Concur:

________________________

Nicholas J. Podsiadly

General Counsel

550 17th Street NW, Washington, D.C. 20429-9990 Division of Insurance and Research

Federal Deposit Insurance Corporation

 September 15, 2020

MEMORANDUM TO: The Board of Directors

FROM: Diane Ellis

Director, Division of Insurance and Research

SUBJECT: Restoration Plan

RECOMMENDATION

The Federal Deposit Insurance Act (the FDI Act) requires that the FDIC’s Board of 

Directors (Board) adopt a restoration plan when the Deposit Insurance Fund (the DIF or the 

fund) reserve ratio falls below 1.35 percent or is expected to within 6 months.1 Staff is 

recommending the adoption of such a restoration plan (Restoration Plan or Plan) for immediate 

implementation, as required by statute.

2

Extraordinary growth in insured deposits during the first and second quarters of 2020 

caused the reserve ratio to decline below the statutory minimum as of June 30, 2020. Under the 

Restoration Plan, detailed below, the FDIC would monitor deposit balance trends, potential 

losses, and other factors that affect the reserve ratio. While subject to considerable uncertainty, 

based on a range of reasonable (though highly uncertain) estimates of future losses and assuming 

a return to normal insured deposit growth, the reserve ratio would return to 1.35 percent without 

further action by the Board before the end of the 8-year period beginning upon the 

implementation of the Plan, as required by law. In addition, the banking system appears better 

positioned to withstand losses when compared to prior periods of stress. However, several 

factors, such as slow economic growth, further market volatility, or additional fiscal and 

monetary stimulus could result in increased insured deposit growth or losses to the fund. Given

this uncertainty, staff believe that raising assessments based on two quarters of extraordinary 

insured deposit growth would be premature. Therefore, under the Plan, the FDIC would maintain 

the current schedule of assessment rates. Staff would update the Board semiannually, or more 

frequently as conditions warrant, to determine if changes to the Plan are necessary.

 1 12 U.S.C. 1817(b)(3)(E).

2 12 U.S.C. 1817(b)(3)(E)(i).
2

BACKGROUND

As of June 30, 2020, the reserve ratio had fallen below the statutory minimum and stood 

at 1.30 percent, 9 basis points below the reserve ratio as of March 31, 2020, and 11 basis points 

below its recent peak of 1.41 percent as of December 31, 2019.

3 Prior to 2020, the DIF reserve 

ratio had not decreased since the fourth quarter of 2009. 

The decline in the reserve ratio during the first half of 2020 was solely a result of 

extraordinary insured deposit growth. Table 1 shows the components of the reserve ratio for the 

last quarter of 2019 and the first two quarters of 2020. Over this period, the DIF balance grew

and did not experience material losses. As of June 30, 2020, the DIF balance totaled a record 

$114.7 billion, up $4.3 billion from the end of 2019. Meanwhile, insured deposits grew by an 

estimated $1 trillion, resulting in an 11 basis point decline in the reserve ratio from the end of 

2019.

Table 1–Fund Balance, Estimated Insured Deposits, and Reserve Ratio 

[$ in Billions]

4th Qtr 2019 1st Qtr 2020 2nd Qtr 2020

Beginning Fund Balance 108.9 110.3 113.2

 Plus: Net Assessment Revenue 1.3 1.4 1.8

 Plus: Investment Incomea 0.5 2.0 0.1

 Less: Loss Provisions -0.1 * *

 Less: Operating Expenses 0.5 0.5 0.5

Ending Fund Balanceb 110.3 113.2 114.7

Estimated Insured Deposits 7,815.2 8,164.2 8,837.3

Ending Reserve Ratio 1.41% 1.39% 1.30%

* = Less than $50 million

a Includes unrealized gains/losses on available-for-sale securities.

b Components of fund balance changes may not sum to totals due to rounding.

The extraordinary growth in insured deposits during the first half of 2020 was also 

unprecedented. As described in more detail below, this increase largely stemmed from actions 

undertaken by depositors, both businesses and individuals, as well as government policy actions 

in response to the Coronavirus 2019 (COVID-19) pandemic. During the first half of 2020, 

estimated insured deposits grew by 4.5 percent (17.9 percent, annualized) in the first quarter and 

by 8.2 percent (33.0 percent, annualized) in the second quarter—two of the highest growth rates 

since quarterly reporting began in 1991.4 Together, estimated insured deposits grew by an 

 3 The reserve ratio is calculated as the ratio of the net worth of the Deposit Insurance Fund (fund balance) to the 

value of the aggregate estimated insured deposits at the end of a given quarter. See 12 U.S.C. 1813(y)(3).

