9338 Federal Register / Vol. 74, No. 40 / Tuesday, March 3, 2009 / Rules and Regulations 

1Section 7(b)(3)(E) of the Federal Deposit 

Insurance Act, 12 U.S.C. 1817(b)(3)(E). 

2 12 U.S.C. 1817(b)(5) provides: Emergency 

special assessments.—In addition to the other 

assessments imposed on insured depository 

institutions under this subsection, the Corporation 

may impose 1 or more special assessments on 

insured depository institutions in an amount 

determined by the Corporation if the amount of any 

such assessment is necessary— 

(A) to provide sufficient assessment income to 

repay amounts borrowed from the Secretary of the 

Treasury under [12 U.S.C. 1824(a)] in accordance 

with the repayment schedule in effect under [12 

U.S.C. 1824(c)] during the period with respect to 

which such assessment is imposed; 

(B) to provide sufficient assessment income to 

repay obligations issued to and other amounts 

borrowed from insured depository institutions 

under [12 U.S.C. 1824(d)]; or 

(C) for any other purpose that the Corporation 

may deem necessary. 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 327 

RIN 3064–AD35 

Assessments 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC). 

ACTION: Interim rule with request for 

comment. 

SUMMARY: The FDIC is adopting an 

interim rule to impose a 20 basis point 

emergency special assessment under 12 

U.S.C. 1817(b)(5) on June 30, 2009. The 

assessment will be collected on 

September 30, 2009. The interim rule 

also provides that, after June 30, 2009, 

if the reserve ratio of the Deposit 

Insurance Fund is estimated to fall to a 

level that the Board believes would 

adversely affect public confidence or to 

a level which shall be close to zero or 

negative at the end of a calendar quarter, 

an emergency special assessment of up 

to 10 basis points may be imposed by 

a vote of the Board on all insured 

depository institutions based on each 

institution’s assessment base calculated 

pursuant to 12 CFR 327.5 for the 

corresponding assessment period. The 

FDIC seeks comment on the interim 

rule. 

DATES: Effective April 1, 2009. 

Comments must be received on or 

before April 2, 2009. 

ADDRESSES: You may submit comments, 

identified by RIN number, by any of the 

following methods: 

• Agency Web Site: http://www.fdic.

gov/regulations/laws/federal/

propose.html. Follow instructions for 

submitting comments on the Agency 

Web Site. 

• E-mail: Comments@FDIC.gov. 

Include the RIN number in the subject 

line of the message. 

• Mail: Robert E. Feldman, Executive 

Secretary, Attention: Comments, Federal 

Deposit Insurance Corporation, 550 17th 

Street, NW., Washington, DC 20429 

• Hand Delivery/Courier: Guard 

station at the rear of the 550 17th Street 

Building (located on F Street) on 

business days between 7 a.m. and 5 p.m. 

Instructions: All submissions received 

must include the agency name and RIN 

for this rulemaking. All comments 

received will be posted without change 

to http://www.fdic.gov/regulations/laws/ 

federal/propose.html including any 

personal information provided. 

FOR FURTHER INFORMATION CONTACT: 

Munsell W. St. Clair, Chief, Banking and 

Regulatory Policy Section, Division of 

Insurance and Research, (202) 898– 

8967; and Christopher Bellotto, Counsel, 

Legal Division, (202) 898–3801 or 

Sheikha Kapoor, Senior Attorney, Legal 

Division, (202) 898–3960. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Recent and anticipated failures of 

FDIC-insured institutions resulting from 

deterioration in banking and economic 

conditions have significantly increased 

losses to the Deposit Insurance Fund 

(the fund or the DIF). The reserve ratio 

of the DIF declined from 1.19 percent as 

of March 31, 2008, to 1.01 percent as of 

June 30, 0.76 percent as of September 

30, and 0.40 percent (preliminary) as of 

December 31. Twenty-five institutions 

failed in 2008, and the FDIC projects a 

substantially higher rate of institution 

failures in the next few years, leading to 

a further decline in the reserve ratio. 

