Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Rules and Regulations 25639 

reserves and the depository institution’s 

contractual clearing balance, if any, and 

then subtracting from this product the 

depository institution’s clearing balance 

allowance, if any; or 

(2) $50,000, minus the depository 

institution’s clearing balance allowance, 

if any. Any carryover not offset during 

the next period may not be carried over 

to subsequent periods. 

§ 204.7 [Removed] 

■ 8. Section 204.7 is removed. 

§ 204.6 [Redesignated as § 204.7] 

■ 9. Section 204.6 is redesignated as 

§ 204.7. 

■ 10. New § 204.6 is added to read as 

follows: 

§ 204.6 Charges for reserve deficiencies. 

(a) Deficiencies in a depository 

institution’s required reserve balance, 

after application of the carryover 

provided in § 204.5(e), are subject 

reserve-deficiency charges. Federal 

Reserve Banks are authorized to assess 

charges for deficiencies in required 

reserves at a rate of 1 percentage point 

per year above the primary credit rate, 

as provided in § 201.51(a) of this 

chapter, in effect for borrowings from 

the Federal Reserve Bank on the first 

day of the calendar month in which the 

deficiencies occurred. Charges shall be 

assessed on the basis of daily average 

deficiencies during each maintenance 

period. Reserve Banks may, as an 

alternative to levying monetary charges, 

after consideration of the circumstances 

involved, permit a depository 

institution to eliminate deficiencies in 

its required reserve balance by 

maintaining additional reserves during 

subsequent reserve maintenance 

periods. 

(b) Reserve Banks may waive the 

charges for reserve deficiencies except 

when the deficiency arises out of a 

depository institution’s gross negligence 

or conduct that is inconsistent with the 

principles and purposes of reserve 

requirements. Decisions by Reserve 

Banks to waive charges are based on an 

evaluation of the circumstances in each 

individual case and the depository 

institution’s reserve maintenance 

record. For example, a waiver may be 

appropriate for a small charge or once 

during a two-year period for a 

deficiency that does not exceed a certain 

percentage of the depository 

institution’s required reserves. If a 

depository institution has demonstrated 

a lack of due regard for the proper 

maintenance of required reserves, the 

Reserve Bank may decline to exercise 

the waiver privilege and assess all 

charges regardless of amount or reason 

for the deficiency. 

(c) In individual cases, where a 

Federal supervisory authority waives a 

liquidity requirement, or waives the 

penalty for failing to satisfy a liquidity 

requirement, the Reserve Bank in the 

District where the involved depository 

institution is located shall waive the 

reserve requirement imposed under this 

part for such depository institution 

when requested by the Federal 

supervisory authority involved. 

(d) Violations of this part may be 

subject to assessment of civil money 

penalties by the Board under authority 

of Section 19(1) of the Federal Reserve 

Act (12 U.S.C. 505) as implemented in 

12 CFR part 263. In addition, the Board 

and any other Federal financial 

institution supervisory authority may 

enforce this part with respect to 

depository institutions subject to their 

jurisdiction under authority conferred 

by law to undertake cease and desist 

proceedings. 

PART 209—ISSUE AND 

CANCELLATION OF FEDERAL 

RESERVE BANK CAPITAL STOCK 

(REGULATION I) 

■ 10. The authority citation for part 209 

continues to read as follows: 

Authority: 12 U.S.C. 2222, 248, 282, 286– 

288, 321, 323, 327–328, 333, and 466. 

■ 11. § 209.2 is amended by revising 

paragraph (c)(1) to read as follows: 

§ 209.2 Banks desiring to become member 

banks. 

* * * * * 

(c) * * * 

(1) General rule. For purposes of this 

part, a national bank or a State bank is 

located in the Federal Reserve District 

that contains the location specified in 

the bank’s charter or organizing 

certificate, or as specified by the 

institution’s primary regulator, or if no 

such location is specified, the location 

of its head office, unless otherwise 

determined by the Board under 

paragraph (c)(2) of this section. 

* * * * * 

By order of the Board of Governors of the 

Federal Reserve System, May 22, 2009. 

Robert deV. Frierson, 

Deputy Secretary of the Board. 

[FR Doc. E9–12431 Filed 5–28–09; 8:45 am] 

BILLING CODE 6210–01–P 

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 327 

RIN 3064–AD35 

Special Assessments 

AGENCY: Federal Deposit Insurance 

Corporation (FDIC). 

ACTION: Final rule. 

SUMMARY: Pursuant to section 7(b)(5) of 

the Federal Deposit Insurance Act, 12 

U.S.C. 1817(b)(5), the FDIC is adopting 

a final rule to impose a 5 basis point 

special assessment on each insured 

depository institution’s assets minus 

Tier 1 capital as of June 30, 2009. The 

amount of the special assessment for 

any institution, however, will not 

exceed 10 basis points times the 

institution’s assessment base for the 

second quarter 2009 risk-based 

assessment. The special assessment will 

be collected on September 30, 2009. The 

final rule also provides that if, 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 that shall be close to or below 

zero at the end of any calendar quarter, 

the Board, by vote, may impose 

additional special assessments of up to 

5 basis points on all insured depository 

institutions based on each institution’s 

total assets minus Tier 1 capital 

reported on the report of condition for 

that calendar quarter. Any single 

additional special assessment will not 

exceed 10 basis points times the 

institution’s assessment base for the 

corresponding quarter’s risk-based 

assessment. The earliest possible date 

for imposing any such additional 

special assessment under the final rule 

would be September 30, 2009, with 

collection on December 30, 2009. The 

latest possible date for imposing any 

such additional special assessment 

under the final rule would be December 

31, 2009, with collection on March 30, 

2010. Authority to impose any 

additional special assessments under 

the final rule terminates on January 1, 

2010. 