4 The growth in estimated insured deposits experienced during the first and second quarters of 2020 was surpassed 

only by quarters in which the growth rate was substantially impacted by a temporary increase in coverage for 

noninterest-bearing transaction accounts or a permanent increase in the standard maximum deposit insurance 

amount from $100,000 to $250,000, including specifically only the fourth quarter of 2010, the third quarter of 2009, 

and the fourth quarter of 2008. 
3

amount equal to approximately three years of insured deposit growth in the first two quarters of 

2020 (Chart 1). 

As of June 30, 2020, the unprecedented rate of insured deposit growth stemming from the 

pandemic had reduced the reserve ratio to below the statutory minimum of 1.35 percent. 

THE RESTORATION PLAN

Under the FDI Act, the FDIC must establish and implement a restoration plan to restore 

the reserve ratio to at least 1.35 percent within 8 years of establishing the plan, absent 

extraordinary circumstances.5

Staff recommends that the Board adopt the attached Restoration Plan. While subject to 

considerable uncertainty, based on a range of reasonable (though highly uncertain) estimates of 

future losses and a return to normal insured deposit growth, the Plan described below would 

restore the reserve ratio to the required minimum level within the timeframe required by law. 

The Restoration Plan provides that: 

1. The FDIC will monitor deposit balance trends, potential losses, and other factors that 

affect the reserve ratio. 

2. The FDIC will maintain the current schedule of assessment rates for all IDIs. 

3. At least semiannually, staff will update the Board on its analysis and projections for the 

fund and, if necessary, recommend any modifications to the Plan, such as increasing 

assessment rates.

 5 12 U.S.C. 1817(b)(3)(E).

$5.0

$5.5

$6.0

$6.5

$7.0

$7.5

$8.0

$8.5

$9.0

2014 2015 2016 2017 2018 2019

Insured Deposits (in Trillions)

Chart 1–Annual Insured Deposit Growth Rates

(December to December)

3.3%

5.2%

6.1%

3.5%

5.1%

3.9%

20Q1

17.9%

20Q2

33.0%

$1 trillion over two quarters

$1 trillion over three years

Average Annual Growth Rate = 4.5%
4

Analysis supporting each element of the Plan is described below.

Monitor factors that affect the reserve ratio

As part of the Restoration Plan, the FDIC will closely monitor deposit balance trends, 

potential losses, and other factors that affect the reserve ratio. To determine whether the reserve 

ratio has reached the statutory minimum, the FDIC will rely on the reserve ratio as of September 

30, 2028.6 As the factors affecting the reserve ratio become clearer, staff will update the Plan, as 

necessary, to reflect any updated assumptions.

Deposit balance trends

The extraordinary growth in insured deposits is largely a result of actions taken by 

monetary and fiscal authorities, and by individuals, businesses, and financial market participants 

in response to the COVID-19 pandemic. Deposit growth initially intensified in March upon the 

outbreak of the COVID-19 pandemic. As COVID-19 infections spread throughout the United 

States, individual states or major metropolitan areas ordered millions of Americans to stay home, 

severely reducing their ability to engage in usual commerce and forcing many businesses to close 

temporarily or furlough employees. Faced with economic disruption and uncertainty, businesses 

drew on their lines of credit and conserved cash, increasing deposits. Market volatility pushed 

investors to safer assets, including cash and insured deposits. Beginning in March, the Board of 

Governors of the Federal Reserve System (Federal Reserve) announced a series of emergency 

actions, including large-scale asset purchases and emergency lending facilities, which rapidly 

expanded its balance sheet by more than $1 trillion and, with it, grew IDI reserve balances and 

deposits. 

As deposit growth associated with a flight to safety began to stabilize, fiscal stimulus and 

reduced spending applied additional upward pressure on deposit growth. As part of the 

Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the U.S. government 

provided over $1 trillion in direct support to consumers and businesses through business loans, 

expanded unemployment insurance, and one-time checks to individuals.7 Lending to small 

businesses resulted in an increase in deposits. For individuals, the resulting surge in personal 

incomes from direct government assistance, combined with the dramatic reduction in 

discretionary spending, fueled deposit growth and lifted the personal savings rate to a record 

high of 33.7 percent in April. The personal savings rate remained elevated through July at 17.8 

percent, and monthly savings more than doubled to $280 billion in June from $116 billion in 

February, or $3.4 trillion compared to $1.4 trillion on an annualized basis. 

