5
 

Deposit Insurance: Fund Management and

Risk-Based Deposit Insurance Assessments 

Introduction 

The 2008 financial crisis and economic downturn precipitated a banking crisis, causing a 

sharp increase in the number of failures of FDIC-insured institutions. After several years 

in which there had been few or no failures, between 2008 and 2013 a total of 489 banks 

and thrifts failed, 157 during 2010 alone (the most since 1992).1

 In 2008 and 2009, as the 

number of bank failures increased, losses incurred by the Deposit Insurance Fund (DIF, 

or the fund) to close failing banks and protect insured depositors significantly exceeded 

fund revenue. The FDIC took several steps intended to keep the fund in the black. When 

these efforts failed, the FDIC turned to ensuring that the fund had sufficient liquid assets 

to continue to protect insured depositors at failed banks. In this effort, the FDIC was 

successful. From 2011 through 2016, the FDIC used the expanded authority granted in the 

Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 (Dodd-Frank) to 

substantially revise both its fund management strategy and its methodology for risk-based 

deposit insurance assessments. (For definitions of key terms, see the box.) 

The FDIC’s approach to deposit insurance fund management and risk-based pricing is 

governed by statute. This chapter traces the evolution of the statutory framework and— 

within that framework—the evolution of the FDIC’s fund management strategy and 

risk-based pricing methods, beginning as the banking crisis was about to erupt, passing 

through a period of adaptive responses, and culminating with implementation of the 

deposit insurance reforms authorized by Dodd-Frank. 

Bank and thrift failures, here and elsewhere in this chapter, exclude instances where open-bank assistance 

was provided in conjunction with a systemic risk exception. See chapter 3 for more details. In 1992, 179 

banks and thrifts failed, including thrift failures handled by the Resolution Trust Corporation (which was 

created by Congress in 1989 to resolve insolvent thrifts). 

1 
152 CRISIS AND RESPONSE: AN FDIC HISTORY, 2008–2013 

Definitions of Key Terms 

The Deposit Insurance Fund (DIF) is used to protect insured depositors and to 

close failing banks. It was formed in 2006 from the merger of two predecessor 

funds, the Bank Insurance Fund and the Savings Association Insurance Fund. In 

this chapter, references to the DIF before 2006 refer to a hypothetical combination 

of the two funds. 

Fund management consists, first, of determining the proper size of the DIF and, 

second, setting overall assessment rates that are sufficient to maintain or achieve 

the proper fund size. (The appendix of this chapter traces the evolution of the 

assessment rate schedules from Q1 2009 to the present.) 

The critical measure of the adequacy of the DIF is the reserve ratio, which is 

the ratio of the fund balance (or net worth) to estimated insured deposits. The 

designated reserve ratio (DRR) has generally been defined as the minimum target 

for the reserve ratio, but for a period of about ten years it also effectively served 

to restrain growth above the target. Under the current statute, the FDIC views the 

DRR—which the FDIC must set each year—as a long-term minimum target ratio. 

Risk-based pricing refers to the way the FDIC charges banks different 

assessment rates for the differing risks they pose to the DIF, given the overall level of 

assessment rates the FDIC has set to attain its fund management goals. To calculate 

a bank’s deposit insurance assessment, the bank’s assessment rate is multiplied by 

its assessment base. 

Background: Fund Management and Risk-Based Pricing at the 

Beginning of the Banking Crisis 

When the banking crisis erupted in 2008, the framework for fund management and riskbased deposit insurance pricing was one that had been put in place by the Federal Deposit 

Insurance Reform Act of 2005 (FDIRA), enacted in February 2006 on the recommendation 

of the FDIC.2 FDIRA ended a ten-year-old statutory restriction (1996–2006) on the FDIC’s 

authority to assess most banks—specifically, those well capitalized and highly rated by their 

supervisors—as long as the reserve ratio was at or above 1.25 percent. As a result of this 

restriction, growth in the fund balance failed to keep pace with insured deposit growth, 

leaving the reserve ratio at year-end 2006 (1.21 percent) 12 basis points lower than it had 

been at the end of 1996 (1.33 percent). (A basis point is one one-hundredth of a percent.) 

Federal Deposit Insurance Reform Act of 2005, Pub. L. No. 109-171, 120 Stat. 9 (2006). The reason for the 

discrepancy in dates is that the act was included as Title 2 in the Deficit Reduction Act of 2005, which was 

signed into law in February 2006. 

2 
CHAPTER 5: Deposit Insurance: Fund Management and Risk-Based Deposit Insurance Assessments 153 

Managing the Size of the DIF 

FDIRA, in contrast to the law it replaced, permitted the FDIC to set the target reserve 

ratio (the DRR) each year between 1.15 and 1.50 percent. If the actual reserve ratio 

exceeded 1.50 percent, however, the FDIC was required to return amounts in the fund 

above 1.50 percent to the industry through “dividends.” Thus the fund had a hard cap 

of 1.50 percent. In addition, if the reserve ratio was between 1.35 and 1.50 percent, the 

FDIC was required to pay dividends to the industry equal to half of all amounts above 

1.35 percent. FDIRA did allow the FDIC to suspend dividends temporarily if the DIF 

faced a significant risk of high losses. (During the period when this provision of FDIRA 

was in effect, the reserve ratio never reached 1.35 percent, so no dividends were paid.) 

FDIRA also directed the FDIC’s Board of Directors, when setting the DRR for any year, 

to consider various factors with the general objective of increasing the fund under 

more favorable economic conditions so that the fund could withstand declines under 

adverse conditions without the need for sharp, procyclical increases in assessments.3 

(“Procyclical” assessments increase when banking conditions are bad and decrease when 

they are good.) 

Under the authority granted by FDIRA, the FDIC set the DRR at 1.25 percent for 

2007 and 2008 (the same target that had been in effect since 1989) and began charging 

every bank, including the least risky, an insurance premium, which the FDIC had not 

been able to do for about 10 years, as explained above. The Corporation’s intent was to 

have the reserve ratio increase gradually, consistent with FDIRA’s objective that the fund 

be allowed to increase when conditions were favorable so that it could decline under 

adverse conditions without the need for sharp increases in assessments.4

 In 2007, the 

outlook for economic conditions affecting banks was favorable, and no bank had failed 

in two years. But FDIRA included one requirement that had a fundamentally limiting 

effect on reserve ratio growth: it required the Corporation to provide credits to offset the 

premiums of banks that had helped rebuild the insurance funds in the early to middle 

1990s. These credits, combined with insured deposit growth, resulted in a reserve ratio 

at the end of 2007—just before the crisis—that was virtually unchanged from its level a 

year earlier: 1.21 percent at year-end 2006, 1.22 percent at year-end 2007. 

3 Under FDIRA, the factors that the Board is required to consider are (1) the risk of losses to the DIF in the 

current and future years, historic experience, and potential and estimated losses from insured depository 

institutions; (2) economic conditions generally affecting insured depository institutions; (3) the importance 

of preventing sharp swings in assessment rates for insured depository institutions; and (4) other factors 

deemed by the Board to be appropriate, consistent with FDIRA’s requirements. See Section 2105 of FDIRA, 

codified at 12 U.S.C. § 1817(b)(3)(C). 