DATES: Effective Date: June 30, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Munsell W. St. Clair, Acting Chief, Fund 

Analysis and Pricing Section, Division 

of Insurance and Research, (202) 898– 

8967; Christopher Bellotto, Counsel, 

Legal Division, (202) 898–3801 or 

Sheikha Kapoor, Senior Attorney, Legal 

Division, (202) 898–3960; Donna 

Saulnier, Manager, Assessment Policy 

Section, Division of Finance (703) 562– 

6167. 


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25640 Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Rules and Regulations 

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

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

2 74 FR 61598 (October 16, 2008). 

3 74 FR 9564 (Mar. 4, 2009). 

4 74 FR 9525 (Mar. 4, 2009). 5 74 FR 9338 (Mar. 4, 2009). 

6The Helping Families Save Their Homes Act of 

2009, discussed below, extends the temporary 

deposit insurance coverage limit increase to 

$250,000 (from the permanent limit of $100,000 for 

deposits other than retirement accounts) through 

the end of 2013. The legislation allows the FDIC to 

factor in the increase in the coverage limit for 

assessment purposes. Institutions do not currently 

report the amount of deposits insured above 

$100,000 (except for retirement accounts). Staff 

estimates that when institutions begin reporting 

estimated insured deposits that reflect the higher 

coverage limit (probably in their September 30, 

2009 reports of condition), projected reserve ratios 

(provided they are positive) will be somewhat lower 

than they would be using the $100,000 coverage 

limit. Taking the coverage limit increase into 

account would not, of course, convert a positive 

reserve ratio to a negative one. 

7Also, according to staff’s projections, the 

combination of the 5 basis points special 

assessment (without any additional special 

assessments) and regular assessments should return 

the reserve ratio to 1.15 percent in 2016, one year 

later than required by the amended Restoration 

Plan, which requires that the reserve ratio return to 

1.15 percent by the end of 2015. It should be noted 

that the Restoration Plan allows the FDIC the 

flexibility to adjust assessment rates as needed 

throughout the plan period to ensure that the fund 

reserve ratio reaches 1.15 percent within seven 

years (loss and income projections must be updated 

at least semiannually). 

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 1.22 percent as 

of December 31, 2007, to 0.40 percent 

(preliminary) as of December 31, 2008, 

and is expected to decline further by 

March 31, 2009. Twenty-five 

institutions failed in 2008, and the FDIC 

projects a substantially higher rate of 

institution failures this year and in the 

next few years, leading to a further 

decline in the reserve ratio. (As of May 

15, 2009, 33 institutions had failed in 

2009.) 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 Federal Deposit 

Insurance Reform Act of 2005 (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.2 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 reached 1.15 percent within five 

years, increase assessment rates. The 

FDIC amended the Restoration Plan on 

February 27, 2009, and extended the 

time within which the reserve ratio 

must be returned to 1.15 percent from 

five years to seven years due to 

extraordinary circumstances.3 The FDIC 

also adopted a final rule (the 

assessments final rule) that, among 

other things, set quarterly initial base 

assessment rates at 12 to 45 basis points 

beginning in the second quarter of 

2009.4 However, given the FDIC’s 

estimated losses from projected 

institution failures, these assessment 

rates will not be sufficient to return the 

fund reserve ratio to 1.15 percent within 

seven years and are unlikely to prevent 

the DIF fund balance and reserve ratio 

from falling to near zero or becoming 

negative in 2009. 

II. Interim Rule With Request for 

Comment 

On February 27, 2009, the FDIC, using 

its statutory authority under section 

7(b)(5) of the FDI Act (12 U.S.C. 

1817(b)(5)), adopted an interim rule 

with request for comment imposing a 20 

basis point special assessment on June 

30, 2009, to be collected on September 

30, 2009, at the same time that the 

regular quarterly risk-based assessments 

for the second quarter of 2009 are 

collected.5 Under the interim rule with 

request for comment, the assessment 

base for the special assessment was the 

same as the assessment base for the 

second quarter risk-based assessment. 

The interim rule with request for 

comment also provided that, after June 

30, 2009, if the reserve ratio of the DIF 

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 or below zero at the end 

of any calendar quarter, the Board, by 

vote, may impose a special assessment 

of up to 10 basis points as of the end 

of any such quarter based on each 

institution’s assessment base calculated 

pursuant to 12 CFR 327.5 for the 

corresponding assessment period. 