 6 The reserve ratio is based on total estimated insured deposits at the end of a given quarter. The FDIC will rely on 

the reserve ratio as of September 30, 2028, the first quarter-end date for which the reserve ratio will be known after 

September 15, 2028, the end date of the 8-year period.

7 The CARES Act established the Paycheck Protection Program, which facilitated credit to small businesses through 

loans backed by the full faith and credit of the U.S. Government. The CARES Act also provided Economic Impact 

Payments of up to $1,200 per adult and $500 per child, based on income, and expanded the amount of and eligibility 

for unemployment benefits. See Public Law 116–136 (Mar. 27, 2020).
5

Insured deposit growth rates are expected to decline compared to rates experienced 

during the first two quarters of 2020. During the third quarter of 2020 to the week ending August 

19, 2020, estimated domestic deposits (including both insured and uninsured deposits) for 

domestically chartered commercial banks declined by 0.7 percent.8 In the near term, low interest 

rates and reduced fiscal support in the face of weak economic conditions, including weak labor 

markets, incomes, and reduced consumer spending may place downward pressure on deposit 

growth as depositors draw down savings. Even as economic conditions improve, deposits may 

decline as the precautionary behavior exhibited by depositors subsides and individuals and 

businesses redirect deposits toward consumption and higher-yielding investments. 

While insured deposit growth rates are expected to decline, deposit balances, including 

insured deposits, could remain elevated until the factors that supported their recent growth 

decline from their current levels, particularly monetary and fiscal policy and economic 

uncertainty. The Federal Reserve has indicated that it will continue to provide monetary policy 

support in the near-term with a continuation of asset purchases. In the medium- to long-term, if 

the Federal Reserve implements a gradual approach to unwinding monetary policy, as it did in 

the post-2008 period, reserves may remain elevated for years, even after economic conditions 

improve. The impact on deposits of a prolonged period of economic weakness is difficult to 

predict, but it is possible deposits may remain elevated if businesses and consumers continue to 

hold back spending under such a scenario. Under the Restoration Plan, the FDIC will monitor 

these deposit balance trends and their impact on the ability of the reserve ratio to return to 1.35 

percent within 8 years of establishing the Plan.

Potential losses 

Losses from past and future bank failures affect the reserve ratio by lowering the fund 

balance. In recent years, the DIF has experienced low losses from IDI failures. On average, five 

IDIs per year failed between 2015 and 2019, at an annual cost to the fund of about $400 million. 

Two IDIs have failed thus far in 2020, marking the sixth year in a row with few or no failures.

Future losses to the DIF remain uncertain as the length of the pandemic and the resulting 

potential economic and banking effects are unclear. The uncertainties include, among others, the 

length of time necessary for a full economic recovery, how quickly businesses are able to reopen 

and return to pre-pandemic operations, and consumer behavior during and after the pandemic, 

which could have longer-term effects on the condition and performance of the banking industry. 

Thus far, the industry has remained a source of strength for the economy, in part, because banks’ 

stronger capital position has better positioned them to withstand losses compared to 2008. As of 

June 30, 2020, capital remained above regulatory minimums and the industry ratios for tier 1 

risk-based capital and total risk-based capital exceeded the ratios reported at year-end 2007 by 

several percentage points.

 8 Percent change for estimated weekly aggregate domestic deposits, which includes insured and uninsured deposits, 

at domestically chartered commercial banks only. This statistic is based on data that are reported weekly by a sample 

of banks and does not include deposits at other IDIs, including savings institutions. Federal Reserve, H.8 Data 

Release, Assets and Liabilities of Commercial Banks in the United States, data as of August 19, 2020, available at 

https://www.federalreserve.gov/releases/h8/current/default.htm. 
6

To anticipate declines in capital that could trigger losses from IDI failures, the FDIC also 

monitors other measures, such as earnings, asset quality, and supervisory ratings. Thus far, while 

economic stress related to COVID-19 has impacted IDI earnings and lowered net interest 

margins, asset quality and supervisory ratings generally remain strong. As of June 30, 2020, 1.08

percent of loan and lease balances were noncurrent, up from a year ago, but below the peak of 

5.46 percent in the first quarter of 2010. The total number of institutions on the FDIC’s Problem 

Bank List fell to 52 in the second quarter of 2020, continuing the decline in the number of 

problem banks that has occurred in every quarter since its peak of 888 institutions in March 

2011.9 Under the Restoration Plan, the FDIC will monitor these and other measures to project 

potential losses from past and future IDI failures and their impact on the ability of the reserve 

ratio to return to 1.35 percent within 8 years of establishing the Plan.