4 71 Fed. Reg. 69282, 69305 (Nov. 30, 2006). 
154 CRISIS AND RESPONSE: AN FDIC HISTORY, 2008–2013 

Implementing Risk-Based Pricing 

The ten-year restriction on the FDIC’s ability to charge assessments to healthy banks as 

long as the reserve ratio was at or above the statutory 1.25 percent reserve ratio target5 

effectively eliminated assessments for at least 90 percent of insured institutions at any 

given time during the ten years—even though during that period the banking industry 

was generally prosperous and healthy. FDIRA restored the FDIC’s discretion to price 

deposit insurance according to risk for all insured institutions regardless of the level 

of the reserve ratio. 

With its discretion to price for risk restored, the FDIC updated its risk-based pricing 

methods. The original risk-based method, which was required by statute, used a bank’s 

capital level and supervisory rating6

 to place the bank into one of nine risk categories 

that determined the bank’s assessment rate. This method took effect in 1993. Effective 

at the beginning of 2007, the FDIC collapsed the nine risk-based pricing categories into 

four (Risk Categories I through IV, with I being the lowest risk). A 2 basis point range 

of assessment rates applied to Risk Category I, which contained the greatest number of 

banks. Banks in this risk category that did not pay the minimum or maximum rates paid 

rates that varied between the minimum and maximum. Banks in one of the other risk 

categories paid a single rate applicable to that category. 

At the same time, the FDIC adopted separate pricing methods for small banks and 

large banks to differentiate risk within Risk Category I. (Generally, a small bank is 

defined as having less than $10 billion in assets, and a large bank as having at least $10 

billion in assets.)7 

For small banks within Risk Category I, the FDIC used a combination of CAMELS 

component ratings and financial ratios8

 to estimate the probability that a bank’s CAMELS 

composite rating would be downgraded to 3, 4, or 5 at the bank’s next examination (such 

a downgrade would signal deterioration in the bank’s condition), and thereby determine 

the bank’s assessment rate. 

5 Deposit Insurance Funds Act, Pub. L. No. 104-208, 60 Stat. 446 (1996). 

6 These bank supervisory ratings are known as CAMELS ratings. CAMELS stands for Capital adequacy, Asset 

quality, Management, Earnings, Liquidity, and Sensitivity to market risk. CAMELS ratings are on a scale 

of 1 to 5, with a 1-rating indicating greatest strength in performance and risk management and the lowest 

level of supervisory concern. At the other end of the scale, a 5-rating indicates the weakest performance, 

inadequate risk management, and the highest level of supervisory concern. The CAMELS composite rating 

is derived from an evaluation of the six CAMELS components; although the composite rating is generally a 

close reflection of the assigned component ratings, it is not an arithmetic average of the component ratings. 

The original risk-based method actually used a bank’s CAMEL composite rating, since the “S” rating was not 

created until 1995. 

7 12 CFR § 327.8(e) and (f). 

8 The financial ratios included the Tier 1 leverage ratio, a ratio of net income to assets, and several asset 

performance ratios. 
CHAPTER 5: Deposit Insurance: Fund Management and Risk-Based Deposit Insurance Assessments 155 

For large banks within Risk Category I, the FDIC used a combination of CAMELS 

component ratings and long-term-debt issuer ratings to determine assessment rates. For 

large banks in Risk Category I that did not have long-term-debt issuer ratings, financial 

ratios were used instead. 

Fund Management and Risk-Based Pricing during the Banking 

Crisis, 2008–2009 

After no banks failed in 2005 and 2006 and only three failed in 2007, failures began to 

climb in 2008, marking the onset of the banking crisis. The DIF balance shrank from 

$52.8 billion on March 31, 2008, to $45.2 billion on June 30 as a result of losses from 

actual bank failures as well as an increase in loss reserves for expected bank failures. 

(Just as banks reserve for losses on troubled loans, the FDIC reserves for anticipated 

losses to the DIF from insured institution failures. An increase in these reserves, which 

are known as the contingent loss reserve, reduces the fund balance, or net worth.) 

The fund’s contingent loss reserve increased from $583 million on March 31 to $10.59 

billion at June 30. The largest contributor to the increase in the contingent loss reserve 

during the second quarter was the reserve for estimated losses associated with the 

failure of IndyMac (which was closed in July).9

 Primarily as a result of the increase in 

the contingent loss reserve, the reserve ratio fell from 1.19 percent at March 31 to 1.01 

percent at June 30.10 (See Figure 5.1.) The DIF balance and reserve ratio fell throughout 

the rest of 2008 and 2009 as losses from actual and expected failures mounted. A total of 

25 banks failed in 2008, and 140 in 2009, leaving the fund balance negative. Mounting 

failures also began draining the fund’s liquid assets, which the FDIC needed to close 

failing banks in a timely manner and to protect insured depositors. 

For more detail about the IndyMac resolution, see chapter 6. 

10 This was the lowest reserve ratio since March 31, 1995, when the combined reserve ratio of the Bank 

Insurance Fund and the Savings Association Insurance Fund (see box above) was 0.98 percent. 

9 
156 CRISIS AND RESPONSE: AN FDIC HISTORY, 2008–2013 

Figure 5.1. Timeline of Events and Reserve Ratio Trends Q1 2007–Q3 2016 

DIF Balance DIF Reserve Ratio 

($ Billions) (Percent of Insured Deposits) 

Pre-Crisis DIF Reserve Ratio DIF Balance 

85 Crisis Post-Crisis 

Q2 2016: Reserve ratio 

surpasses 1.15 

Q2 2008: DIF balance dips 

to $45.2B; RR falls to 1.01 

and triggers Restoration 

Plan requirement 

Q3 2008: IndyMac fails 

Q4 2008: FDIC adopts DIF 

Restoration Plan 

Q1 2009: 7 basis point 

increase in assessment 

rates 

Q2 2009: New pricing 

adjustments for certain 

liabilities; special 

assessment of $5.5B 

Q3 2009: DIF balance 

and RR go negative 

Q4 2009: $45.7B 

prepaid assessment 

Q1 2007: 2007 DRR is set 

at 1.25; with new FDIRA 

authority, FDIC charges 

assessments to all banks 

Q2 2011: New assessment base 

and large-bank pricing rule 

Q4 2010: FDIC Board 

sets 2.0 DRR for 2011 Q3 2016: Lower assessment rates, 

large bank surcharge, and new 

Q3 2010: Dodd-Frank enacted small bank pricing method

1.5 

75 

65 

55 1.0 

45 

35 

0.5 

25 

15 

5 

0.0 

-5 

-15 

-25 -0.5 

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 

Fund Management: Attempting to Maintain a Positive Fund Balance 

The reserve ratio’s decline below 1.15 percent in the second quarter of 2008 triggered a 

requirement under FDIRA that the FDIC adopt a restoration plan to restore the reserve 

ratio to 1.15 percent within five years. (Under “extraordinary circumstances,” the FDIC 

Board was allowed to extend the restoration period beyond five years.)11 During the second 

half of 2008, estimated losses from actual failures and reserves set aside for anticipated 

failures increased, and the fund balance and reserve ratio continued to decline. 

