to collect the amount of losses in excess 
of the amount collected. Collection of the entire shortfall special 
assessment would also occur in one quarter.
    Conversely, if the amount collected under the one-time special 
assessment exceeded actual losses, the FDIC is required by statute to 
place the excess funds collected in the DIF.\58\
---------------------------------------------------------------------------

    \58\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
---------------------------------------------------------------------------

    Similar to this alternative, one commenter suggested that banks 
should have the option to fully fund obligations prior to the end of 
the proposed time period. While under both the final rule and this 
alternative, the estimated amount of the special assessment would be 
recognized with the accrual of a liability and an estimated loss (i.e., 
expense) from a loss contingency when the institution determines that 
the conditions for accrual under GAAP have been met, which impacts 
capital and earnings, this alternative would additionally require 
payment of the entire amount in the second quarter of 2024, and would 
impact liquidity significantly in one quarter. The FDIC rejected this 
alternative in order to spread the liquidity impact over multiple 
quarters and to mitigate the risk of overcollecting.
Alternative 2: Asset Size Applicability Threshold
    A second alternative the FDIC considered would be to base 
applicability on an asset size threshold as an alternative to deducting 
the first $5 billion in estimated uninsured deposits in calculating an 
IDI or banking organization's assessment base for the special 
assessment. One commenter supported this approach.
    As described previously, in implementing special assessments, the 
FDI Act requires the FDIC to consider the types of entities that 
benefit from any action taken or assistance provided pursuant to the 
determination of systemic risk.\59\ Large banks and regional banks, and 
particularly those with large amounts of uninsured deposits, were the 
banks most exposed to and likely would have been the most affected by 
uninsured deposit runs had those occurred as a result of the bank 
failures. Larger banks also benefited the most from the stability 
provided to the banking industry under the systemic risk determination.
---------------------------------------------------------------------------

    \59\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
---------------------------------------------------------------------------

    While both the methodology adopted under the final rule, including 
the $5 billion deduction from estimated uninsured deposits, and an 
alternative asset-size-based applicability threshold would effectively 
remove the smallest institutions from eligibility, the deduction of $5 
billion from each banking organization's estimated uninsured deposits 
in calculating the special assessment helps to mitigate a ``cliff 
effect'' relative to applying a different threshold for applicability, 
such as applying an asset size threshold, thereby ensuring more 
equitable treatment. With an asset size threshold, an IDI just above 
such threshold would pay a significant amount in special assessments, 
while an IDI just below such threshold would pay none. The FDIC 
rejected this alternative for these reasons.
Alternative 3: Assessment Base Equal to All Uninsured Deposits, Without 
$5 Billion Deduction
    A third alternative the FDIC considered would be to eliminate the 
$5 billion deduction from the assessment base for the special 
assessment, and allocate the special assessment among IDIs based on 
each IDI or banking organization's total estimated uninsured deposits 
as of December 31, 2022. This alternative would result in a special 
assessment imposed on every IDI that reported a non-zero amount of 
estimated uninsured deposits as of December 31, 2022, or nearly 100 
percent of all IDIs with total assets of $1 billion or more.\60\ 
Relative to the methodology applied in final rule, more IDIs would pay 
the special assessment under this alternative, and IDIs with greater 
amounts of uninsured deposits would generally pay a lower special 
assessment relative to the methodology applied in the final rule since 
the special assessment would be allocated across a significantly larger 
number of institutions. As stated previously, the majority of 
commenters expressed support for the proposal and for the scope of 
application, including the $5 billion deduction applied to the 
assessment base for the special assessment.
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    \60\ IDIs with less than $1 billion in total assets as of June 
30, 2021, were not required to report the estimated amount of 
uninsured deposits on the Call Report for December 31, 2022. 
Therefore, for IDIs that had less than $1 billion in total assets as 
of June 30, 2021, the amount and share of estimated uninsured 
deposits as of December 31, 2022, would be zero.
---------------------------------------------------------------------------