Other factors that affect the reserve ratio 

The FDIC also will monitor other factors that affect the reserve ratio, including changes 

in IDI risk profiles, which influence assessment rates; growth in the assessment base; DIF 

investment income and unrealized gains and losses on investments; and operating expenses. For 

example, under the current rate schedule adopted pursuant to the FDIC’s long-term fund 

management plan,

10 the weighted average assessment rate for all IDIs is approximately 4.0 basis

points for the assessment period ending June 30, 2020.

11 In future quarters, this rate may increase 

or decrease based on the risk profiles of institutions, affecting the DIF balance and, thus, the 

reserve ratio through assessment income.

Maintain current schedule of assessment rates for all IDIs

In developing this Restoration Plan, staff projected the DIF balance and associated 

reserve ratio at the end of 8 years, using current data and assuming different rates of insured 

deposit growth.12 While subject to considerable uncertainty, staff believe that raising 

assessments based on two quarters of extraordinary insured deposit growth would be premature.

Table 2 depicts the amount of losses that the DIF could absorb and still reach 1.35

percent within 8 years. For example, if insured deposits grow at an annual rate of 2.5 percent 

over the next 8 years, the DIF could absorb losses of up to $23.7 billion and still reach the 

minimum reserve ratio requirement within 8 years. Alternatively, if insured deposits grow at an 

 9 “Problem” institutions are institutions with a CAMELS composite rating of “4” or “5” due to financial, 

operational, or managerial weaknesses that threaten their continued financial viability.

10 See 12 CFR 327.10(b); see also 76 Fed. Reg. 10672, 10718 (Feb. 25, 2011) and 81 Fed. Reg. 32180, 32202 (May 

20, 2016).

11 The quarterly weighted average assessment rate was calculated based on FDIC data as of August 24, 2020, and is 

subject to change due to amendments made through September 28, 2020, to IDIs’ quarterly Consolidated Reports of 

Condition and Income or quarterly Reports of Assets and Liabilities of U.S. Branches and Agencies of Foreign 

Banks (as applicable). 

12 For simplicity, the analysis shown in Table 2 assumes that: (1) the assessment base grows 4.5 percent, annually; 

(2) the average assessment rate remains at 4.0 basis points; (3) interest income on the deposit insurance fund balance 

is zero; and (4) operating expenses grow at 1 percent per year.
7

annual rate of 4.5 percent over the next 8 years, the DIF would need an additional $1.5 billion for 

the reserve ratio to reach the 1.35 percent minimum. 

Table 2–Projected Reserve Ratio at the End of 8 Years Assuming Different Rates of Insured 

Deposit Growth

Annual 

Insured 

Deposit 

Growth 

Rate 

[percent]

Industry 

Insured 

Deposits

[billions of 

dollars]

DIF 

Reserve 

Ratio

[percent]

DIF Balance 

needed to reach 

1.35 percent 

reserve ratio

[billions of 

dollars]

Amount available 

to absorb losses and 

reach 1.35 percent 

reserve ratio

[billions of dollars]

2.5 10,835 1.56 145.7 23.7

3.0 11,279 1.50 151.7 17.7

3.5 11,739 1.44 157.9 11.5

4.0 12,215 1.39 164.3 5.1

4.5 12,708 1.33 170.9 (1.5)

It is reasonable that annual insured deposit growth could average less than 4.5 percent 

over the next 8 years for two main reasons. First, annualized growth has been less than 4.5 

percent or negative during most (57 percent) quarters since quarterly reporting was adopted in 

1991. Most importantly, as previously discussed, deposit growth could face downward pressure 

in the near-term based on economic conditions, as the consumption and investment patterns of 

individuals and households exhibit less precautionary behavior and as surge deposits are 

disbursed or leave the banking system, with growth rates normalizing over the next 8 years.

For example, if insured deposits grow at an annual rate of approximately 3.3 percent over 

the next 8 years, reflecting the flow of surge deposits out of the banking system and a return to 

normal consumer behavior, then the long-term growth rate (including extraordinary growth 

during the first two quarters of 2020) would equal the long-term average rate of 4.5 percent that 

the fund has experienced since the 1990s. Under this scenario, the table above shows that losses 

would have to exceed $11.5 billion to prevent the reserve ratio from reaching 1.35 percent in 8 

years.