III. Comments Received 

The FDIC sought comments on every 

aspect of the interim rule with request 

for comment, with six particular issues 

posed. The FDIC received over 14,000 

comments, which are discussed in 

section V below. 

IV. Final Rule 

The final rule differs in several ways 

from the interim rule with request for 

comment. The final rule imposes a 5 

basis point special assessment on each 

institution’s assets minus Tier 1 capital 

as reported on the report of condition as 

of June 30, 2009, rather than a 20 basis 

point special assessment on each 

institution’s assessment base for the 

second quarter 2009 risk-based 

assessment, as provided in the interim 

rule with request for comment. The 

amount of the special assessment for 

any institution, however, will not 

exceed 10 basis points times the 

institution’s assessment base for the 

second quarter 2009 risk-based 

assessment. The special assessment will 

be collected on September 30, 2009. 

The FDIC estimates that the total 

amount collected under the special 

assessment will approximately equal the 

amount that would have been collected 

by imposing approximately a 7 and onethird basis point special assessment on 

the aggregate industry assessment base 

for the second quarter 2009 risk-based 

assessment. For all institutions, the 

assessment rate in the final rule will 

result in a much smaller assessment 

than under the interim rule with request 

for comment. 

According to the FDIC’s projections, 

the special assessment, combined with 

the rates adopted in the final assessment 

rule in February 2009, should result in 

maintaining a year-end 2009 fund 

balance and reserve ratio that are 

positive, albeit close to zero.6, 7 It is 

important, however, to recognize the 

inherent uncertainty in these 

projections. Given the importance of 

maintaining a positive fund balance and 

reserve ratio, it is probable that an 

additional special assessment will be 

necessary, although the amount and 

timing of such a special assessment is 

uncertain. 

Therefore, the final rule also provides 

that, if, after June 30, 2009, but before 

January 1, 2010, the reserve ratio of the 

DIF 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 or below zero at the end 

of any calendar quarter, the Board, by 

vote, may impose an additional special 

assessment of up to 5 basis points as of 

the end of any such quarter on all 

insured depository institutions based on 

each institution’s total assets minus Tier 

1 capital as reported on the report of 

condition for that calendar quarter. Any 

single additional special assessment 

will not exceed 10 basis points times the 

institution’s assessment base for the 

corresponding quarter’s risk-based 


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Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Rules and Regulations 25641 

8The Helping Families Save Their Homes Act of 

2009, discussed above, extends the temporary 

deposit insurance coverage limit increase to 

$250,000 (from the permanent limit of $100,000 for 

deposits other than retirement accounts) through 

the end of 2013. The legislation allows the FDIC to 

factor in the increase in the coverage limit for 

assessment purposes. Institutions do not currently 

report the amount of deposits insured above 

$100,000 (except for retirement accounts). The FDIC 

estimates that when institutions begin reporting 

estimated insured deposits that reflect the higher 

coverage limit (probably in their September 30, 

2009 reports of condition), projected reserve ratios 

(provided they are positive) will be somewhat lower 

than they would be using the $100,000 coverage 

limit. Taking the coverage limit increase into 

account would not, of course, convert a positive 

reserve ratio to a negative one. 

9Section 302(a), Pub. L. 102–242, 105 Stat. 2236, 

2345–48 (Dec. 19, 1991). 

assessment. The interim rule with 

request for comment had allowed 

additional special assessments of up to 

10 basis points on the assessment base 

used for quarterly risk-based 

assessments. 

The earliest any such additional 

special assessment could be imposed 

under the final rule would be September 

30, 2009, with collection on December 

30, 2009. An additional special 

assessment of up to 5 basis points may 

be needed and the FDIC will consider 

whether to impose such an additional 

special assessment later in 2009, but the 

amount and timing of any additional 

special assessment remain uncertain. 

Authority to impose any additional 

special assessments terminates under 

this rule on January 1, 2010. The FDIC’s 

ability to collect any special 

assessments imposed prior to January 1, 

2010, would not be affected by this 

termination date. 

Special Assessment 

The FDIC realizes that assessments 

are a significant expense, particularly 

during a financial crisis and recession 

when bank earnings are under pressure. 

Banks currently face tremendous 

challenges even without having to pay 

higher assessments. Assessments reduce 

the funds that banks can lend in their 

communities to help revitalize the 

economy. For that reason, the FDIC has 

found ways to reduce the size of the 

special assessment since adopting the 

interim rule with request for comment. 

The FDIC recently imposed a surcharge 

on senior unsecured debt guaranteed 

under the Temporary Liquidity 

Guarantee Program (TLGP). Funds 

collected and anticipated to be collected 

from this surcharge allow the FDIC to 

reduce somewhat the size of the special 

assessment. 

The FDIC also requested that Congress 

increase the FDIC’s authority to borrow 

from Treasury. The size of the special 

assessment adopted in the interim rule 

with request for comment reflected the 

FDIC’s need to maintain adequate 

resources to cover potential unforeseen 

losses. The FDIC had a thin cushion 

against unforeseen losses because its 

$30 billion borrowing authority from 

Treasury for losses from bank failures 

had not increased since 1991, although 

industry assets had more than tripled. 