Because the fund reserve ratio fell below 

1.15 percent as of June 30, 2008, and 

was expected to remain below 1.15 

percent, the Reform Act required the 

FDIC to establish and implement a 

Restoration Plan that would restore the 

reserve ratio to at least 1.15 percent 

within five years, absent extraordinary 

circumstances.1

On October 7, 2008, the FDIC 

established a Restoration Plan for the 

DIF. The Restoration Plan called for the 

FDIC to set assessment rates such that 

the reserve ratio would return to 1.15 

percent within five years. The plan also 

required the FDIC to update its loss and 

income projections for the fund and, if 

needed to ensure that the fund reserve 

ratio reaches 1.15 percent within five 

years, increase assessment rates. 

Simultaneously with the adoption of 

this interim rule, the FDIC has amended 

the Restoration Plan and extended the 

time within which the reserve ratio 

must be returned to 1.15 percent to 7 

years due to extraordinary 

circumstances. Also, again 

simultaneously with the adoption of 

this interim rule, the FDIC has adopted 

a final rule (the assessments final rule) 

that, among other things, sets initial 

base assessment rates at 12 to 45 basis 

points. 

However, given the FDIC’s estimated 

losses from projected institution 

failures, the assessment rates adopted in 

the final rule are not sufficient to return 

the fund reserve ratio to 1.15 percent 

within 7 years and are unlikely to 

prevent the DIF fund balance and 

reserve ratio from falling to near zero or 

becoming negative this year. 

II. Emergency Special Assessment 

The FDIC believes that it is important 

that the fund not decline to a level that 

could undermine public confidence in 

federal deposit insurance. Even though 

the FDIC has significant authority to 

borrow from the Treasury to cover 

losses, a fund balance and reserve ratio 

that are near zero or negative could 

create public confusion about the FDIC’s 

ability to move quickly to resolve 

problem institutions and protect insured 

depositors. The FDIC views the 

Treasury line of credit as available to 

cover unforeseen losses, not as a source 

of financing projected losses. 

The FDIC projects that the reserve 

ratio will fall to close to zero or become 

negative in 2009 unless the FDIC 

receives more revenue than regular 

quarterly assessments will produce, 

given the rates adopted in the final rule 

on assessments. Therefore, the FDIC 

will impose an emergency special 

assessment equal to 20 basis points of 

an institution’s assessment base on June 

30, 2009.2 The special assessment will 

be collected on September 30, 2009, at 

the same time that the risk-based 

assessments for the second quarter of 

2009 are collected. The assessment base 

for the special assessment shall be the 

same as the assessment base for the 

second quarter risk-based assessment. 

The FDIC has extended the period of 

the Restoration Plan to seven years due 

to the extraordinary circumstances 

facing the banking industry—including 

the severe problems in the financial 

markets and the prospects of a lengthy 

recession. If the Restoration Plan period 

remained at its original five years, the 

FDIC estimates that initial assessment 

rates would have had to range from 20 

to 45 basis points, compared to the 

actual initial assessment rates adopted 

in the assessments final rule, which 

range from 12 to 45 basis points. 

A 20 basis point special assessment 

rate should increase the reserve ratio by 

approximately 32 basis points. 


pwalker on PROD1PC71 with RULES2
Federal Register / Vol. 74, No. 40 / Tuesday, March 3, 2009 / Rules and Regulations 9339 

3Section 7(b)(3)(E)(iv) of the Federal Deposit 

Insurance Act (12 U.S.C. 1817(b)(3)(E)(iv)). 

4For 2009 and 2010, credits may not offset more 

than 90 percent of an institution’s assessment. 

Section 7(e)(3)(D)(ii) of the Federal Deposit 

Insurance Act (12 U.S.C. 1817(e)(3)(D)(ii)). 

According to the FDIC’s projections, the 

20 basis point special assessment 

combined with the rates adopted in the 

final assessments rule would return the 

reserve ratio to 1.15 percent by the end 

of 2015, consistent with the amended 

seven-year Restoration Plan period. 