In October 2008, the FDIC finalized a restoration plan under which assessment 

rates would be increased to raise the fund balance and the reserve ratio.12 In the same 

month, pursuant to the plan, the FDIC proposed a rate increase of 7 basis points for 

all banks, and the increased rates became effective in the first quarter of 2009.13 (See 

Table 5.A.1.) In February 2009, given the enormous stresses on financial institutions 

and the likelihood of a prolonged and severe economic recession, the FDIC extended 

11 12 U.S.C. § 1817(b)(3)(E). 

12 73 Fed. Reg. 61598 (Oct. 16, 2008). 

13 73 Fed. Reg. 78155 (Dec. 22, 2008). 
CHAPTER 5: Deposit Insurance: Fund Management and Risk-Based Deposit Insurance Assessments 157 

the time frame of the restoration plan from five years to seven, as FDIRA permitted 

under extraordinary circumstances. 

In 2009, with bank failures accelerating, the FDIC took a series of additional actions 

designed to keep the DIF balance positive and increase the DIF’s liquidity. (Attempts 

to keep the DIF balance positive are discussed in this section; increasing the fund’s 

liquidity, in the next section.) In an attempt to maintain a positive fund balance, the 

agency imposed a one-time special assessment. The agency was concerned that a fund 

balance and reserve ratio near or below zero might create public confusion about the 

FDIC’s ability to move quickly to resolve problem institutions and protect insured 

depositors. The FDIC’s statutory authority permitted it to borrow from the Treasury,14 

which it had done in the early 1990s during the bank and thrift crisis, but in 2009 it 

elected not to. Its borrowing in the early 1990s had been from the Treasury’s Federal 

Financing Bank (FFB), and the purpose had been to obtain working capital.15 Borrowing 

from the Treasury, however, while ensuring that sufficient liquid funds are available to 

resolve failing banks quickly, does not shore up the fund balance (the net worth of the 

DIF) and the reserve ratio. In addition, the FDIC viewed its line of credit at the Treasury 

not as a source of financing for projected losses but as a means of covering unforeseen 

losses.16 In contrast to borrowing from the Treasury, a special assessment would increase 

the fund balance by raising revenue. 

14 The FDIC may borrow from the Treasury under two statutory provisions. First, the FDIC has statutory 

authority to borrow on an interest-bearing basis from the Treasury, with the Secretary’s approval. In 2009, 

Congress permanently increased the maximum amount of borrowing under this authority from $30 billion 

to $100 billion, and temporarily increased it to $500 billion through 2010. (Amounts borrowed under this 

authority in excess of the $100 billion permanent maximum required the concurrence of the FDIC Board, 

the Federal Reserve Board, and the Secretary of the Treasury in consultation with the President.) The 

enabling legislation was the Helping Families Save Their Homes Act of 2009, Pub. L. 111-22, §204(b), 123 

Stat. 1632 (2009). The industry is required to repay any borrowings under this authority through assessments 

(which can include special assessments) pursuant to a repayment schedule agreed to by the Secretary of the 

Treasury and the FDIC Board after consultation with the Financial Services Committee of the House of 

Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate. 12 U.S.C. § 

1824(a). In addition to this borrowing line from the Treasury, the FDIC may also borrow from the Treasury 

Department’s Federal Financing Bank (FFB), subject to a “maximum obligation limitation” that depends in 

part on the value of DIF assets. 12 U.S.C. §§1824(b) and 1825(c). 

15 12 U.S.C. § 1824(b). On January 8, 1991, the FDIC and the FFB entered into a Note Purchase Agreement, 

renewable annually, permitting the FDIC to borrow. The FDIC first borrowed under the agreement 

on June 30, 1991. The date of the peak amount outstanding on the debt ($15 billion) was June 15, 1992. 

FDIC, 1993 Annual Report, p. 1. The debt was repaid in full on August 6, 1993. In addition, the Resolution 

Trust Corporation borrowed from the FFB for working capital; the maximum amount borrowed was 

$63 billion, and the amount was repaid in full in 1998. Resolution Trust Corporation (U.S.), Office of 

Planning, Research, and Statistics, Statistical Abstract: August 1989/September 1995 (Washington, DC, 

1995), 64, https://fraser.stlouisfed.org/scribd/?title_id=851&filepath=/files/docs/publications/statabsrtc/ 

statabs_rtc_1989-1995.pdf. 

16 For a more detailed discussion of resolutions, losses, and cash management, see chapter 6. 
158 CRISIS AND RESPONSE: AN FDIC HISTORY, 2008–2013 

In June 2009, therefore, the FDIC imposed a $5.5 billion special assessment that 

was collected on September 30, 2009.17 (The final rule had been adopted in May.) In 

addition, the FDIC reserved the authority to impose a second special assessment if the 

DIF was later projected to fall to a level that the Corporation believed would adversely 

affect public confidence or if the fund was close to or below zero. (The second special 

assessment could equal up to 5 basis points on each bank’s assets minus Tier 1 capital.) 

In the meantime, in May 2009 Congress had amended the statute governing the 

establishment and implementation of the restoration plan and now allowed the FDIC 

up to eight years to return the DIF reserve ratio to 1.15 percent (although, as before the 

amendment, the period could be extended because of extraordinary circumstances).18 

Following up on Congress’s action, in September 2009 the FDIC amended the restoration 

plan, extending the period to return the reserve ratio to 1.15 percent to eight years.19 

In the amended plan, the FDIC stated that it would not impose the additional special 

assessments that had been allowed under the May 2009 final rule imposing the special 

assessment. The FDIC planned to maintain assessment rates at their existing levels 

through the end of 2010 and, to ensure that the fund would return to 1.15 percent within 

eight years from when it fell below that threshold (i.e., by 2016), the Corporation adopted 

a uniform 3 basis point increase in assessment rates effective January 1, 2011. 

The special assessment did not achieve its objective of maintaining a positive fund 

balance. In fact, the DIF balance fell below zero at the end of the next quarter (the third 

quarter of 2009). The fund ended the year with a negative $20.9 billion balance and 

remained negative for a total of seven quarters. (Since then, however, the DIF has grown 

every quarter [see Figure 5.1] and became positive in the second quarter of 2011.) 