Due to the uncertainties discussed elsewhere, losses from bank failures remain difficult to 

project. However, the banking industry is well capitalized, the problem bank list remains low, 

and the banking industry has appeared resilient to the early stages of the economic effects of the 

pandemic. As the effect of the pandemic on the banking industry becomes more apparent, staff 

will reassess its analysis of insured deposit growth, potential losses, and other factors that affect 

the reserve ratio.

Semiannual Update of Income and Loss Projections

Under the terms of the proposed Restoration Plan, staff will update its projections for the 

fund balance and reserve ratio at least semiannually while the Restoration Plan is in effect and 

recommend rate adjustments as necessary. Staff believe that frequent updates are necessary 
8

because loss and reserve ratio projections made so far into the future are subject to considerable 

uncertainty. 

Losses could differ from projected amounts if economic conditions worsen or financial 

stresses facing IDIs prove more or less severe. For example, DIF loss projections may increase if 

the quality of IDI assets quickly deteriorates or capital markets become severely constrained, and 

income could be affected by the factors described previously. Insured deposit growth could be 

higher or lower based on future economic conditions and the response of fiscal and monetary 

authorities and depositors. 

Future updates to the Board may result in changes in assumptions that result in different 

assessment revenue needs. Consequently, in order to fulfill the statutory requirement to return 

the fund reserve ratio to 1.35 percent, the FDIC may need to adopt higher assessment rates than 

those included in the current assessment rate schedule. Under assessment regulations, the Board 

has the authority to adjust assessment rates for all IDIs by up to two basis points, without notice 

and comment, if conditions warrant such an increase.13 Any increase greater than two basis 

points would require notice and comment. Given the considerable uncertainty of long-range 

projections and because the statutory deadline is 8 years away, staff recommends maintaining the 

current assessment rate schedule.

CONCLUSION

FDIC staff recommends that the Board adopt the attached Restoration Plan for immediate 

implementation, and authorize its publication, including a detailed analysis of the factors 

considered and the basis for the actions taken with regard to the Plan, in the Federal Register.

Staff contacts:

DIR

Michael Spencer

Associate Director, Financial Risk Management

(202) 898-7041

LEGAL

Sheikha Kapoor

Senior Counsel

(202) 898-3960

 13 The Board may increase or decrease the total base assessment rate schedule up to a maximum increase of 2 basis 

points or a fraction thereof or a maximum decrease of 2 basis points or a fraction thereof (after aggregating increases 

and decreases), as the Board deems necessary. See 12 CFR 327.10(f).
11

FEDERAL DEPOSIT INSURANCE CORPORATION

Federal Deposit Insurance Corporation Restoration Plan

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Notice of Establishment of Restoration Plan.

Federal Deposit Insurance Corporation Restoration Plan

Extraordinary growth in insured deposits during the first and second quarters of 2020 

caused the Deposit Insurance Fund (the DIF or the fund) reserve ratio to decline below the 

statutory minimum of 1.35 percent.14 As of June 30, 2020, the reserve ratio had fallen below the 

statutory minimum and stood at 1.30 percent, 9 basis points below the reserve ratio as of March 

31, 2020, and 11 basis points below its recent peak of 1.41 percent as of December 31, 2019. 

Prior to 2020, the DIF reserve ratio had not decreased since the fourth quarter of 2009. 

The Federal Deposit Insurance Act (the FDI Act) requires that the FDIC’s Board of 

Directors (Board) adopt a restoration plan when the DIF reserve ratio falls below 1.35 percent or 

is expected to within 6 months.15 Under the FDI Act, the restoration plan must restore the reserve 

ratio to at least 1.35 percent within 8 years of establishing the Plan, absent extraordinary 

circumstances.16

Therefore, pursuant to section 7(b)(3)(E) (12 U.S.C. 1817(b)(3)(E), the FDIC established 

the following Restoration Plan (or the Plan) on September 15, 2020. 

 14 The reserve ratio is calculated as the ratio of the net worth of the Deposit Insurance Fund (fund balance) to the 

value of the aggregate estimated insured deposits at the end of a given quarter. See 12 U.S.C. 1813(y)(3).

15 12 U.S.C. 1817(b)(3)(E)(i).

16 12 U.S.C. 1817(b)(3)(E)(ii).
12

1. The FDIC will monitor deposit balance trends, potential losses, and other factors that 

affect the reserve ratio. 

2. The FDIC will maintain the current schedule of assessment rates for all IDIs. 

3. At least semiannually, the FDIC will update its analysis and projections for the fund and, 

if necessary, recommend any modifications to the Plan, such as increasing assessment 

rates. 