On May 20, 2009, Congress increased 

the FDIC’s authority to borrow from 

Treasury from $30 billion to $100 

billion as a part of the Helping Families 

Save Their Homes Act of 2009. In 

addition, this legislation authorized a 

temporary increase until December 31, 

2010, in the FDIC’s borrowing authority 

above $100 billion (but not to exceed 

$500 billion) based on a process that 

would require the concurrence of the 

FDIC’s Board, the Federal Reserve 

Board, and the Secretary of the Treasury 

in consultation with the President. This 

increase in the FDIC’s borrowing 

authority gives the FDIC a sufficient 

cushion against unforeseen bank 

failures to allow it to reduce the size of 

the special assessment significantly 

while continuing to assess at a level that 

maintains the DIF through industry 

funding. Although the industry would 

still pay assessments to cover projected 

losses and rebuild the fund over time, 

a lower special assessment will mitigate 

the pro-cyclical effects of assessments. 

Nevertheless, the FDIC still needs to 

impose a special assessment. The FDIC 

currently projects approximately $70 

billion in losses due to insured 

depository institution failures over the 

next five years, the great majority of 

which are expected to occur in 2009 and 

2010. The $70 billion estimate of losses 

is about $5 billion higher than the 

FDIC’s estimate in February 2009. The 

FDIC also currently projects that, 

without a special assessment, the 

reserve ratio of the DIF will become 

negative by the end of 2009. Given 

current projections, the FDIC expects 

that the special assessment will keep the 

DIF positive, albeit at a low level.8

Section 7(b)(5) of the FDI Act, 

governing special assessments, allows 

the Corporation to impose one or more 

special assessments on insured 

depository institutions in an amount 

determined by the Corporation for any 

purpose that the Corporation may deem 

necessary. One of the FDIC’s principal 

purposes in imposing special 

assessments under this rule is to prevent 

the reserve ratio of the fund from 

declining to zero or below. The statute 

does not define the assessment base to 

be used when imposing a special 

assessment. Thus, the FDIC has 

authority to define the appropriate 

assessment base for the special 

assessment by rulemaking. Chevron 

USA v. NRDC, 467 U.S. 837, 843 (1984); 

12 U.S.C. 1819 (a) Tenth. Moreover, 

prior to 1991, section 7(b)(4) of the FDI 

Act defined a depository institution’s 

assessment base as the institution’s 

liability for deposits as reported on the 

institution’s report of condition, subject 

to certain statutory adjustments. The 

Federal Deposit Insurance Corporation 

Improvement Act of 1991 repealed those 

provisions and substituted the current 

risk-based assessment system 

provisions.9 No specific definition of 

the assessment base was put in its place, 

thus giving the FDIC the discretion to 

establish the appropriate base against 

which to charge assessments depending 

on circumstances. 

The interim rule with request for 

comment based the amount of the 

special assessment on the assessment 

base used for the regular quarterly riskbased assessments. In contrast, the final 

rule bases the special assessment on an 

institution’s total assets less Tier 1 

capital. After careful consideration, the 

FDIC has concluded that a departure 

from the regular risk-based assessment 

base is appropriate in the current 

circumstances because it better balances 

the burden of the special assessment. 

The FDIC has excluded Tier 1 capital 

from the assessment base to ensure that 

no institution will be penalized for 

holding large amounts of capital. 

Unless additional special assessments 

are needed, all institutions will pay less 

than they would have under the interim 

rule with request for comment. Even if 

a second special assessment is needed, 

no institution will pay more than it 

would have paid under the interim rule 

with request for comment. 

A 5 basis point special assessment 

rate based on assets minus Tier 1 capital 

should increase the reserve ratio as of 

the end of 2009 by approximately 10 

basis points. According to the FDIC’s 

projections, this 5 basis point special 

assessment (without any additional 

special assessments), combined with the 

rates adopted in the final assessment 

rule in February 2009, would return the 

reserve ratio to 1.15 percent in 2016, 

one year later than required by the 

amended Restoration Plan, which 

requires that the reserve ratio return to 

1.15 percent by the end of 2015. It 

should be noted that the Restoration 

Plan allows the FDIC the flexibility to 

adjust assessment rates as needed 

throughout the plan period to ensure 

that the fund reserve ratio reaches 1.15 

percent within seven years (loss and 

income projections must be updated at 

least semiannually). 


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25642 Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Rules and Regulations 

10Section 7(b)(3)(E)(iv) of the Federal Deposit 

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

Congress awarded the industry, in aggregate, 

approximately $4.7 billion in assessment credits in 

the Federal Deposit Insurance Reform Act of 2005. 

Almost all of these credits have been used. 

11For 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)). 

12The FDIC excluded goodwill losses and 

amortization expenses and impairment losses for 

other intangible assets from earnings during this 

period, since many of these items were unusual, 

one-time charges. 