    Given the FDIC's statutory requirement to consider the types of 
entities that benefit from any action taken or assistance provided 
under the determination of systemic risk in implementing special 
assessments, and given the general support for the deduction of $5 
billion from the assessment base for the special assessment, the FDIC 
rejected this alternative in favor of allocating the special assessment 
to larger institutions with the largest amounts of uninsured deposits 
as of December 31, 2022, and that experienced significant and 
widespread declines in uninsured deposits between December 31, 2022, 
and March 31, 2023, with the result that smaller institutions would not 
have to contribute to the special assessment. In general, large banks 
and regional banks, and particularly those with large amounts of 
uninsured deposits, were the banks most exposed to and likely would 
have been the most affected by uninsured deposit runs. Generally 
speaking, larger banks benefited the most from the stability provided 
to the banking industry under the systemic risk determination.
Alternative 4: Special Assessment Based on Each Institution's 
Percentage of Uninsured Deposits to Total Deposits
    A fourth alternative the FDIC considered would be to allocate the 
special assessment among IDIs based on each IDI's estimated uninsured 
deposits as a percentage of their total domestic deposits reported as 
of December 31, 2022, as a proxy for reliance on uninsured deposits at 
the time the determination of systemic risk was made and uninsured 
depositors of the failed institutions were protected. Similar to the 
third alternative, this would result in a special assessment imposed on 
every IDI that reported a non-zero amount of estimated uninsured 
deposits as of December 31, 2022, or nearly 100 percent of IDIs with 
total assets of $1 billion or more.\61\ Two commenters supported an 
assessment base for the special assessment equal to uninsured deposits 
as a percentage of total deposits or to otherwise apply a

[[Page 83345]]

calculation that would result in a larger special assessment for 
institutions with a greater reliance on uninsured deposits for funding.
---------------------------------------------------------------------------

    \61\ IDIs with less than $1 billion in total assets as of June 
30, 2021, were not required to report the estimated amount of 
uninsured deposits on the Call Report for December 31, 2022. 
Therefore, for IDIs that had less than $1 billion in total assets as 
of June 30, 2021, the amount and share of estimated uninsured 
deposits as of December 31, 2022, would be zero.
---------------------------------------------------------------------------

    Under this alternative, IDIs with a greater reliance on uninsured 
deposits would generally pay the greatest amount of the special 
assessment; however, the special assessment would be allocated across a 
large number of institutions, unless a threshold is imposed. Even with 
a threshold based on assets or another measure, this alternative would 
result in institutions of vastly different asset sizes and with 
different dollar amounts of uninsured deposits paying a similar dollar 
amount of the special assessment. For example, an institution just 
above the asset threshold would pay the same special assessment as a 
much larger institution with the same reliance on uninsured deposits. 
It also would result in some smaller banking organizations paying 
potentially significant amounts of the special assessment, and the 
larger banks that have high amounts of uninsured deposits and benefited 
the most from the stability provided to the banking industry under the 
systemic risk determination, but that do not have high uninsured 
deposit concentrations, paying a smaller share of the special 
assessment.
    In general, large banks and regional banks, and particularly those 
with large amounts of uninsured deposits, were the banks most exposed 
to and likely would have been the most affected by uninsured deposit 
runs. Generally speaking, larger banks benefited the most from the 
stability provided to the banking industry under the systemic risk 
determination. The FDIC rejected this alternative for these reasons and 
because the methodology in the final rule results in a larger special 
assessment for similarly sized banking organizations reporting greater 
concentrations of uninsured deposits.
Alternative 5: Charge IDIs for 50 Percent of Special Assessment in Year 
One Based on Uninsured Deposits as of December 31, 2022; Charge for the 
Remainder in Year Two Based on Uninsured Deposits Reported as of 
December 31, 2023
    Under the final rule and all alternatives described above, the 
special assessment would initially be calculated based on an estimated 
amount of losses, as the exact amount of losses will not be known until 
the FDIC terminates the two receiverships. A fifth alternative the FDIC 
considered would be to collect 50 percent of the special assessment 
during the initial four-quarter collection period based on estimated 
uninsured deposits reported by all IDIs as of December 31, 2022, and 
collect the remaining special assessment for an additional four-quarter 
collection period based on an updated estimate of losses pursuant to 
the systemic risk determination and estimated uninsured deposits 
reported by all IDIs as of December 31, 2023.
    Under this alternative, for the initial four-quarter collection 
period the special assessment would be allocated to all IDIs based on 
each IDI or banking organization's estimated uninsured deposits as a 
share of estimated uninsured deposits reported by all IDIs as of 
December 31, 2022, as a proxy for the amount of uninsured deposits in 
each institution at the time the determination of systemic risk was 
made and uninsured depositors of the failed institutions were 
protected. Such methodology would allocate the special assessment to 
the institutions that had the largest amounts of uninsured deposits at 
the time of the determination of systemic risk.
    The remaining special assessment would be based on an updated 
estimate of losses as of December 31, 2023, and would be allocated to 
IDIs with total assets of $1 billion or more, based on each IDI or 
banking organization's estimated uninsured deposits as a share of 
estimated uninsured deposits reported by all IDIs as of December 31, 
2023, in order to reflect amounts of uninsured deposits that did not 
run off following the determination of systemic risk. The FDIC rejected 
this alternative because in the FDIC's view, estimated uninsured 
deposits as of December 31, 2022, most closely approximate an 
institution's vulnerability to significant deposit withdrawals in the 
absence of the determination of systemic risk, and therefore reflect 
the institutions that most benefited from such determination. 
Additionally, three commenters supported the use of an alternative 
measure in the special assessment base specifically for the reason that 
they believe use of uninsured deposits in the assessment base 
discourages banks from holding uninsured deposits. This alternative may 
also change the timing of accrual of the contingent liability by banks. 
The final rule's allocation methodology based on amounts of uninsured 
deposits as of December 31, 2022, would result in transparent and 
consistent payments, and a more simplified framework for calculating 
the special assessment.
Alternative 6: Apply Special Assessment Rate to Regular Assessment 
Base, With or Without Application of a $5 Billion Deduction
    A sixth alternative the FDIC considered is to apply a special 
assessment rate to an institution's regular quarterly deposit insurance 
assessment base (regular assessment base) for that quarter, with or 
without applying a $5 billion deduction. Generally, an IDI's assessment 
base equals its average consolidated total assets minus its average 
tangible equity.\62\ Under this alternative, the FDIC estimates that it 
would need to charge an annual assessment rate of 3.97 basis points 
over two years to recover estimated losses without the $5 billion 
deduction, or 4.84 basis points with the $5 billion deduction; however, 
a significantly larger number of banking organizations would be subject 
to the special assessment relative to the proposal. Two commenters 
supported use of the regular assessment base to calculate the special 
assessment.
---------------------------------------------------------------------------