17 The special assessment equaled 5 basis points of each bank’s assets minus Tier 1 capital as of June 30, 2009, 

but was capped at 10 basis points of a bank’s second quarter 2009 regular assessment base. At that time, banks’ 

regular assessment bases were approximately equal to their domestic deposits. The FDIC initially adopted an 

interim rule imposing a special assessment of 20 basis points of each bank’s regular assessment base, but in 

the final rule, in response to comments on the interim rule, the Corporation revised the assessment base for 

the special assessment so as to “better balance... the burden of the special assessment.” 74 Fed. Reg. 25639, 

25641 (May 29, 2009). The revised assessment base meant that large banks, which tend to rely proportionally 

less on domestic deposits than do small banks, paid a larger share of the special assessment than they would 

have under the special assessment as originally proposed. 

Two developments enabled the FDIC to reduce the size of the special assessment. First, funds collected 

and expected to be collected from a surcharge on senior unsecured debt guaranteed under the Temporary 

Liquidity Guarantee Program (see chapter 2) provided additional resources to the FDIC. Second, between 

the adoption of the interim rule and the adoption of the final rule, Congress acted on the FDIC’s request 

to increase the FDIC’s authority to borrow from the Treasury (see footnote 14). The increase in the FDIC’s 

borrowing authority gave the Corporation a larger cushion against unforeseen bank failures. 

18 12 U.S.C. §1817(b)(3)(E), as amended by the Helping Families Save Their Homes Act of 2009, Pub. L. No. 

111-22, §204(b), 123 Stat. 1649 (2009). 

19 74 Fed. Reg. 51062 (Oct. 2, 2009). 
 

 

 

 

 

 

CHAPTER 5: Deposit Insurance: Fund Management and Risk-Based Deposit Insurance Assessments 159 

Fund Management: Increasing Fund Liquidity 

The DIF’s negative balance itself did not mean that the fund lacked the liquid assets 

necessary to quickly resolve failing banks and pay insured depositors. The fund balance, 

or net worth, equals the fund’s assets minus its liabilities. Among the assets are cash and 

Treasury securities, which are liquid assets that enable the FDIC to promptly resolve failing 

banks and protect insured depositors. Among the DIF’s liabilities is the contingent loss 

reserve. The negative fund balance at the end of the third quarter 2009 resulted from the 

increase in the contingent loss reserve as expected failures rose sharply, from $24 billion at 

the end of 2008 to a peak of $44 billion at the end of 2009. (Figure 5.2 charts the contingent 

loss reserve, portfolio liquidity, and fund balance for the years 2007 through 2010.) 

Figure 5.2. Contingent Loss Reserve, DIF Portfolio Liquidity, and DIF Balance, 

Q1 2007–Q4 2010 

-30 

-10 

10 

30 

50 

70 

90 

110 

Q1 2007 Q3 2007 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 

Billions of Dollars Contingent Loss Reserve DIF Balance DIF Portfolio Liquidity 

Q2 2008: DIF balance dips 

to $45.2B primarily because 

of a $10B increase in the 

contingent loss reserve 

Q4 2009: $45.7B prepaid 

assessment strengthens 

DIF liquidity 

Q2 2009: Special assessment of 

$5.5B was imposed in an attempt 

to keep the DIF balance positive 

Even though an increase in the contingent loss reserve lowers the fund balance, it does 

not reduce the liquid assets of the fund unless and until the liabilities are paid. As expected 

failures materialized throughout 2009, however, the DIF’s liquid assets declined sharply. As 

of June 30, 2009, the DIF’s liquid assets had fallen to a little under $30 billion from slightly 

over $53 billion one year earlier. In September 2009, the FDIC projected that liquidity 

needs would exceed liquid assets beginning in the first quarter of 2010 and, furthermore, 

that liquidity needs could significantly exceed liquid assets through 2010 and 2011.20 If 

20 FDIC, “Memorandum to the FDIC Board of Directors: Special Assessment, Restoration Plan and Proposal 
160 CRISIS AND RESPONSE: AN FDIC HISTORY, 2008–2013 

not addressed, this potential squeeze on the liquid assets of the DIF threatened the FDIC’s 

ability to pay depositors promptly. 

To strengthen the DIF’s liquidity, the FDIC adopted a novel approach. In November 

2009, the FDIC required the banking industry to prepay their quarterly assessments for 

the fourth quarter of 2009 and for all of 2010, 2011, and 2012.21 On December 30, 2009, 

the FDIC collected $45.7 billion of prepaid assessments, which boosted the fund’s liquidity 

significantly (as Figure 5.2 illustrates).22 

The FDIC chose to require prepayment of assessments rather than imposing additional 

special assessments for two main reasons. First, the FDIC wanted to avoid increasing 

assessments when bank earnings and capital were already under stress. In the second 

quarter of 2009, when the special assessment was charged, FDIC-insured commercial 

banks and savings institutions reported an aggregate net loss of $3.7 billion.23 In contrast 

to a special assessment, which immediately affects a bank’s earnings and capital, a 

prepaid assessment does not. Banks book a prepayment as an asset (prepaid expense) 

with a zero percent risk weight (meaning that the asset will not affect a bank’s riskbased capital levels), and they expense it as they are charged their quarterly assessments. 

Industry trade groups such as the Independent Community Bankers Association and 

the American Bankers Association supported the prepaid assessment, the American 

Bankers Association stating that the assessment “strike[s] the right balance at this time 

to assure that the FDIC has the cash necessary to meet its obligations without impairing 

banks’ ability to meet their obligations to their communities.”24 

The second reason for preferring prepayment to additional special assessments was 

to avoid discouraging the extension of credit. When the prepayment was collected in 

December 2009, bank lending was already on the decline,25 and throughout 2009 public 

scrutiny had focused on banks’ ability and willingness to lend to consumers; in addition, 

government assistance programs that focused specifically on lending were underway. The 

Corporation, knowing that banks were holding significant amounts of cash in response 

to the freeze in short-term lending markets in the fall of 2008, believed that most of the 

for Maintaining Fund Liquidity,” September 28, 2009, https://www.fdic.gov/news/board/Sept29no1.pdf. 

21 74 Fed. Reg. 59056 (Nov. 17, 2009). 

22 FDIC, 2009 Annual Report, 20. 

23 FDIC, Quarterly Banking Profile, June 30, 2009, https://www5-qa.fdic.gov/qbp/2009jun/qbp.pdf. 

24 American Bankers Association, Comment letter on proposed rulemaking on prepaid assessments, 75 Fed. 

Reg. 51063 (Oct. 2, 2009), Oct. 28, 2009, https://www.fdic.gov/regulations/laws/federal/2009/09c109ad49. 

pdf; see also, Independent Community Bankers of America, Comment letter on proposed rulemaking on 

prepaid assessments, 74 Fed. Reg. 51063 (Oct. 2, 2009), Oct. 27, 2009, https://www.fdic.gov/regulations/ 

laws/federal/2009/09c82ad49.pdf. 