As part of the Restoration Plan, the 

FDIC has the authority to restrict credit 

use while the plan is in effect, providing 

that institutions may still apply credits 

against their assessments equal to the 

lesser of their assessment or 3 basis 

points.3 The FDIC has decided not to 

restrict credit use in the Restoration 

Plan. The FDIC projects that the amount 

of credits remaining at the time that the 

special assessment is imposed will be 

very small and that their use will have 

very little effect on the assessment 

revenue necessary to meet the 

requirements of the plan.4

Effect on Capital and Earnings 

The FDIC has analyzed the effect of a 

20 basis point special assessment on the 

capital and earnings of insured 

institutions. For this analysis, it relied 

on the projected range of industry 

earnings in 2009 described in Appendix 

2 of the preamble to the final rule on 

assessments. Given the assumptions in 

the analysis, for the industry as a whole, 

the special assessment in 2009 would 

result in year-end 2009 capital that 

would be approximately 0.7 percent 

lower than in the absence of a special 

assessment. Based on the range of 

projected industry earnings, a 20 basis 

point special assessment would cause 9 

to 13 institutions (with $3 billion to $5 

billion in aggregate assets) whose 

equity-to-assets ratio would have 

exceeded 4 percent in the absence of 

such an assessment to fall below that 

percentage and 3 to 4 institutions (with 

about $1 billion in aggregate assets) to 

fall below 2 percent. 

For profitable institutions, the special 

assessment in 2009 would result in pretax income that would be between 10 

percent and 13 percent lower than if the 

FDIC did not charge such the special 

assessment. For unprofitable 

institutions, pre-tax losses would 

increase by an average of between 3 

percent and 6 percent. 

III. Further Special Assessments 

The FDIC recognizes that there is 

considerable uncertainty about its 

projections for losses and insured 

deposit growth, and, therefore, of future 

fund reserve ratios. To further ensure 

that the fund reserve ratio does not 

decline to a level that could undermine 

public confidence in federal deposit 

insurance, the FDIC may impose an 

emergency special assessment of up to 

10 basis points of an institution’s 

assessment base whenever, after June 

30, 2009, the reserve ratio of the Deposit 

Insurance Fund is estimated to fall to a 

level that the Board believes would 

adversely affect public confidence or to 

a level which shall be close to zero or 

negative at the end of a calendar quarter. 

Any such special assessment will be 

imposed on the last day of a quarter 

(March 31, June 30, September 30 or 

December 31) and will be collected 

approximately three months later, at the 

same time that risk-based assessments 

are collected. The earliest possible date 

for such a special assessment is 

September 30, 2009 (which would be 

collected December 30, 2009). 

The assessment base for any special 

assessment shall be the base for the riskbased assessment for the quarter ending 

the date the special assessment is 

imposed. Thus, for example, the 

assessment base for a special assessment 

imposed on September 30, 2009, would 

be the assessment base for the quarterly 

risk-based assessment for the third 

quarter of 2009 (collected December 30, 

2009). 

Near the end of each quarter, the FDIC 

will estimate the reserve ratio for that 

quarter from available data on, or 

estimates of, insurance fund assessment 

income, investment income, operating 

expenses, other revenue and expenses, 

and loss provisions (including 

provisions for anticipated failures). 

Because no data on estimated insured 

deposits will be available until after the 

quarter-end, the FDIC will assume that 

estimated insured deposits will increase 

during the quarter at the average 

quarterly rate over the previous four 

quarters. 

If the FDIC estimates that the reserve 

ratio will fall to a level that the Board 

believes would adversely affect public 

confidence or to a level close to zero or 

negative at the end of a calendar quarter, 

and the Board decides to impose an 

emergency special assessment of up to 

10 basis points, the FDIC will announce 

the imposition and rate of the special 

assessment no later than the last day of 

the quarter. As soon as practicable after 

any such announcement, the FDIC will 

have a notice published in the Federal 

Register of the imposition of the special 

assessment. 