    \62\ See 12 CFR 327.5.
---------------------------------------------------------------------------

    Under this alternative, the IDIs with the largest assessment base 
would pay the greatest amount of the special assessment. IDIs for which 
certain assets are excluded in the calculation of the regular 
assessment base would pay a lower special assessment due to their 
smaller assessment base.
    This alternative would result in smaller banking organizations, 
regardless of reliance on uninsured deposits for funding, paying 
potentially significant amounts of the special assessment. Further, 
IDIs engaged in trust activities, or with fiduciary and custody and 
safekeeping assets, and for which certain assets are excluded from 
their regular assessment base, would pay lower amounts of the special 
assessment due to these exclusions, despite holding significant amounts 
of uninsured deposits. The FDIC rejected this alternative for these 
reasons.
    In the FDIC's view, the final rule reflects an appropriate 
balancing of the statutory requirement to apply the special assessment 
to the types of entities that benefited the most from the protection of 
uninsured depositors provided under the determination of systemic risk 
while ensuring equitable, transparent, and consistent treatment based 
on amounts of uninsured deposits at the time of the determination of 
systemic risk. The final rule also allows for payments to be collected 
over an extended period of time in order to mitigate the liquidity 
effects of the special assessment by requiring smaller,

[[Page 83346]]

consistent quarterly payments. On balance, in the FDIC's view, the 
final rule best promotes maintenance of liquidity, which will allow 
institutions to absorb any potential unexpected setbacks while 
continuing to meet the credit needs of the U.S. economy.

C. Effective Date and Application Date of the Final Rule

    The FDIC is issuing this final rule with an effective date of April 
1, 2024. The first collection for the special assessment will be 
reflected on the invoice for the first quarterly assessment period of 
2024 (i.e., January 1 through March 31, 2024), with a payment date of 
June 28, 2024, and the FDIC will continue to collect the special 
assessment for an anticipated total of eight quarterly assessment 
periods. Because the estimated loss pursuant to the systemic risk 
determination will be periodically adjusted, and to allow for any 
corrective amendments to the amount of uninsured deposits reported for 
the December 31, 2022, reporting period applied to the calculation of 
the special assessment, the FDIC retains the ability to cease 
collection early, impose an extended special assessment collection 
period after the initial eight-quarter collection period to collect the 
difference between losses and the amounts collected, and impose a one-
time final shortfall special assessment after both receiverships 
terminate.