25 The banking industry’s ratio of total loans and leases to total assets had declined from a peak of 61.8 percent 

at the end of 2005 to 55.6 percent at the end of 2009. The ratio continued to trend downward and reached a 

low of 53.0 percent at the end of March 2015. 
CHAPTER 5: Deposit Insurance: Fund Management and Risk-Based Deposit Insurance Assessments 161 

prepaid assessments would be drawn from banks’ available cash and excess reserves at 

the Federal Reserve without significantly affecting banks’ lending activities. And in fact, 

by the end of 2009—even after the prepayment of assessments—banks on average had 

a much higher ratio of cash and balances due from other depository institutions to total 

assets than they did before the crisis. (Cash and balances due from other depository 

institutions include excess balances at the Federal Reserve.) On average, the ratio of cash 

and balances due from other depository institutions to total assets at the end of 2009 

was 8.0 percent, which was considerably higher than the 5.0 percent average from 2003 

through 2007. (The ratio continued to remain considerably higher during the rest of the 

banking crisis and beyond.) 

Just as the FDIC had opted not to borrow from the Treasury earlier in 2009 to 

strengthen the fund balance and the reserve ratio, the FDIC decided in late 2009 not 

to borrow from the Treasury to increase fund liquidity. One reason the FDIC turned 

to prepaid assessments was that prepaid assessments ensured that the DIF remained 

directly industry funded, whereas borrowing from the Treasury would not. Another 

reason was that, unlike the prepaid assessments, borrowings from the Treasury would 

bear interest, which the banking industry would have had to pay eventually through 

higher assessments. 

In the end, the FDIC was successful in maintaining sufficient DIF liquidity throughout 

the crisis. After the prepaid assessment was collected at the end of 2009, liquid assets (as 

measured at month-end) never fell below $34 billion. (This month-end low was reached 

on August 31, 2013.) The prepaid assessment was buttressed by the use of loss-sharing 

agreements to resolve most failed banks, and these agreements greatly reduced the 

Corporation’s cash outflows. (Loss-sharing agreements are discussed in detail in chapter 6.) 

Adjusting Risk-Based Assessments 

Effective the second quarter of 2009, the FDIC made several major changes to risk-based 

pricing and also adjusted assessment rates to reflect these changes (see Table 5.A.2).26 

First, to make assessment rates more accurately reflect the risk that banks posed to the 

fund, the FDIC widened the range of assessment rates applicable to Risk Category I from 

a 2 basis point spread to a 4 basis point spread. 

Second, the FDIC introduced three possible adjustments to a bank’s assessment rate: 

the secured liability adjustment, the brokered deposit adjustment, and the unsecured 

debt adjustment.27 These adjustments were intended to account both for liabilities that 

would increase the loss to the fund when a bank failed (secured liabilities and brokered 

deposits) and for liabilities that would reduce the loss (unsecured debt). The secured 

liability adjustment increased assessment rates for banks that held large amounts of 

26 74 Fed. Reg. 9525 (Mar. 4, 2009). 

27 Ibid. 
162 CRISIS AND RESPONSE: AN FDIC HISTORY, 2008–2013 

secured debt. When a bank fails, secured debt reduces the assets available to repay 

the FDIC for its outlays to protect insured deposits. At that time, however, secured 

debt was not part of the assessment base, so banks paid no more in assessments for 

issuing debt that would increase the DIF’s losses if the bank were to fail.28 The brokered 

deposit adjustment increased assessment rates for riskier banks that held large amounts 

of brokered deposits relative to their total domestic deposits, since brokered deposits 

tend to increase both a bank’s probability of failure and the DIF’s losses when a bank 

does fail.29 (For the least risky banks, those in Risk Category I, the FDIC added a new 

ratio to the financial ratios used to determine assessment rates. The new ratio increased 

assessment rates for banks that used relatively large amounts of brokered deposits to 

fund rapid asset growth.)30 The unsecured debt adjustment lowered assessment rates for 

banks with long-term, unsecured debt, since unsecured debt tends to reduce the DIF’s 

losses when a bank fails.31 

Finally, the FDIC revised the assessment methodology for large banks in Risk 

Category I so that assessment rates were based not only on CAMELS component 

ratings and long-term-debt issuer ratings (as they had been since the beginning of 

2007), but also on the same financial ratios that applied to small banks. This change, 

like the other two, was meant to make assessment rates reflect risk more accurately, but 

had another purpose as well: to have rates respond to changing risk profiles sooner, 

since the methodology being replaced (using only CAMELS component ratings and 

long-term-debt issuer ratings) had often not fully reflected large banks’ deteriorating 

conditions quickly enough. 

28 The secured liability adjustment was eliminated in 2011 when the assessment base was broadened to average 

consolidated total assets minus average tangible equity. The new assessment base encompasses all liabilities— 

including secured debt. The change in base is discussed in detail below in the section “Reallocating the Costs 

of Supporting the DIF between Small and Large Banks.” 

29 Beginning with the third quarter of 2016 the FDIC revised the treatment of brokered deposits in the riskbased pricing method applicable to an established small bank (generally, a bank with less than $10 billion in 

total assets that has been federally insured for at least five years) so that holding large amounts of brokered 

deposits relative to assets can directly increase the assessment rate of any established small bank. 

30 The ratio applicable to Risk Category I banks excluded reciprocal deposits. Reciprocal deposits are deposits 

that a bank receives through a deposit placement network on a reciprocal basis, such that (1) for any deposit 

received, the institution (as agent for depositors) places the same amount with other banks through the 

network; and (2) each member of the network sets the interest rate to be paid on the entire amount of funds 

it places with other network members. 

31 When an institution fails, holders of unsecured claims, including subordinated debt, do not receive 

distributions from the receivership estate unless and until all secured claims, administrative claims, and 

deposit claims have been paid in full. Consequently, greater amounts of long-term unsecured claims provide 

a cushion that can reduce the FDIC’s loss in the event of failure. 
CHAPTER 5: Deposit Insurance: Fund Management and Risk-Based Deposit Insurance Assessments 163 

Reforms to Fund Management and Risk-Based Pricing, 2010–2016 

The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted on July 

21, 2010, contained several provisions designed to strengthen the DIF. In the years 

since the law’s enactment, the FDIC has drawn on the authorities in these provisions to 

develop a comprehensive, long-term fund management plan. In addition to provisions 

strengthening the DIF, Dodd-Frank also included provisions designed to reallocate the 

costs of supporting the fund between large and small banks, and these provisions, too, 

the FDIC has implemented.32 Finally, and independent of Dodd-Frank, the FDIC has 

updated its risk-based pricing methods for small and large banks, incorporating data and 

experience from the banking crisis to better estimate the risks that banks pose to the DIF. 

Strengthening the DIF: The Long-Term Fund Management Plan 

To strengthen the DIF, Dodd-Frank raised the minimum DRR from 1.15 percent to 1.35 

percent and required that the reserve ratio reach this new minimum by September 30, 

2020. Dodd-Frank also eliminated the upper limit on the reserve ratio (and therefore on 

the size of the fund), and it eliminated the requirement that the FDIC pay dividends to 

banks when the reserve ratio is between 1.35 and 1.50 percent. And when the reserve 

ratio exceeds 1.50 percent, the FDIC has sole discretion in determining whether to 

suspend or limit dividends. 