While subject to considerable uncertainty, based on a range of reasonable (though highly 

uncertain) estimates of future losses and assuming a return to normal insured deposit growth, the 

reserve ratio would return to 1.35 percent without further action by the FDIC before the end of 

the 8-year period beginning upon the implementation of the Plan, as required by law. 

Detailed Analysis and Basis for Actions Taken by the Restoration Plan

The FDI Act requires that the FDIC publish in the Federal Register a detailed analysis of 

the factors considered and the basis for the actions taken with regard to the Restoration Plan.17

The following summarizes the analysis the FDIC conducted that formed the basis of the 

Restoration Plan.

Source of Decline in Reserve Ratio

The decline in the reserve ratio during the first half of 2020 was solely a result of 

extraordinary insured deposit growth. Table 1 shows the components of the reserve ratio for the 

last quarter of 2019 and the first two quarters of 2020. Over this period, the DIF balance grew 

and did not experience material losses. As of June 30, 2020, the DIF balance totaled a record 

$114.7 billion, up $4.3 billion from the end of 2019. Meanwhile, insured deposits grew by an 

 17 12 U.S.C. 1817(b)(3)(E)(v).
13

estimated $1 trillion, resulting in an 11 basis point decline in the reserve ratio from the end of 

2019.

Table 1–Fund Balance, Estimated Insured Deposits, and Reserve Ratio

[$ in Billions]

4th Qtr 2019 1st Qtr 2020 2nd Qtr 2020

Beginning Fund Balance 108.9 110.3 113.2

 Plus: Net Assessment Revenue 1.3 1.4 1.8

 Plus: Investment Incomea 0.5 2.0 0.1

 Less: Loss Provisions -0.1 * *

 Less: Operating Expenses 0.5 0.5 0.5

Ending Fund Balanceb 110.3 113.2 114.7

Estimated Insured Deposits 7,815.2 8,164.2 8,837.3

Ending Reserve Ratio 1.41% 1.39% 1.30%

* = Less than $50 million

a Includes unrealized gains/losses on available-for-sale securities.

b Components of fund balance changes may not sum to totals due to rounding.

The extraordinary growth in insured deposits during the first half of 2020 was also 

unprecedented. As described in more detail below, this increase largely stemmed from actions 

undertaken by depositors, both businesses and individuals, as well as government policy actions 

in response to the Coronavirus 2019 (COVID-19) pandemic. During the first half of 2020, 

estimated insured deposits grew by 4.5 percent (17.9 percent, annualized) in the first quarter and 

by 8.2 percent (33.0 percent, annualized) in the second quarter—two of the highest growth rates 

since quarterly reporting began in 1991.18 Together, estimated insured deposits grew by an 

amount equal to approximately three years of insured deposit growth in the first two quarters of 

2020 (Chart 1). 

 18 The growth in estimated insured deposits experienced during the first and second quarters of 2020 was surpassed 

only by quarters in which the growth rate was substantially impacted by a temporary increase in coverage for 

noninterest-bearing transaction accounts or a permanent increase in the standard maximum deposit insurance 

amount from $100,000 to $250,000, including specifically only the fourth quarter of 2010, the third quarter of 2009, 

and the fourth quarter of 2008. 
14

As of June 30, 2020, the unprecedented rate of insured deposit growth stemming from the 

pandemic had reduced the reserve ratio to below the statutory minimum of 1.35 percent. 

Factors that affect the ability of the reserve ratio to return to 1.35 percent

Deposit balance trends, potential losses, and other factors will affect the ability of the 

reserve ratio to return to 1.35 percent within 8 years of implementing the Restoration Plan. To 

determine whether the reserve ratio has reached the statutory minimum, the FDIC will rely on 

the reserve ratio as of September 30, 2028.19 Under the Plan, the FDIC will closely monitor the 

factors affecting the reserve ratio and, as they become clearer, will update the Plan, as necessary, 

to reflect any updated assumptions. 

Deposit Balance Trends

The extraordinary growth in insured deposits during the first and second quarters of 2020 

is largely a result of actions taken by monetary and fiscal authorities, and by individuals, 

 19 The reserve ratio is based on total estimated insured deposits at the end of a given quarter. The FDIC will rely on 

the reserve ratio as of September 30, 2028, the first quarter-end date for which the reserve ratio will be known after 

September 15, 2028, the end date of the 8-year period.