IV. Administrative Law Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency, 
in connection with a final rule, to prepare and make available for 
public comment a final regulatory flexibility analysis that describes 
the impact of the final rule on small entities.\63\ However, a final 
regulatory flexibility analysis is not required if the agency certifies 
that the final rule will not have a significant economic impact on a 
substantial number of small entities. The Small Business Administration 
(SBA) has defined ``small entities'' to include banking organizations 
with total assets of less than or equal to $850 million.\64\ Certain 
types of rules, such as rules of particular applicability relating to 
rates, 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.\65\ Because the final rule relates 
directly to the rates imposed on FDIC-insured institutions, the final 
rule is not subject to the RFA. Nonetheless, the FDIC is voluntarily 
presenting information in this RFA section.
---------------------------------------------------------------------------

    \63\ 5 U.S.C. 601 et seq.
    \64\ The SBA defines a small banking organization as having $850 
million or less in assets, where an organization's ''assets are 
determined by averaging the assets reported on its four quarterly 
financial statements for the preceding year.'' See 13 CFR 121.201 
(as amended by 87 FR 69118, effective December 19, 2022). In its 
determination, the ''SBA counts the receipts, employees, or other 
measure of size of the concern whose size is at issue and all of its 
domestic and foreign affiliates.'' See 13 CFR 121.103. Following 
these regulations, the FDIC uses an insured depository institution's 
affiliated and acquired assets, averaged over the preceding four 
quarters, to determine whether the insured depository institution is 
''small'' for the purposes of RFA.
    \65\ 5 U.S.C. 601(2).
---------------------------------------------------------------------------

    The FDIC insures 4,654 institutions as of June 30, 2023, of which 
3,373 are small entities.\66\ As discussed previously, the final rule 
implements a special assessment on IDIs that are part of banking 
organizations that reported $5 billion or more in uninsured deposits 
for the reporting period that ended December 31, 2022. Given that no 
small entity has reported $5 billion or more in uninsured deposits, the 
FDIC does not believe the final rule will have a direct effect on any 
small entity.
---------------------------------------------------------------------------

    \66\ June 30, 2023, Call Report data, the most current Call 
Reports for which the FDIC can determine which insured depository 
institutions are ``small'' for purposes of RFA.
---------------------------------------------------------------------------

    The FDIC invited comments regarding the supporting information 
provided in the RFA section in the proposed rule, but did not receive 
comments on this topic.

B. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 \67\ (PRA) states that no 
agency may conduct or sponsor, nor is the respondent required to 
respond to, an information collection unless it displays a currently 
valid Office of Management and Budget (OMB) control number. The FDIC's 
OMB control numbers for its assessment regulations are 3064-0057, 3064-
0151, and 3064-0179. The final rule does not create any new, or revise 
any of these existing assessment information collections pursuant to 
the PRA; consequently, no submissions in connection with these OMB 
control numbers will be made to the OMB for review.
---------------------------------------------------------------------------

    \67\ 44 U.S.C. 3501-3521.
---------------------------------------------------------------------------

C. Riegle Community Development and Regulatory Improvement Act

    Section 302(a) of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (RCDRIA) \68\ requires that the Federal banking 
agencies, including the FDIC, in determining the effective date and 
administrative compliance requirements of new regulations that impose 
additional reporting, disclosure, or other requirements on IDIs, 
consider, consistent with principles of safety and soundness and the 
public interest, any administrative burdens that such regulations would 
place on depository institutions, including small depository 
institutions, and customers of depository institutions, as well as the 
benefits of such regulations. Subject to certain exceptions, new 
regulations and amendments to regulations prescribed by a Federal 
banking agency which impose additional reporting, disclosures, or other 
new requirements on insured depository institutions shall take effect 
on the first day of a calendar quarter which begins on or after the 
date on which the regulations are published in final form.\69\
---------------------------------------------------------------------------

    \68\ 12 U.S.C. 4802(a).
    \69\ 12 U.S.C. 4802(b).
---------------------------------------------------------------------------

    The final rule does not impose additional reporting, disclosure, or 
other new requirements on insured depository institutions, including 
small depository institutions, or on the customers of depository 
institutions. Accordingly, section 302 of RCDRIA does not apply. The 
FDIC invited comments regarding the application of RCDRIA in the 
proposed rule, but did not receive comments on this topic. 
Nevertheless, the requirements of RCDRIA have been considered in 
setting the final effective date.

D. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act \70\ requires the Federal 
banking agencies to use plain language in all proposed and final 
rulemakings published in the Federal Register after January 1, 2000. 
FDIC staff believes the final rule is presented in a simple and 
straightforward manner. The FDIC invited comments regarding the use of 
plain language in the proposed rule but did not receive any comments on 
this topic.
---------------------------------------------------------------------------

    \70\ Public Law 106-102, section 722, 113 Stat. 1338, 1471 
(1999), 12 U.S.C. 4809.
---------------------------------------------------------------------------

E. Congressional Review Act

    For purposes of the Congressional Review Act, the OMB makes a 
determination as to whether a final rule constitutes a ``major'' 
rule.\71\ If a rule is deemed a ``major rule'' by the OMB, the 
Congressional Review Act generally provides that the rule may not take 
effect until at least 60 days following its publication.\72\
---------------------------------------------------------------------------

    \71\ 5 U.S.C. 801 et seq.
    \72\ 5 U.S.C. 801(a)(3).
---------------------------------------------------------------------------

    The Congressional Review Act defines a ``major rule'' as any rule 
that the Administrator of the Office of

[[Page 83347]]

Information and Regulatory Affairs of the OMB finds has resulted in or 
is likely to result in: (1) an annual effect on the economy of 
$100,000,000 or more; (2) a major increase in costs or prices for 
consumers, individual industries, Federal, State, or local government 
agencies or geographic regions; or (3) significant adverse effects on 
competition, employment, investment, productivity, innovation, or on 
the ability of United States-based enterprises to compete with foreign-
based enterprises in domestic and export markets.\73\
---------------------------------------------------------------------------

    \73\ 5 U.S.C. 804(2).
---------------------------------------------------------------------------

    The OMB has determined that the final rule is a major rule for 
purposes of the Congressional Review Act and the FDIC will submit the 
final rule and other appropriate reports to Congress and the Government 
Accountability Office for review.

List of Subjects in 12 CFR Part 327

    Bank deposit insurance, Banks, Banking, Savings associations.

Authority and Issuance

    For the reasons stated in the preamble, the Federal Deposit 
Insurance Corporation amends 12 CFR part 327 as follows:

PART 327--ASSESSMENTS

0
1. The authority citation for part 327 is revised to read as follows:

    Authority: 12 U.S.C. 1813, 1815, 1817-19, 1821, 1823.


0
2. Add Sec.  327.13 to read as follows:


Sec.  327.13  Special Assessment Pursuant to March 12, 2023, Systemic 
Risk Determination.