The FDIC took advantage of Dodd-Frank’s grant of greater authority to manage the 

fund by developing a comprehensive, long-term DIF management plan in 2010. The 

plan is designed to reduce procyclical volatility in the assessment system and keep 

assessment rates moderate and steady throughout economic and credit cycles, while 

also maintaining a positive fund balance even during a banking crisis. In developing the 

plan, the FDIC sought industry input and, in addition, undertook a historical analysis to 

determine the reserve ratio that would have been required to maintain both a positive 

balance and stable assessment rates from 1950 through 2010. 

To get industry input, the FDIC organized a roundtable that was held September 

24, 2010. At the roundtable, bank executives and industry trade group representatives 

uniformly favored steady, predictable assessments and objected to high assessment 

rates during crises.33 

Using historical DIF losses and simulated income data on DIF investments from 

1950 through 2010, the analysis in the FDIC’s historical study varied assessment rates 

and dividends paid from the DIF to banks to determine what would have happened 

to a simulated fund balance and reserve ratio during the same period. The study 

concluded that moderate, long-term industry average assessment rates, combined with 

32 Pub. L. 111-203, 331-334, 124 Stat. 1376, 1539 (12 U.S.C. §§ 1813(y)(3), and 1817(a)(2)(B), (b)(1)(E), (b)(2), 

(b)(3)(B), (b)(3)(E)(ii) and (note)). 

33 76 Fed. Reg. 79286 (Dec. 20, 2010). 76 Fed. Reg. 10672, 10,683 (Feb. 25, 2011). 
164 CRISIS AND RESPONSE: AN FDIC HISTORY, 2008–2013 

an appropriate dividend or an appropriate assessment rate reduction policy, would have 

sufficed to prevent the fund from becoming negative during the two banking crises that 

occurred during the 60-year period covered by the analysis—but only if the reserve ratio 

had exceeded 2.0 percent before the onset of each crisis.34 

To increase the probability that the reserve ratio would reach a level sufficient to 

withstand a future crisis, the FDIC Board set the DRR for 2011 at 2.0 percent, consistent 

with the FDIC’s historical analysis.35 The FDIC Board has voted annually since then to 

maintain the 2.0 percent DRR, viewing it as the minimum level needed to withstand 

future crises of the magnitude of past crises and as a long-term goal. 

In another provision of the long-term DIF management plan and consistent with the 

authority granted under Dodd-Frank, the FDIC suspended dividends indefinitely (FDIRA 

had required that dividends be returned to the industry when the fund reserve ratio exceeds 

1.5 percent). Instead, consistent with the historical analysis, the plan prescribed (and the 

FDIC Board adopted) assessment rates that become progressively lower when the reserve 

ratio exceeds 1.15, 2.0, and 2.5 percent (see Tables 5.A.4, 5.A.5, and 5.A.6). 

In addition, consistent with Dodd-Frank’s requirement that the reserve ratio reach the 

new minimum level of 1.35 percent by that date, the FDIC extended the termination of 

the restoration plan from the end of 2016 to September 30, 2020.36 

Reallocating the Costs of Supporting the DIF between Small and Large Banks 

Other provisions of Dodd-Frank, as noted above, aimed to reallocate the costs of 

supporting the deposit insurance fund between small and large banks. The reallocation 

required the FDIC to amend its regulations in two ways. 

First, seeking to ensure that, in the aggregate, large and small banks’ shares of 

assessments were proportionate to their shares of industry assets, Dodd-Frank required 

the FDIC to amend its regulations to redefine the assessment base by broadening it 

from domestic deposits to average consolidated total assets minus average tangible 

equity. Since a bank’s assessment is the product of its assessment rate and its assessment 

base, changing the assessment base changes a bank’s assessment, all else equal. The new 

assessment base became effective April 1, 2011.37 The rule also adjusted risk-based rates 

34 75 Fed. Reg. 66272 (Oct. 27, 2010); 76 Fed. Reg. 79286 (Dec. 20, 2010); 76 Fed. Reg. 10672, 10674 (Feb. 25, 

2011). For more on the historical analysis, see Lee K. Davison and Ashley M. Carreon, “Toward a Long-Term 

Strategy for Deposit Insurance Fund Management,” FDIC Quarterly 4, no. 4 (2010), https://www.fdic.gov/ 

bank/analytical/quarterly/2010-vol4-4/fdic-quarterly-v4n4-fundmgmt-121610.pdf. 

35 75 Fed. Reg. 79286 (Dec. 20, 2010). 

36 75 Fed. Reg. 66293 (Oct. 27, 2010). Given the continuing stresses on the earnings of insured depository 

institutions and the additional time allowed for reaching the minimum reserve ratio, the FDIC decided 

to forego the uniform 3 basis point increase in initial assessment rates that, pursuant to the amended plan 

adopted in September 2009, had been scheduled to take effect on January 1, 2011. 

37 76 Fed. Reg. 10672 (Feb. 28, 2011). As permitted by statute, the assessment base for banker’s banks and 

custodial banks is subject to reductions not applicable to other banks. The rule also eliminated the secured 
CHAPTER 5: Deposit Insurance: Fund Management and Risk-Based Deposit Insurance Assessments 165 

to raise approximately the same aggregate amount of revenue on the new assessment 

base as would have been raised on the old base. (See Table 5.A.3.) While aggregate 

assessments remained unchanged, the proportion of total industry assessments paid by 

small banks decreased and the proportion paid by large banks increased, consistent with 

congressional intent. Before the change in the assessment base, banks with less than $10 

billion in assets held approximately 20 percent of industry assets, yet paid approximately 

30 percent of total assessments; after the change, small banks paid approximately 20 

percent of total assessments, consistent with their share of industry assets. 

Second, when Dodd-Frank raised the minimum reserve ratio from 1.15 percent to 

1.35 percent and required that the reserve ratio reach this new minimum by September 

30, 2020, it also directed the FDIC, when setting assessments, to offset the effect on small 

banks of the increase in the minimum reserve ratio. Therefore, to raise the reserve ratio to 

1.35 percent by the statutory deadline and offset the effect of the increase on small banks, 

the FDIC approved a final rule in March 2016 imposing quarterly surcharges on large 

banks.38 Surcharges began in the third quarter of 2016 (the quarter after the reserve ratio 

exceeded the previous minimum target of 1.15 percent) and will last until the quarter in 

which the reserve ratio reaches or exceeds 1.35 percent. The surcharges will not, however, 

extend past December 31, 2018. If the reserve ratio has not reached 1.35 percent by that 

date, banks with $10 billion or more in assets will be assessed a shortfall assessment on 

March 31, 2019. In addition, small banks will receive assessment credits for the portion 

of their regular assessments that contributed to growth in the reserve ratio between 1.15 

percent and 1.35 percent. When the reserve ratio is 1.38 percent or higher, the FDIC will 

apply these credits to offset small banks’ regular quarterly assessments. 