Thus, for example, if in late 

September 2009, the FDIC estimates that 

the reserve ratio on September 30, 2009, 

will fall to zero, and the FDIC’s Board 

votes to impose a special assessment of 

up to 10 basis points, the FDIC will 

announce no later than September 30 

that it is imposing a special assessment 

on September 30, 2009, and the rate of 

the assessment, and will collect the 

special assessment, along with the usual 

quarterly deposit insurance assessment, 

on December 30, 2009. 

The FDIC currently projects that the 

combination of regular quarterly 

assessments and the 20 basis point 

special assessment will prevent the fund 

reserve ratio from falling to a level that 

that the Board believes would adversely 

affect public confidence or to a level 

close to zero or negative during the 

period of the Restoration Plan. For this 

reason, the FDIC does not expect to 

impose a special assessment of up to 10 

basis points. However, the FDIC will not 

make its estimates of quarter-end 

reserve ratios for purposes of any such 

special assessment, nor will the Board 

determine whether to impose such a 

special assessment, until shortly before 

the end of each quarter, in order to take 

advantage of the most recently available 

data. 

IV. Requests for Comments 

The FDIC seeks comment on every 

aspect of this rulemaking. In particular, 

the FDIC seeks comment on the issues 

set out below. The FDIC asks that 

commenters include reasons for their 

positions. 

1. Should the June 30, 2009 special 

assessment be at a rate other than 20 

basis points? 

2. Should there be a maximum rate 

that the combination of an institution’s 

regular quarterly assessment rate and a 

special assessment could not exceed? 

For example, an institution in Risk 

Category IV could possibly be charged a 

regular quarterly assessment at the 

annual rate of 77.5 basis points 

beginning in the second quarter of 2009. 

A 20 basis point special assessment 

would effectively increase the 

maximum possible annual rate to nearly 

100 basis points. Should the rate be 

capped at a smaller amount? 

3. Should weaker institutions be 

exempted, in whole or in part, from the 

special assessment? For example, 

should institutions with CAMELS 

ratings of 4 or 5 be exempted? Should 

adequately or undercapitalized 

institutions be exempted? Should 

institutions that would become 

undercapitalized (or critically 

undercapitalized) as the result of the 

special assessment be exempted? 

4. Should special assessments be 

assessed on assets or some other 

measure, rather than the regular riskbased assessment base? 


pwalker on PROD1PC71 with RULES2
9340 Federal Register / Vol. 74, No. 40 / Tuesday, March 3, 2009 / Rules and Regulations 

5See 5 U.S.C. 603, 604 and 605. 

6 5 U.S.C. 601. 

7Additional special assessments of up to 10 basis 

points could uniformly increase each institution’s 

assessment rate up to 10 basis points for additional 

assessment collections. 

5. Should there be special 

assessments of up to10 basis points? 

Should some other rate be used? For 

example, should the rate be the rate 

needed to maintain the fund reserve 

ratio at particular value for the reserve 

ratio? 

6. Should FDIC assessments, 

including emergency special 

assessments, take into account the 

assistance being provided to 

systemically important institutions? 

V. Effective Date 

This interim rule will take effect April 

1, 2009. 

VI. Regulatory Analysis and Procedure 

A. Administrative Procedure Act 

Pursuant to section 553(b)(B) of the 

Administrative Procedure Act (APA), 

notice and comment are not required 

prior to the issuance of a final rule if an 

agency for good cause finds that notice 

and public procedure thereon are 

impracticable, unnecessary, or contrary 

to the public interest. The FDIC finds 

good cause to adopt this interim rule 

without prior notice and comment. 

The FDIC believes that it is important 

that the fund not decline to a level that 

could undermine public confidence in 

federal deposit insurance. A fund 

balance and reserve ratio that are near 

zero or negative could create public 

confusion about the FDIC’s ability to 

move quickly to resolve problem 

institutions and protect insured 

depositors. Without additional revenue 

other than quarterly risk-based 

assessments based on the rates adopted 

in the Final Rule, the FDIC projects the 

reserve ratio will fall close to zero or 

become negative in 2009. Therefore, it is 

important for public confidence to have 

the interim rule in place quickly. 