    (a) Special Assessment. A special assessment shall be imposed on 
each insured depository institution to recover losses to the Deposit 
Insurance Fund, as described in paragraph (b) of this section, 
resulting from the March 12, 2023, systemic risk determination pursuant 
to 12 U.S.C. 1823(c)(4)(G). The special assessment shall be collected 
from each insured depository institution on a quarterly basis as 
described in this section during the initial special assessment period 
as defined in paragraph (i) of this section and, if necessary, the 
extended special assessment period as defined in paragraph (j) of this 
section, and if further necessary, on a one-time basis as described in 
paragraph (m) of this section.
    (b) Losses to the Deposit Insurance Fund. As used in this section, 
``losses to the Deposit Insurance Fund'' refers to losses incurred by 
the Deposit Insurance Fund resulting from actions taken by the FDIC 
under the March 12, 2023, systemic risk determination, as may be 
revised from time to time.
    (c) Calculation of quarterly special assessment amount. An insured 
depository institution's special assessment for each quarter during the 
initial special assessment period and extended special assessment 
period shall be calculated by multiplying the special assessment rate 
defined in paragraph (i)(2) or (j)(3) of this section, as appropriate, 
by the institution's special assessment base as defined in paragraph 
(i)(3) or (j)(4) of this section, as appropriate.
    (d) Invoicing of special assessment. For each assessment period in 
which the special assessment is imposed, the FDIC shall advise each 
insured depository institution of the amount and calculation of any 
special assessment payment due in a form that notifies the institution 
of the special assessment base and special assessment rate exclusive of 
any other assessments imposed under this part. The FDIC shall also 
advise each insured depository institution subject to the special 
assessment of any revisions, if any, to losses to the Deposit Insurance 
Fund as defined in paragraph (b) of this section. This information 
shall be provided at the same time as the institution's quarterly 
certified statement invoice under Sec.  327.2 for the assessment period 
in which the special assessment was imposed.
    (e) Payment of quarterly special assessment amount. Each insured 
depository institution shall pay to the Corporation any special 
assessment imposed under this section in compliance with and subject to 
the provisions of Sec. Sec.  327.3, 327.6, and 327.7. The date for any 
special assessment payment shall be the date provided in Sec.  
327.3(b)(2) for the institution's quarterly certified statement invoice 
for the calendar quarter in which the special assessment was imposed.
    (f) Uninsured deposits. For purposes of this section, the term 
``uninsured deposits'' means an institution's estimated uninsured 
deposits as reported in Memoranda Item 2 on Schedule RC-O, Other Data 
For Deposit Insurance Assessments in the Consolidated Reports of 
Condition and Income (Call Report) or Report of Assets and Liabilities 
of U.S. Branches and Agencies of Foreign Banks (FFIEC 002) for the 
quarter ended December 31, 2022, reported as of the later of:
    (1) November 2, 2023, adjusted for mergers prior to March 12, 2023; 
or
    (2) The date of the institution's most recent amendment to its Call 
Report or FFIEC 002 for the quarter ended December 31, 2022, if such 
amendment arises from, or is confirmed through, the FDIC's Assessment 
Reporting Review. Institutions with less than $1 billion in total 
assets as of June 30, 2021, were not required to report such items; 
therefore, for purposes of calculating the special assessment or a 
shortfall special assessment under this section, the amount of 
uninsured deposits for such institutions as of December 31, 2022, is 
zero.
    (g) $5 billion deduction from the special assessment base--
institution's portion. For purposes of this section, an institution's 
portion of the $5 billion deduction shall equal the ratio of the 
institution's uninsured deposits to the sum of the institution's 
uninsured deposits and the uninsured deposits of all of the 
institution's affiliated insured depository institutions, multiplied by 
$5 billion.
    (h) Affiliates. For the purposes of this section, an affiliated 
insured depository institution is an insured depository institution 
that meets the definition of ``affiliate'' in section 3 of the FDI Act, 
12 U.S.C. 1813(w)(6).
    (i) Special assessment during initial special assessment period--
(1) Initial special assessment period. The initial special assessment 
period shall begin with the first quarterly assessment period of 2024 
and end the earlier of the last quarterly assessment period of 2025 or 
the first quarterly assessment period that the aggregate amount of 
special assessments collected under this section meets or exceeds the 
losses to the Deposit Insurance Fund, where amounts collected and 
losses are compared on a quarterly basis.
    (2) Special assessment rate during initial special assessment 
period. The special assessment rate during the initial special 
assessment period is 3.36 basis points on a quarterly basis.
    (3) Special assessment base during initial special assessment 
period--(i) The special assessment base for an insured depository 
institution during the initial special assessment period that has no 
affiliated insured depository institution shall equal:
    (A) The institution's uninsured deposits; minus
    (B) $5 billion; provided, however, that an institution's assessment 
base cannot be negative.
    (ii) The special assessment base for an insured depository 
institution during the initial special assessment period that has one 
or more affiliated insured depository institutions shall equal:

[[Page 83348]]