Updating Risk-Based Pricing Using Data and Experience from the Crisis 

Independent of Dodd-Frank, the FDIC has revised its pricing methodologies for both 

small and large banks, including highly complex banks.39 Before the revisions, pricing 

methodologies had relied on data from the previous banking crisis (the bank and thrift 

crisis of the late 1980s and early 1990s). The large number of failures during the recent 

banking crisis gave the FDIC a wealth of new data on the characteristics of banks that 

failed. With the new data and fresh experience, the Corporation was able to update its 

pricing methodologies to better estimate the risks that banks pose to the DIF. 

liability adjustment (secured debt was included in the new assessment base and an adjustment was no longer 

necessary). 

38 81 Fed. Reg. 32180 (May 20, 2016). The surcharges equal an annual rate of 4.5 basis points; they are applied 

to a large bank’s assessment base that has certain adjustments made to it. The base for the surcharge is the 

bank’s regular assessment base reduced by $10 billion, and adjusted for affiliated banks. 

39 76 Fed. Reg. 10672 (Feb. 28, 2011). Generally, a highly complex bank is defined as (a) a large bank with at 

least $50 billion of total assets that is controlled by a U.S. parent with at least $500 billion in assets, or (b) a 

processing bank or a trust company with fiduciary assets of at least $500 billion. 12 CFR § 327.8(g). 
166 CRISIS AND RESPONSE: AN FDIC HISTORY, 2008–2013 

Large Banks and Highly Complex Institutions 

The final rule that revised the assessment base effective April 1, 2011, also revised the 

pricing methodology for large banks and highly complex institutions.40 The changes 

made to the large-bank methodology were meant to do three things: (1) capture risk 

closer to the time a bank assumes the risk, (2) better differentiate risks posed by banks 

during good economic and banking conditions based on how the banks would fare 

during periods of stress or economic downturn, and (3) account more accurately for the 

losses the FDIC might incur if a large bank fails. 

Under the revised large-bank pricing methodology, the FDIC uses two scorecards, 

one for the majority of large banks and a second for highly complex institutions. 

Both scorecards use banks’ CAMELS component ratings and financial measures to 

determine a performance score and a loss severity score. Together, these scores predict 

the performance of banks during periods of stress and are used to determine a bank’s 

assessment rate.41 (See Tables 5.A.3 and 5.A.4.) The two scorecards are similar, but the 

scorecard for highly complex institutions uses some financial measures intended to 

reflect the more complex activities of these institutions. Risk categories were eliminated 

in the revised large-bank pricing methodology.42 To compare the revised methodology 

with the one it replaced, the FDIC analyzed how well the new measures would have 

predicted a rank ordering of large banks based on the risk they posed as of the end of 

2009. (The rank ordering was based on an expert valuation of relative risk by the FDIC.) 

The FDIC found that the measures in the revised methodology would have performed 

significantly better than the method it replaced. 

Established Small Institutions 

A revised pricing methodology for established small banks became effective in the third 

quarter of 2016, which was the same quarter that lower assessment rates adopted by the 

FDIC Board in 2011 went into effect and also the quarter after the reserve ratio first 

40 In this rulemaking, the FDIC also created a depository institution debt adjustment (DIDA). The DIDA 

increases a bank’s assessment rate when the bank holds long-term unsecured debt issued by another insured 

depository institution. 

41 Some of the definitions used in the large-bank and highly complex institution pricing methodologies were 

amended in 2012 and 2014. The 2014 revisions also contained other changes to assessment rules applicable 

to large and small banks; these changes were designed to conform to regulatory changes in capital rules 

adopted pursuant to Basel III (an international set of capital standards that are implemented by domestic 

banking regulators). See 77 Fed. Reg. 66000 (Oct. 31, 2012) and 79 Fed. Reg. 70427 (Nov. 26, 2014). 

42 In addition, long-term-debt-issuer ratings were no longer used. Dodd-Frank explicitly required all federal 

agencies to review and modify regulations in order to remove reliance on credit ratings and substitute an 

alternative standard of creditworthiness. Pub. L. 111-203, § 939A, 124 Stat. 1376, 1886 (codified at 15 U.S.C. 

78o-7 note). Even before Dodd-Frank was enacted, however, the FDIC had proposed removing long-termdebt issuer ratings from its assessment calculations. 75 Fed. Reg. 23516, 23517 (May 3, 2010). 
CHAPTER 5: Deposit Insurance: Fund Management and Risk-Based Deposit Insurance Assessments 167 

returned to 1.15 percent.43 (See Table 5.A.4.) (An established small bank is generally 

defined as a bank that has been federally insured for at least five years and has less than 

$10 billion in total assets.)44 The new methodology draws on data from the two most 

recent banking crises and the years between them. The underlying model uses financial 

ratios and CAMELS component ratings to estimate the probability of failure over three 

years. The new methodology uses the results of the underlying model to determine 

assessment rates, and uses CAMELS composite ratings (rather than risk categories, as 

in the methodology being replaced) to place limits on the assessment rates that banks 

can be charged. The FDIC’s backtesting revealed that the new methodology would 

have differentiated between banks that later failed and those that did not better than 

the methodology being replaced, and would have differentiated significantly better both 

immediately before and at the beginning of the crisis. 

The change in the pricing methodology for established small institutions was designed 

to be revenue neutral (that is, to raise approximately the same aggregate amount of revenue 

from small banks as would have been collected under the pricing methodology it replaced). 

Conclusion 

When the banking crisis began in 2008, the FDIC’s deposit insurance fund lacked 

sufficient capital to withstand the losses that stemmed from that crisis. Although 

legislative reforms in 2006 had given the FDIC somewhat greater authority than it had 

had for the previous decade to manage the fund and to price for risk, the reforms came 

too late to allow the Corporation to build up the DIF before the crisis struck. 

Dodd-Frank in 2010 gave the FDIC more authority to manage the DIF and to price 

deposit insurance for risk than the Corporation ever had, and the FDIC has used this 

authority to substantially revise its approach both to fund management and to risk-based 

pricing. The FDIC has developed a comprehensive, long-term DIF management plan 

designed to reduce procyclical volatility in the assessment system and keep assessment 

rates moderate and steady throughout economic and credit cycles, while also maintaining 

a positive fund balance even during a banking crisis. Based on a historical analysis of fund 

losses over a 60-year period, the FDIC has set a long-term fund reserve ratio target of 2.0 

percent, since that level, combined with steady assessment rates, would have sufficed to 

prevent the fund from becoming negative during the last two banking crises. The FDIC 

also relied on this analysis to adopt moderate overall assessment rates that are intended 

to remain in place even during a downturn. 

43 81 Fed. Reg. 16059 (Mar. 25, 2016). 