Nevertheless, the FDIC desires to have 

the benefit of public comment and thus 

invites interested parties to submit 

comments during a 30-day comment 

period. The 30-day comment period will 

allow the FDIC to receive comments in 

a timely manner, given that the interim 

rule will be on April 1, 2009. The FDIC 

will revise the interim rule, if 

appropriate, in light of the comments 

received. 

B. Solicitation of Comments on Use of 

Plain Language 

Section 722 of the Gramm-LeachBliley Act, Public Law 106–102, 113 

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

requires the federal banking agencies to 

use plain language in all proposed and 

final rules published after January 1, 

2000. The FDIC invites your comments 

on how to make this proposal easier to 

understand. For example: 

• Has the FDIC organized the material 

to suit your needs? If not, how could 

this material be better organized? 

• Are the requirements in the 

regulation clearly stated? If not, how 

could the regulation be more clearly 

stated? 

• Does the regulation contain 

language or jargon that is not clear? If 

so, which language requires 

clarification? 

• Would a different format (grouping 

and order of sections, use of headings, 

paragraphing) make the regulation 

easier to understand? If so, what 

changes to the format would make the 

regulation easier to understand? 

• What else could the FDIC do to 

make the regulation easier to 

understand? 

C. Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

requires that each federal agency either 

certify that a final rule would not have 

a significant economic impact on a 

substantial number of small entities or 

prepare an initial regulatory flexibility 

analysis of the proposal and publish the 

analysis for comment.5 Certain types of 

rules, such as rules of particular 

applicability relating to rates or 

corporate or financial structures, or 

practices relating to such rates or 

structures, are expressly excluded from 

the definition of ‘‘rule’’ for purposes of 

the RFA.6 The interim rule relates 

directly to the rates imposed on insured 

depository institutions for deposit 

insurance. In addition, this interim rule 

does not involve the issuance of a notice 

of proposed rulemaking. For these 

reasons, the requirements of the RFA do 

not apply. Nonetheless, the FDIC is 

voluntarily undertaking a regulatory 

flexibility analysis and is seeking 

comment on it. 

As of December 31, 2008, of the 8,305 

insured commercial banks and savings 

institutions, 4,567 were small insured 

depository institutions as that term is 

defined for purposes of the RFA (i.e., 

those with $165 million or less in 

assets). 

The FDIC’s total assessment needs are 

driven by the statutory requirement that 

the FDIC adopt a Restoration Plan that 

provides that the fund reserve ratio 

reach at least 1.15 percent within five 

years absent extraordinary 

circumstances and by the FDIC’s 

aggregate insurance losses, expenses, 

investment income, and insured deposit 

growth, among other factors. Under the 

interim rule, each institution would be 

subject to a special assessment at a 

uniform rate to help meet FDIC 

assessment revenue needs. Apart from 

the uniform special assessment on all 

institutions to help meet the FDIC’s total 

revenue needs, the interim rule makes 

no other changes in rates for any 

insured institution, including small 

insured depository institutions. In 

effect, the interim rule would uniformly 

increase each institution’s assessment 

rate by 20 basis points for one 

assessment collection (including each 

small institution’s assessment rate, as a 

small institution is defined for RFA 

purposes), and would not alter the 

present distribution of assessment 

rates.7 The interim rule does not 

directly impose any ‘‘reporting’’ or 

‘‘recordkeeping’’ requirements within 

the meaning of the Paperwork 

Reduction Act. The compliance 

requirements for the interim rule would 

not exceed existing compliance 

requirements for the present system of 

FDIC deposit insurance assessments, 

which, in any event, are governed by 

separate regulations. The FDIC is 

unaware of any duplicative, overlapping 

or conflicting federal rules. 

D. Small Business Regulatory 

Enforcement Fairness Act 

The Office of Management and Budget 

has determined that the interim rule is 

not a ‘‘major rule’’ within the meaning 

of the relevant sections of the Small 

Business Regulatory Enforcement Act of 

1996 (SBREFA) Public Law 110–28 

(1996). As required by law, the FDIC 

will file the appropriate reports with 

Congress and the Government 

Accountability Office so that the interim 

rule may be reviewed. 