As part of the Restoration Plan, the 

FDIC has the authority to restrict the use 

of the one-time assessment credit while 

the plan is in effect, although an 

institution may still apply any 

remaining credit against its assessment 

to the lesser of its assessment or 3 basis 

points.10 The FDIC has decided not to 

restrict assessment credit use in the 

Restoration Plan. The FDIC projects that 

the amount of the assessment credit 

remaining at the time that the special 

assessment is imposed on June 30, 2009, 

will be very small and that its use will 

have very little effect on assessment 

revenue.11

Effect on Capital and Earnings 

The FDIC has analyzed the effect of a 

5 basis point special assessment on 

assets minus Tier 1 capital (not to 

exceed 10 basis points on an 

institution’s June 30, 2009, assessment 

base) on the capital and earnings of 

insured institutions. For this analysis, 

the FDIC has projected that insured 

institutions’ earnings from April 1, 

2009, through March 31, 2010, will 

equal their earnings from April 1, 2008, 

through March 31, 2009, a period that 

included several stressful quarters.12

Given this projection, for the industry as 

a whole, the 5 basis point special 

assessment in 2009 would result in 

March 31, 2010, equity capital that 

would be approximately 0.2 percent 

lower than in the absence of a special 

assessment. Based on this projection for 

industry earnings, a 5 basis point 

special assessment would cause 2 

institutions (with $2.9 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. Of these 

institutions, the equity-to-assets ratio of 

one institution (with $0.2 billion in 

aggregate assets) would fall below 2 

percent. 

For profitable institutions, the 5 basis 

point special assessment would result in 

pre-tax income for 2009 that would be 

5.1 percent lower than if the FDIC did 

not charge the special assessment. For 

unprofitable institutions, pre-tax losses 

would increase by an average of 2.0 

percent. 

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. As a result, the FDIC 

has concluded that the need for any 

further special assessments should be 

considered periodically beginning later 

this year when the FDIC can use the 

most recently available data on fund 

losses and the fund reserve ratio. 

Under the final rule, the Board may, 

by vote, impose additional special 

assessments of up to 5 basis points each 

on all insured depository institutions to 

further ensure that the fund reserve ratio 

does not decline to a level that could 

undermine public confidence in federal 

deposit insurance or to a level which 

shall be close to or below zero at the end 

of a calendar quarter. Any such special 

assessment would be imposed on the 

last day of a quarter for the remainder 

of 2009 (September 30 or December 31) 

and would be collected approximately 

three months later at the same time that 

quarterly risk-based assessments are 

collected. The earliest possible date that 

the Board, by vote, may impose such an 

additional special assessment is 

September 30, 2009 (which would be 

collected December 30, 2009). The latest 

possible date for imposing any such 

special assessment under the final rule 

would be December 31, 2009 (which 

would be collected on March 30, 2010). 

The final rule reduces the maximum 

size of any such additional special 

assessment to 5 basis points from the 10 

basis points allowed by the interim rule 

with request for comment, and also 

changes the base for calculating this 

special assessment. 

Any additional special assessment 

also would be based on an institution’s 

total assets minus Tier 1 capital as 

reported on the report of condition for 

the quarter ending the date the special 

assessment is imposed rather than being 

based on the institution’s assessment 

base. Thus, for example, a special 

assessment imposed on December 31, 

2009, would be based on total assets 

minus Tier 1 capital reported for the 

fourth quarter of 2009 (and would be 

collected March 30, 2010). Any single 

additional special assessment is capped 

at 10 basis points of the institution’s 

assessment base used for the 

corresponding quarter’s risk-based 

assessment. If the FDIC needs to impose 

an additional special assessment larger 

than 5 basis points, it will do so by 

further rulemaking. 

Near the end of the third and fourth 

quarters of 2009, if there is a reasonable 

possibility that the reserve ratio has 

declined to a level that could 

undermine public confidence in federal 

deposit insurance or to a level which 

shall be close to or below zero, staff 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 or 

below zero at the end of a calendar 

quarter, and the Board decides to 

impose a special assessment of up to 5 

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. 

For example, if the FDIC estimates in 

late December 2009 that the reserve 

ratio on December 31, 2009, will fall to 

close to or below zero, the FDIC’s Board 

may vote to impose a special assessment 

of up to 5 basis points. Should the 

Board so vote, the special assessment 

will be announced no later than 

December 31. The announcement will 

state that the special assessment is being 

imposed on December 31, 2009, the rate 

of the assessment, and that the 

assessment will be collected along with 

the regular quarterly deposit insurance 

assessment on March 30, 2010. Notice of 

the special assessment will be published 

in the Federal Register as soon as 

practicable. 

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 current data 

available. 

Authority to impose any additional 

special assessments terminates under 

this rule on January 1, 2010. However, 

the FDIC’s ability to collect any special 

assessments imposed prior to January 1, 

2010, would not be affected by this 

termination date. Thus, in the previous 


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example, if the Board voted to impose 

an additional 5 basis point special 

assessment on December 31, 2009, the 

special assessment would be collected 

with the regular quarterly deposit 

insurance assessment on March 30, 

2010. 

V. Summary of Comments 

The FDIC received over 14,000 

comment letters, the vast majority of 

which stated that the proposed 20 basis 

point special assessment could have a 

significant adverse effect on the 

industry at a very difficult time in the 

economic and business cycles. A 

number of letters from smaller 

institutions and their trade groups noted 

that the assessment would be 

particularly hard for community banks 

to absorb. 