    (A) The institution's uninsured deposits; minus
    (B) The institution's portion of the $5 billion deduction; 
provided, however, that an institution's special assessment base cannot 
be negative.
    (j) Special assessment during extended special assessment period--
(1) Shortfall amount. The shortfall amount is the amount of losses to 
the Deposit Insurance Fund, as reviewed and revised as of the last 
quarterly assessment period of 2025, that exceed the aggregate amount 
of special assessments collected during the initial special assessment 
period.
    (2) Extended special assessment period. If there is a shortfall 
amount after the last quarterly assessment period of 2025, the special 
assessment period will be extended, with at least 30 day notice to 
insured depository institutions, to collect the shortfall amount. The 
length of the extended special assessment period shall be the minimum 
number of quarters required to recover the shortfall amount at a rate 
under paragraph (j)(3) of this section that is at or below 3.36 basis 
points per quarter.
    (3) Assessment rate during extended special assessment period. The 
quarterly assessment rate during the extended special assessment period 
will be the shortfall amount, divided by the total amount of uninsured 
deposits, adjusted for mergers, consolidation, and termination of 
insurance as of the last quarterly assessment period of 2025, minus the 
$5 billion deduction for each insured depository institution or each 
institution's portion of the $5 billion deduction, divided by the 
minimum number of quarters that results in the quarterly rate being no 
greater than 3.36 basis points.
    (4) Assessment base during the extended special assessment period. 
(i) The special assessment base for an insured depository institution 
during the extended special assessment period that has no affiliated 
insured depository institution shall equal:
    (A) The institution's uninsured deposits; minus
    (B) $5 billion; provided, however, that an institution's special 
assessment base cannot be negative.
    (ii) The special assessment base for an insured depository 
institution during the extended special assessment period that has one 
or more affiliated insured depository institutions shall equal:
    (A) The institution's uninsured deposits; minus
    (B) The institution's portion of the $5 billion deduction, adjusted 
for termination of insurance as of the last assessment period of 2025; 
provided, however, that an institution's special assessment base cannot 
be negative.
    (k) Effect of mergers, consolidations, and other terminations of 
insurance on the special assessment--(1) Final quarterly certified 
invoice for acquired institution. The surviving or resulting insured 
depository institution in a merger or consolidation shall be liable for 
any unpaid special assessment or one-time final shortfall special 
assessment outstanding at the time of the merger or consolidation on 
the part of the institution that is not the resulting or surviving 
institution consistent with Sec.  327.6.
    (2) Special assessment for quarter in which the merger or 
consolidation occurs and subsequent quarters. If an insured depository 
institution is the surviving or resulting institution in a merger or 
consolidation or acquires all or substantially all of the assets, or 
assumes all or substantially all of the deposit liabilities, of an 
insured depository institution, then the surviving or resulting insured 
depository institution or the insured depository institution that 
acquires such assets or assumes such deposit liabilities, shall be 
liable for the acquired institutions' special assessment from the 
quarter of the acquisition through the remainder of the initial and 
extended special assessment period, including any one-time final 
shortfall special assessment.
    (3) Other termination. When the insured status of an institution is 
terminated, and the deposit liabilities of such institution are not 
assumed by another insured depository institution, the special 
assessment and any shortfall special assessment shall be paid 
consistent with Sec.  327.6(c). When an insured depository institution 
voluntarily terminates its deposit insurance, the institution shall be 
liable for any unpaid special assessment or one-time final shortfall 
special assessment outstanding at the time of the termination and all 
future special assessments, if any, the institution would have been 
invoiced through the remainder of the initial or extended special 
assessment period, as applicable, including any one-time final 
shortfall special assessment for which the institution has been given 
notice before termination. Any special assessment or one-time final 
shortfall special assessment liabilities will be included, in full, on 
the final quarterly assessment invoice following voluntary termination.
    (l) Corrective reporting amendments--(1) Recalculation of quarterly 
special assessment amount. Corrective amendments to an institution's 
uninsured deposits that arise from, or are confirmed through, the 
FDIC's Assessment Reporting Review will apply retroactively beginning 
the first quarterly collection period of the initial special assessment 
period. An institution's special assessment base and portion of the $5 
billion deduction, along with the portion of the $5 billion deduction 
allocated to the institution's affiliated insured depository 
institutions, will be recalculated for prior collection quarters. Any 
overpayment or underpayment in prior collection quarters as a result of 
the recalculation will be invoiced as described in paragraph (l)(2) of 
this section.
    (2) Invoicing overpayment and underpayment. Any underpayment of the 
special assessment by an institution as the result of corrective 
amendments to uninsured deposits will be included, in full and with 
interest, on the invoice for the quarter following the date a 
corrective amendment is filed. If a corrective amendment results in an 
overpayment of the special assessment, the institution will be credited 
the overpayment amount, with interest, and such amount will be applied 
to the institution's subsequent special assessment invoices beginning 
in the quarter following the date of the amendment. If any excess 
credit amount remains after the end of the initial and any extended 
special assessment period(s), the excess credit amount shall be 
refunded to the institution. Payment and collection of interest on 
amounts resulting from overpayment and underpayment of the special 
assessment shall be consistent with Sec.  327.7.
    (m) One-time final shortfall special assessment. If the aggregate 
amount of the special assessment collected during the initial and any 
extended special assessment period(s) do not meet or exceed the losses 
to the Deposit Insurance Fund, as calculated after the receiverships 
resulting from the March 12, 2023, systemic risk determination are 
terminated, insured depository institutions shall pay a one-time final 
shortfall special assessment in accordance with this paragraph.
    (1) Notification of one-time final shortfall special assessment. 
The FDIC shall notify each insured depository institution of the amount 
of such institution's one-time final shortfall special assessment no 
later than 45 days before such shortfall assessment is due.
    (2) Aggregate one-time final shortfall special assessment amount. 
The aggregate amount of the one-time final shortfall special assessment 
imposed across all insured depository institutions shall equal the 
losses to the