$5.0

$5.5

$6.0

$6.5

$7.0

$7.5

$8.0

$8.5

$9.0

2014 2015 2016 2017 2018 2019

Insured Deposits (in Trillions)

Chart 1–Annual Insured Deposit Growth Rates

(December to December)

3.3%

5.2%

6.1%

3.5%

5.1%

3.9%

20Q1

17.9%

20Q2

33.0%

$1 trillion over two quarters

$1 trillion over three years

Average Annual Growth Rate = 4.5%
15

businesses, and financial market participants in response to the COVID-19 pandemic. Deposit 

growth initially intensified in March upon the outbreak of the COVID-19 pandemic. As COVID19 infections spread throughout the United States, individual states or major metropolitan areas 

ordered millions of Americans to stay home, severely reducing their ability to engage in usual 

commerce and forcing many businesses to close temporarily or furlough employees. Faced with 

economic disruption and uncertainty, businesses drew on their lines of credit and conserved cash, 

increasing deposits. Market volatility pushed investors to safer assets, including cash and insured 

deposits. Beginning in March, the Board of Governors of the Federal Reserve System (Federal 

Reserve) announced a series of emergency actions, including large-scale asset purchases and 

emergency lending facilities, which rapidly expanded its balance sheet by more than $1 trillion 

and, with it, grew IDI reserve balances and deposits.

As deposit growth associated with a flight to safety began to stabilize, fiscal stimulus and 

reduced spending applied additional upward pressure on deposit growth. As part of the 

Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the U.S. government 

provided over $1 trillion in direct support to consumers and businesses through business loans, 

expanded unemployment insurance, and one-time checks to individuals.20 Lending to small 

businesses resulted in an increase in deposits. For individuals, the resulting surge in personal 

incomes from direct government assistance, combined with the dramatic reduction in 

discretionary spending, fueled deposit growth and lifted the personal savings rate to a record 

high of 33.7 percent in April. The personal savings rate remained elevated through July at 17.8 

 20 The CARES Act established the Paycheck Protection Program, which facilitated credit to small businesses 

through loans backed by the full faith and credit of the U.S. Government. The CARES Act also provided Economic 

Impact Payments of up to $1,200 per adult and $500 per child, based on income, and expanded the amount of and 

eligibility for unemployment benefits. See Public Law 116–136 (Mar. 27, 2020).
16

percent, and monthly savings more than doubled to $280 billion in June from $116 billion in 

February, or $3.4 trillion compared to $1.4 trillion on an annualized basis. 

Insured deposit growth rates are expected to decline compared to rates experienced 

during the first two quarters of 2020. During the third quarter of 2020 to the week ending August 

19, 2020, estimated domestic deposits (including both insured and uninsured deposits) for all 

domestically chartered commercial banks declined by 0.7 percent.21 In the near term, low interest 

rates and reduced fiscal support in the face of weak economic conditions, including weak labor 

markets, incomes, and reduced consumer spending may place downward pressure on deposit 

growth as depositors draw down savings. Even as economic conditions improve, deposits may 

decline as the precautionary behavior exhibited by depositors subsides and individuals and 

businesses redirect deposits toward consumption and higher-yielding investments. 

While insured deposit growth rates are expected to decline, deposit balances, including 

insured deposits, could remain elevated until the factors that supported their recent growth 

decline from their current levels, particularly monetary and fiscal policy and economic 

uncertainty. The Federal Reserve has indicated that it will continue to provide monetary policy 

support in the near-term with a continuation of asset purchases. In the medium- to long-term, if 

the Federal Reserve implements a gradual approach to unwinding monetary policy, as it did in 

the post-2008 period, reserves may remain elevated for years, even after economic conditions 

improve. The impact on deposits of a prolonged period of economic weakness is difficult to 

predict, but it is possible deposits may remain elevated if businesses and consumers continue to 

 21 Percent change for estimated weekly aggregate domestic deposits, which includes insured and uninsured deposits, 

at domestically chartered commercial banks only. This statistic is based on data that are reported weekly by a sample 

of banks and does not include deposits at other IDIs, including savings institutions. Federal Reserve, H.8 Data 

Release, Assets and Liabilities of Commercial Banks in the United States, data as of August 19, 2020, available at 

https://www.federalreserve.gov/releases/h8/current/default.htm.
17

hold back spending under such a scenario. Under the Restoration Plan, the FDIC will monitor 

these deposit balance trends and their impact on the ability of the reserve ratio to return to 1.35 

percent within 8 years of establishing the Plan.