E. Paperwork Reduction Act 

No collections of information 

pursuant to the Paperwork Reduction 

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

contained in the interim rule. 

F. The Treasury and General 

Government Appropriations Act, 1999— 

Assessment of Federal Regulations and 

Policies on Families 

The FDIC has determined that the 

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

of the Treasury and General 

Government Appropriations Act, 

enacted as part of the Omnibus 

Consolidated and Emergency 

Supplemental Appropriations Act of 

1999 (Pub. L. 105–277, 112 Stat. 2681). 


pwalker on PROD1PC71 with RULES2
Federal Register / Vol. 74, No. 40 / Tuesday, March 3, 2009 / Rules and Regulations 9341 

List of Subjects in 12 CFR Part 327 

Bank deposit insurance, Banks, 

banking, Savings associations. 

■ For the reasons set forth in the 

preamble, the FDIC proposes to amend 

chapter III of title 12 of the Code of 

Federal Regulations as follows: 

PART 327—ASSESSMENTS 

■ 1. The authority citation for part 327 

continues to read as follows: 

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

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

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

109–173, 119 Stat. 3605. 

■ 2. In part 327 add new § 327.15 to 

Subpart A to read as follows: 

§ 327.11 Emergency special assessments. 

(a) Emergency special assessment 

imposed on June 30, 2009. On June 30, 

2009, the FDIC shall impose an 

emergency special assessment of 20 

basis points on each insured depository 

institution based on the institution’s 

assessment base calculated pursuant to 

§ 327.5 for the second assessment period 

of 2009. 

(b) Emergency special assessments 

after June 30, 2009. After June 30, 2009, 

if the reserve ratio of the Deposit 

Insurance Fund is estimated to fall to a 

level that that the Board believes would 

adversely affect public confidence or to 

a level which shall be close to zero or 

negative at the end of a calendar quarter, 

an emergency special assessment of up 

to 10 basis points may be imposed by 

a vote of the Board on all insured 

depository institutions based on each 

institution’s assessment base calculated 

pursuant to § 327.5 for the 

corresponding assessment period. 

(1) Estimation process. For purposes 

of any emergency special assessment 

under this paragraph (b), the FDIC shall 

estimate the reserve ratio of the Deposit 

Insurance Fund for the applicable 

calendar quarter end from available data 

on, or estimates of, insurance fund 

assessment income, investment income, 

operating expenses, other revenue and 

expenses, and loss provisions, including 

provisions for anticipated failures. The 

FDIC will assume that estimated insured 

deposits will increase during the quarter 

at the average quarterly rate over the 

previous four quarters. 

(2) Imposition and announcement of 

emergency special assessments. Any 

emergency special assessment under 

this paragraph (b) shall be on the last 

day of a calendar quarter and shall be 

announced by the end of such quarter. 

As soon as practicable after 

announcement, the FDIC will have a 

notice published in the Federal Register 

of the emergency special assessment. 

(c) Invoicing of any emergency special 

assessments. The FDIC shall advise each 

insured depository institution of the 

amount and calculation of any 

emergency special assessment imposed 

under paragraph (a) or (b) of this 

section. This information shall be 

provided at the same time as the 

institution’s quarterly certified 

statement invoice for the assessment 

period in which the emergency special 

assessment was imposed. 

(d) Payment of any emergency special 

assessment. Each insured depository 

institution shall pay to the Corporation 

any emergency special assessment 

imposed under paragraph (a) or (b) of 

this section in compliance with and 

subject to the provisions of §§ 327.3, 

327.6 and 327.7 of subpart A, and the 

provisions of subpart B. The payment 

date for any emergency special 

assessment shall be the date provided in 

§ 327.3(b)(2) for the institution’s 

quarterly certified statement invoice for 

the calendar quarter in which the 

emergency special assessment was 

imposed. 

By order of the Board of Directors. 

Dated at Washington, DC, this 27th day of 

February, 2009. 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

[FR Doc. E9–4585 Filed 3–2–09; 8:45 am] 

BILLING CODE 6714–01–P 


pwalker on PROD1PC71 with RULES2