[[Page 83349]]

Deposit Insurance Fund, as of termination of the receiverships to which 
the March 12, 2023, systemic risk determination applied, minus the 
aggregate amount of the special assessment collected under this section 
through initial and extended special assessment periods, including the 
net amount of interest paid or received as a result of overpayments and 
underpayments.
    (3) One-time final shortfall special assessment rate. The final 
shortfall special assessment rate shall be the aggregate final 
shortfall special assessment amount divided by the total amount of 
uninsured deposits, as described in paragraph (f) of this section, 
adjusted for mergers, consolidation, and termination of insurance as of 
the assessment period preceding the final shortfall special assessment 
period, minus the $5 billion deduction for each insured depository 
institution or each institution's portion of the $5 billion deduction.
    (4) One-time final shortfall special assessment base--(i) The one-
time final shortfall special assessment base for an insured depository 
institution that has no affiliated insured depository institution shall 
equal:
    (A) The institution's uninsured deposits; minus
    (B) $5 billion; provided, however, that an institution's one-time 
final shortfall special assessment base cannot be negative.
    (ii) The one-time final shortfall special assessment base for an 
insured depository institution that has one or more affiliated insured 
depository institutions shall equal:
    (A) The institution's uninsured deposits; minus
    (B) The institution's portion of the $5 billion deduction, adjusted 
for termination of insurance as of the assessment period preceding the 
final shortfall assessment period; provided, however, that an 
institution's one-time final shortfall special assessment base cannot 
be negative.
    (5) Calculation of one-time final shortfall special assessment. An 
insured depository institution's final shortfall special assessment 
shall be calculated by multiplying the final shortfall special 
assessment rate by the institution's one-time final shortfall special 
assessment base.
    (6) One-time final special assessment. The one-time final shortfall 
special assessment shall be collected on a one-time quarterly basis 
after losses to the Deposit Insurance Fund are determined after 
termination of the receiverships to which the March 12, 2023, systemic 
risk determination applied.
    (7) Payment, invoicing, and mergers. Paragraphs (d), (e), and (k) 
of this section are applicable to the one-time shortfall special 
assessment.
    (n) Request for revisions. An insured depository institution may 
submit a written request for revision of the computation of any special 
assessment or shortfall special assessment pursuant to this part 
consistent with Sec.  327.3(f).
    (o) Special assessment collection in excess of losses. Any special 
assessment collected under this section that exceeds the losses to the 
Deposit Insurance Fund, as of termination of the receiverships to which 
the March 12, 2023, systemic risk determination applied, shall be 
placed in the Deposit Insurance Fund.
    (p) Rule of construction. Nothing in this section shall prevent the 
FDIC from imposing additional special assessments as required to 
recover current or future losses to the Deposit Insurance Fund 
resulting from any systemic risk determination under 12 U.S.C. 
1823(c)(4)(G).

Federal Deposit Insurance Corporation.

    By order of the Board of Directors.

    Dated at Washington, DC, on November 16, 2023.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2023-25813 Filed 11-28-23; 8:45 am]
BILLING CODE 6714-01-P


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