Alternatives 

While recognizing that the banking 

industry stands behind the DIF, most of 

the comments suggested alternatives to 

reduce or eliminate a large, one-time 

special assessment. Proposed 

alternatives included spreading out 

payments over a number of quarters or 

years, increasing the amount of time 

needed to recapitalize the fund, 

borrowing from the Treasury, issuing 

FICO-like bonds, borrowing from the 

industry, allowing the industry to take 

an equity stake in the FDIC similar to 

the credit union model implemented by 

the National Credit Union 

Administration (NCUA) for the National 

Credit Union Share Insurance Fund 

(NCUSIF), using revenue from the 

TLGP, Legacy Loan Program and 

Troubled Asset Relief Program (TARP) 

initiatives, and reducing FDIC 

operational and resolutions costs. 

The FDIC is aware, and has 

acknowledged, that a 20 basis point 

special assessment would be a 

significant expense for the industry, 

particularly given current conditions. 

For the reasons discussed earlier, the 

FDIC has decided to reduce the size of 

the special assessment to 5 basis points 

on each insured depository institution’s 

assets minus Tier 1 capital as of June 30, 

2009, with the potential for imposing 

additional special assessments of up to 

5 basis points on each institution’s total 

assets minus Tier 1 capital should the 

FDIC’s Board determine that the fund 

has declined to a level that would 

undermine public confidence in the 

deposit insurance system or to a level 

close to or below zero at the end of a 

calendar quarter. This decision, in 

effect, reduces the special assessment 

and spreads it out (if more than one 

assessment becomes necessary), thereby 

avoiding a large one time fee and the 

effect of that fee on earnings and capital. 

While the increase in the FDIC’s 

borrowing authority from the Treasury 

gives the FDIC a sufficient cushion 

against unforeseen bank failures to 

allow it to reduce the size of the special 

assessment, the FDIC continues to 

believe that the line of credit with 

Treasury should be used to fund 

unexpected losses, not expected losses. 

Many of the other proposed 

alternative funding mechanisms would 

require legislative changes, as the FDIC 

does not currently have the statutory 

authority to issue equity or create an 

entity to issue FICO-like bonds. Even if 

the FDIC had the authority to issue 

equity, insured institutions would need 

to determine regularly whether their 

equity investment was impaired and, if 

so, whether the impairment was other 

than temporary. If the investment were 

other-than-temporarily impaired, 

institutions would have to recognize an 

impairment loss in earnings and write 

down the asset (as credit unions have 

recently had to do with respect to their 

deposits in the NCUSIF). Given the 

FDIC’s current projections for the fund 

balance, banks may have to recognize an 

other-than-temporary impairment loss 

on equity investments in the FDIC soon 

after the issuance of the equity. 

While FICO-like bonds, if properly 

structured, could allow insured 

institutions to finance recapitalization 

of the DIF over a long period, Congress 

is not currently considering this option 

(or the possibility of allowing the FDIC 

to issue equity). Consequently, this 

option would probably not solve the 

FDIC’s short-term need for funds to keep 

the fund balance positive. 

Regarding the proposals to use funds 

from various financial stability 

initiatives, as previously discussed, 

anticipated funds collected from the 

TLGP surcharge have allowed the FDIC 

to reduce somewhat the size of the 

special assessment. The FDIC does not 

have access to TARP funds. 

Borrowing from the industry would 

create both an asset and offsetting 

liability for the FDIC and this would not 

increase the fund or the reserve ratio. 

Several commenters, including a 

national trade association, expressed 

concern about the potential for a 

negative feedback loop where the 

special assessment causes deterioration 

in performance ratios leading by 

extension to CAMELS downgrades and 

a subsequent increase in premiums. The 

FDIC is aware of this and will issue 

guidance to examiners following the 

adoption of this rule instructing them to 

assign component and composite ratings 

without regard to payment of the special 

assessment. 

Maximum Rate/Exemption for Weaker 

Institutions 

In addition to requesting comments 

on the special assessment, the FDIC 

sought specific comment on whether 

there should be a maximum rate that the 

combination of an institution’s regular 

quarterly assessment rate and a special 

assessment could not exceed and 

whether weaker institutions should be 

exempted, in whole or in part, from the 

special assessment. 

The FDIC received a few comments 

on whether there should be a cap, or 

maximum rate, that the combination of 

an institution’s regular quarterly 

assessment rate and a special 

assessment should not exceed. Several 

state trade groups noted that, for 

institutions whose rate is close to 100 

basis points, there should be a cap, 

suggesting 50 basis points. Regarding 

whether weaker banks should be 

exempted, many commenters noted that 

the special assessment should be risk 

based so that less of the burden would 

be placed on healthy, well-run banks. 

However, in response to both questions, 

some national trade groups noted that 

the industry needs as many viable 

institutions as possible to limit costs to 

recapitalize the DIF. 

Given the significant reduction in the 

amount of the special assessment, the 

FDIC does not believe that either a cap 

(other than the general cap of 10 basis 

points of an institution’s assessment 

base used for its risk-based assessment) 

or an exemption for weaker institutions 

is warranted. In addition, the FDIC does 

not favor using a risk-based system in 

this situation. The special assessment is 

intended to rebuild the fund, not to 

reflect risk of failure. Moreover, a riskbased special assessment would result 

in too large a premium for the riskiest 

institutions, particularly when taken in 

combination with regular premiums. 