44 12 CFR § 327.8(e), (k). 
168 CRISIS AND RESPONSE: AN FDIC HISTORY, 2008–2013 

Using statistical techniques, the FDIC has also incorporated large amounts of failure 

data from the recent banking crisis into its risk-based pricing methodologies for small 

banks and for large and highly complex banks. These new methodologies are able to 

better distinguish between banks that are likely to survive a downturn and those that are 

not, consistent with the goals of a risk-based pricing system. 
CHAPTER 5: Deposit Insurance: Fund Management and Risk-Based Deposit Insurance Assessments 169 

Appendix 

Evolution of the Assessment Rate Schedules, Q1 2009 to Present 

To calculate a bank’s quarterly deposit insurance assessment, the bank’s assessment rate 

is multiplied by its assessment base. All rates below are annual and are in basis points, 

which are cents per $100 of the assessment base. 

Table 5.A.1. Assessment Rate Schedule, Q1 2009 

Risk Categorya 

I II III IV 

Base Assessment Rate 12 to 14 17 35 50 

Note: Assessment base is approximately equal to domestic deposits. 

a Risk Category I comprises banks that pose the least risk, and each successively higher risk category 

comprises banks that pose increasingly higher risk. 

Table 5.A.2. Assessment Rate Schedule, Q2 2009–Q1 2011 

Risk Categorya 

I II III IV 

Initial Base Assessment Rate 12 to 16 22 32 45 

Unsecured Debt Adjustment –5 to 0 –5 to 0 –5 to 0 –5 to 0 

Secured Debt Adjustment 0 to 8 0 to 11 0 to 16 0 to 22.5 

Brokered Deposit Adjustment N/A 0 to 10 0 to 10 0 to 10 

Total Base Assessment Rate 7 to 24 17 to 43 27 to 58 40 to 77.5 

Note: Assessment base is approximately equal to domestic deposits. 

a Risk Category I comprises banks that pose the least risk, and each successively higher risk category 

comprises banks that pose increasingly higher risk. 
170 

c 

CRISIS AND RESPONSE: AN FDIC HISTORY, 2008–2013 

Table 5.A.3. Assessment Rate Schedule, Q2 2011–Q2 2016 

Small-Bank Risk Categorya Large & Highly 

Complex 

Institutions I II III IV 

Initial Base Assessment Rate 5 to 9 14 23 35 5 to 35 

Unsecured Debt Adjustmentb –4.5 to 0 –5 to 0 –5 to 0 –5 to 0 –5 to 0 

Brokered Deposit Adjustment N/A 0 to 10 0 to 10 0 to 10 0 to 10 

Total Base Assessment Ratec 2.5 to 9 9 to 24 18 to 33 30 to 45 2.5 to 45 

Note: Assessment base equals average consolidated total assets minus average tangible equity, with additional 

reductions for custodial banks and banker’s banks. 

a Risk Category I comprises banks that pose the least risk, and each successively higher risk category 

comprises banks that pose increasingly higher risk. 

b The unsecured debt adjustment cannot exceed the lesser of 5 basis points or 50 percent of an insured 

institution’s initial base assessment rate; thus, for example, an insured depository institution with an initial 

base assessment rate of 5 basis points will have a maximum unsecured debt adjustment of 2.5 basis points 

and cannot have a total base assessment rate lower than 2.5 basis points. 

Total base assessment rates do not include the depository institution debt adjustment. 
CHAPTER 5: Deposit Insurance: Fund Management and Risk-Based Deposit Insurance Assessments 171 

Table 5.A.4. Assessment Rate Schedule, Q3 2016 to Present 

(After the reserve ratio reaches 1.15 percent but is less than 2.0 percent) 

Established Small Banks Large & 

Highly 

Complex 

Institutions 

CAMELS Composite 

1 or 2 3 4 or 5 

Initial Base Assessment Rate 3 to 16 6 to 30 16 to 30 3 to 30 

Unsecured Debt Adjustmenta –5 to 0 –5 to 0 –5 to 0 –5 to 0 

Brokered Deposit Adjustment N/A N/A N/A 0 to 10 

Total Base Assessment Rateb 1.5 to 16 3 to 30 11 to 30 1.5 to 40 

Note: Assessment base equals average consolidated total assets minus average tangible equity, with additional 

reductions for custodial banks and banker’s banks. 

a The unsecured debt adjustment cannot exceed the lesser of 5 basis points or 50 percent of an insured 

institution’s initial base assessment rate; thus, for example, an insured depository institution with an initial 

base assessment rate of 3 basis points will have a maximum unsecured debt adjustment of 1.5 basis points 

and cannot have a total base assessment rate lower than 1.5 basis points. 

b Total base assessment rates do not include the depository institution debt adjustment. 
172 CRISIS AND RESPONSE: AN FDIC HISTORY, 2008–2013 

Table 5.A.5. Assessment Rate Schedule 

(After the reserve ratio reaches 2.0 percent but is less than 2.5 percent) 

Established Small Banks Large & 

Highly 

Complex 

Institutions 

CAMELS Composite 

1 or 2 3 4 or 5 

Initial Base Assessment Rate 2 to 14 5 to 28 14 to 28 2 to 28 

Unsecured Debt Adjustmenta –5 to 0 –5 to 0 –5 to 0 –5 to 0 

Brokered Deposit Adjustment N/A N/A N/A 0 to 10 

Total Base Assessment Rateb 1 to 14 2.5 to 28 9 to 28 1 to 38 

Note: Assessment base equals average consolidated total assets minus average tangible equity, with additional 

reductions for custodial banks and banker’s banks. 

a The unsecured debt adjustment cannot exceed the lesser of 5 basis points or 50 percent of an insured 

institution’s initial base assessment rate; thus, for example, an insured depository institution with an initial 

base assessment rate of 2 basis points will have a maximum unsecured debt adjustment of 1 basis point 

and cannot have a total base assessment rate lower than 1 basis point. 

b Total base assessment rates do not include the depository institution debt adjustment. 
CHAPTER 5: Deposit Insurance: Fund Management and Risk-Based Deposit Insurance Assessments 173 

Table 5.A.6. Assessment Rate Schedule 

(After the reserve ratio reaches 2.5 percent) 

Established Small Banks Large & 

Highly 

Complex 

Institutions 

CAMELS Composite 

1 or 2 3 4 or 5 

Initial Base Assessment Rate 1 to 13 4 to 25 13 to 25 1 to 25 

Unsecured Debt Adjustmenta –5 to 0 –5 to 0 –5 to 0 –5 to 0 

Brokered Deposit Adjustment N/A N/A N/A 0 to 10 

Total Base Assessment Rateb 0.5 to 13 2 to 25 8 to 25 0.5 to 35 

Note: Assessment base equals average consolidated total assets minus average tangible equity, with additional 

reductions for custodial banks and banker’s banks. 

a The unsecured debt adjustment cannot exceed the lesser of 5 basis points or 50 percent of an insured 

institution’s initial base assessment rate; thus, for example, an insured depository institution with an initial 

base assessment rate of 1 basis point will have a maximum unsecured debt adjustment of 0.5 basis points 

and cannot have a total base assessment rate lower than 0.5 basis points. 

b Total base assessment rates do not include the depository debt adjustment. 
174 CRISIS AND RESPONSE: AN FDIC HISTORY, 2008–2013 

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