Alternative Assessment Base/Assistance 

to Systemically Important Institutions 

The FDIC also asked for comments on 

whether FDIC assessments, including 

special assessments, should take into 

account the assistance being provided to 

systemically important institutions and 

whether special assessments should be 

assessed on assets or some other 

measure, rather than the regular 

assessment base. 

In response, a large number of 

commenters stated that the special 

assessment should be based on total 

assets for two reasons: (1) Assets are a 

more accurate gauge of risk; and (2) it 

would place less of the burden on 


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25644 Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Rules and Regulations 

13See 5 U.S.C. 603, 604 and 605. 

14 5 U.S.C. 601. 

15The FDIC estimates that the total amount 

collected under the special assessment will 

approximately equal the amount that would have 

been collected by imposing approximately a 7.33 

basis point special assessment on the aggregate 

industry assessment base for the second quarter 

2009 risk-based assessment. 

smaller institutions. Several large banks 

and trade groups whose clients are 

predominantly large institutions 

objected to a new assessment base, 

arguing that deviation from the current 

assessment base would be inconsistent 

with the purpose of the DIF, which is to 

insure deposits. Several state bankers 

associations commented that weaker 

systemically important institutions 

should pay more, given the amount of 

assistance already received. A 

community bank trade group advocated 

a systemic risk premium. 

For the reasons discussed earlier, the 

FDIC agrees that the special assessment 

should be based on assets (minus Tier 

1 capital). 

In response to the question regarding 

additional assessments, some 

commenters, including several national 

trade groups and a large bank, thought 

that the FDIC should go through a 

comment period before implementation 

of additional special assessments. 

The FDIC believes the current rule 

making has provided the public and the 

industry with sufficient opportunity to 

comment. Further, the mechanism 

adopted for additional special 

assessments allows the FDIC to act 

quickly, using the most up-to-date data, 

which reduces the chances that the 

FDIC would have to impose a special 

assessment that could have been 

avoided with better data. 

VI. Effective Date 

This final rule will take effect June 30, 

2009. 

VII. Regulatory Analysis and Procedure 

A. 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.13 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.14 The final rule relates directly 

to the rates imposed on insured 

depository institutions for deposit 

insurance. In addition, this final 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. 

As of March 31, 2009, of the 8,247 

insured commercial banks and savings 

institutions, 4,479 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. (The FDIC 

adopted an amended Restoration Plan 

extending the time within which the 

reserve ratio must be returned to 1.15 

percent from five years to seven years 

due to extraordinary circumstances). 

Under the final 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, the final rule makes no 

other changes in rates for any insured 

institution, including small insured 

depository institutions. In effect, the 

final rule would uniformly increase 

each institution’s assessment by 5 basis 

points of the institution’s total assets 

minus Tier 1 capital for one assessment 

collection (including small institutions 

as defined for RFA purposes), and 

would alter the present distribution of 

assessments by reducing the percentage 

of the special assessment borne by small 

institutions. Using the standard 

assessment base of deposits as reported 

in the institution’s report of condition 

(subject to certain statutory adjustments) 

and applying a 7.33 15 basis point 

charge, smaller institutions, as defined 

here, would bear 3.8 percent of the total 

cost of the special assessment. Applying 

a 5 basis point charge on assets minus 

Tier 1 capital, as provided in the final 

rule, smaller institutions would bear 2.8 

percent of the total cost of the special 

assessment. 

The final rule does not directly 

impose any ‘‘reporting’’ or 

‘‘recordkeeping’’ requirements within 

the meaning of the Paperwork 

Reduction Act. The compliance 

requirements for the final 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. 

B. Small Business Regulatory 

Enforcement Fairness Act 

The Office of Management and Budget 

has determined that the final rule is not 

a ‘‘major rule’’ within the meaning of 

the relevant sections of the Small 

Business Regulatory Enforcement 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 final 

rule may be reviewed. 

C. Paperwork Reduction Act 

No collections of information 

pursuant to the Paperwork Reduction 

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

contained in the final rule. 

F. The Treasury and General 

Government Appropriations Act, 1999— 

Assessment of Federal Regulations and 

Policies on Families 

The FDIC has determined that the 

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

of the Treasury and General 

Government Appropriations Act, 

enacted as part of the Omnibus 

Consolidated and Emergency 

Supplemental Appropriations Act of 

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

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 amends 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 § 327.11 to 

Subpart A to read as follows: 

§ 327.11 Special assessments. 

(a) Special assessment imposed on 

June 30, 2009. On June 30, 2009, the 

FDIC shall impose a special assessment 

on each insured depository institution 

of 5 basis points based on the 

institution’s total assets less Tier 1 

capital as reported on the report of 

condition for the second assessment 


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Federal Register / Vol. 74, No. 102 / Friday, May 29, 2009 / Rules and Regulations 25645 

period of 2009. The special assessment 

paid by any institution shall not exceed 

10 basis points times the institution’s 

assessment base for the second quarter 

2009 risk-based assessment. 

(b) Special assessments after June 30, 

2009—(1) Authority for additional 

special assessments. 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 or below 

zero at the end of a calendar quarter, a 

special assessment of up to 5 basis 

points on total assets less Tier 1 capital 

as reported on the report of condition 

for that calendar quarter may be 

imposed by a vote of the Board on all 

insured depository institutions. For any 

institution, the amount of such a special 

assessment shall not exceed 10 basis 

points times the institution’s assessment 

base reported as of the date that the 

special assessment is imposed. 

(2) Termination of authority. The 

authority to impose additional special 

assessments under this paragraph (b) 

shall terminate on January 1, 2010, but 

such termination of authority shall not 

prevent the Corporation from thereafter 

collecting any special assessment 

imposed prior to January 1, 2010. 

(3) Estimation process. For purposes 

of any 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. 

(4) Imposition and announcement of 

special assessments. Any special 

assessment under this paragraph (b) 

shall be imposed 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 of the special assessment 

published in the Federal Register. 

(c) Invoicing of any special 

assessments. The FDIC shall advise each 

insured depository institution of the 

amount and calculation of any 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 special assessment 

was imposed. 

(d) Payment of any special 

assessment. Each insured depository 

institution shall pay to the Corporation 

any 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 

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 special assessment 

was imposed. 

Dated at Washington, DC this 22nd day of 

May, 2009. 

By order of the Board of Directors. 

Federal Deposit Insurance Corporation. 

Robert E. Feldman, 

Executive Secretary. 

[FR Doc. E9–12549 Filed 5–27–09; 11:15 am] 

BILLING CODE 6714–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 25 

[Amendment No. 25–128] 

Transport Category Airplanes, Various 

Technical Amendments and 

Corrections 

AGENCY: Federal Aviation 

Administration (FAA), DOT. 

ACTION: Final rule; technical 

amendment. 

SUMMARY: This amendment corrects a 

number of errors in the safety standards 

for transport category airplanes. None of 

the changes are substantive in nature, 

and this amendment will not impose 

any additional burdens on any person 

affected by these regulations. 

DATES: Effective Date: This amendment 

becomes effective May 29, 2009. 

FOR FURTHER INFORMATION CONTACT: For 

technical questions concerning this final 

rule, contact: Jeff Gardlin, FAA Airframe 

and Cabin Safety Branch, ANM–115, 

Transport Airplane Directorate, Aircraft 

Certification Service, 1601 Lind Avenue 

SW., Renton, Washington 98057–3356; 

telephone (425) 227–2136; facsimile 

(425) 227–1149; e-mail: 

jeff.gardlin@faa.gov. For legal questions 

concerning this final rule, contact: 

Douglas Anderson, ANM–7, FAA, Office 

of Regional Counsel, 1601 Lind Ave. 

SW., Renton, WA 98057–3356 

telephone (202) 267–2166; e-mail: 

Douglas.Anderson@faa.gov. 

SUPPLEMENTARY INFORMATION: 

Background 

A number of unrelated errors in the 

safety standards for transport category 

airplanes have been brought to the 

attention of the FAA. Some are due to 

inadvertent omissions or other editing 

errors; others are simply typographical 

or printing errors. This document 

amends part 25 to correct those errors. 

None of the corrections are substantive 

in nature, and this amendment will not 

impose any additional burdens on any 

person affected by these regulations. 

List of Subjects in 14 CFR Part 25 

Airplanes, Aviation safety, Reporting 

and recordkeeping requirements. 

The Amendment 

■ In consideration of the following, the 

Federal Aviation Administration 

amends part 25 of Title 14, Code of 

Federal Regulations, as follows: 

PART 25—AIRWORTHINESS 

STANDARDS: TRANSPORT 

CATEGORY AIRPLANES 

■ 1. The authority citation of part 25 

continues to read as follows: 

Authority: 49 U.S.C. 106(g), 40113, 44701, 

44702 and 44704. 

§ 25.812 [Amended] 

■ 2. Amend § 25.812(h), introductory 

text, by removing the phrase 

‘‘§§ 25.810(a) and (d)’’ and adding the 

phrase ‘‘§§ 25.810(a)(1) and (d)’’ in its 

place. 

§ 25.813 [Amended] 

■ 3. Amend § 25.813(b)(5) by removing 

the phrase ‘‘§ 25.807(d)(3)(ii)’’ and 

adding the phrase ‘‘§ 25.807(g)(9)(ii)’’ in 

its place. 

Appendix F to Part 25 [Amended] 

■ 4. Amend Appendix F, part VII, 

paragraph (f)(1), by removing the phrase 

‘‘paragraph (c)(4) or (c)(4)(i)’’ and 

adding the phrase ‘‘paragraph (c)(3)(iv)’’ 

in its place. 

Issued in Washington, DC, on May 22, 

2009. 

Pamela Hamilton-Powell, 

Director, Office of Rulemaking. 

[FR Doc. E9–12435 Filed 5–28–09; 8:45 am] 

BILLING CODE 4910–13–P 


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