Potential Losses

Losses from past and future bank failures affect the reserve ratio by lowering the fund 

balance. In recent years, the DIF has experienced low losses from IDI failures. On average, five 

IDIs per year failed between 2015 and 2019, at an annual cost to the fund of about $400 million. 

Two IDIs have failed thus far in 2020, marking the sixth year in a row with few or no failures.

Future losses to the DIF remain uncertain as the length of the pandemic and the resulting 

potential economic and banking effects are unclear. The uncertainties include, among others, the 

length of time necessary for a full economic recovery, how quickly businesses are able to reopen 

and return to pre-pandemic operations, and consumer behavior during and after the pandemic, 

which could have longer-term effects on the condition and performance of the banking industry. 

Thus far, the industry has remained a source of strength for the economy, in part, because banks’ 

stronger capital position has better positioned them to withstand losses compared to 2008. As of 

June 30, 2020, capital remained above regulatory minimums and the industry ratios for tier 1 

risk-based capital and total risk-based capital exceeded the ratios reported at year-end 2007 by 

several percentage points. 

To anticipate declines in capital that could trigger losses from IDI failures, the FDIC also 

monitors other measures, such as earnings, asset quality, and supervisory ratings. Thus far, while 

economic stress related to COVID-19 has impacted IDI earnings and lowered net interest 

margins, asset quality and supervisory ratings generally remain strong. As of June 30, 2020, 1.08 

percent of loan and lease balances were noncurrent, up from a year ago, but below the peak of 
18

5.46 percent in the first quarter of 2010. The total number of institutions on the FDIC’s Problem 

Bank List fell to 52 in the second quarter of 2020, continuing the decline in the number of 

problem banks that has occurred in every quarter since its peak of 888 institutions in March 

2011.22 Under the Restoration Plan, the FDIC will monitor these and other measures to project 

potential losses from past and future IDI failures and their impact on the ability of the reserve 

ratio to return to 1.35 percent within 8 years of establishing the Plan.

Other Factors

Other factors that affect the reserve ratio include changes in IDI risk profiles, which 

influence assessment rates; growth in the assessment base; DIF investment income and 

unrealized gains and losses on investments; and operating expenses. For example, under the 

current rate schedule adopted pursuant to the FDIC’s long-term fund management plan,23 the 

weighted average assessment rate for all IDIs is approximately 4.0 basis points for the 

assessment period ending June 30, 2020.24 In future quarters, this rate may increase or decrease 

based on the risk profiles of institutions, affecting the DIF balance and, thus, the reserve ratio 

through assessment income. Under the Restoration Plan, the FDIC will monitor these factors and 

their impact on the ability of the reserve ratio to return to 1.35 percent within 8 years of 

establishing the Plan.

Current Schedule of Assessment Rates and Fund Projections

 22 “Problem” institutions are institutions with a CAMELS composite rating of “4” or “5” due to financial, 

operational, or managerial weaknesses that threaten their continued financial viability.

23 See 12 CFR 327.10(b); see also 76 Fed. Reg. 10672, 10718 (Feb. 25, 2011) and 81 Fed. Reg. 32180, 32202 (May 

20, 2016).

24 The quarterly weighted average assessment rate was calculated based on FDIC data as of August 24, 2020, and is 

subject to change due to amendments made through September 28, 2020, to IDIs’ quarterly Consolidated Reports of 

Condition and Income or quarterly Reports of Assets and Liabilities of U.S. Branches and Agencies of Foreign 

Banks (as applicable). 
19

In developing this Restoration Plan, the FDIC projected the DIF balance and associated 

reserve ratio at the end of 8 years, using the current rate schedule and assuming different rates of 

insured deposit growth.25 While subject to considerable uncertainty, it is the FDIC’s view that 

raising assessments based on two quarters of extraordinary insured deposit growth would be 

premature.

Table 2 depicts the amount of losses that the DIF could absorb and still reach 1.35 

percent within 8 years. For example, if insured deposits grow at an annual rate of 2.5 percent 

over the next 8 years, the DIF could absorb losses of up to $23.7 billion and still reach the 

minimum reserve ratio requirement within 8 years. Alternatively, if insured deposits grow at an 

annual rate of 4.5 percent over the next 8 years, the DIF would need an additional $1.5 billion for 

the reserve ratio to reach the 1.35 percent minimum. 

Table 2–Projected Reserve Ratio at the End of 8 Years Assuming Different Rates of Insured 

Deposit Growth

Annual 

Insured 

Deposit 

Growth 

Rate 

[percent]

Industry 

Insured 

Deposits

[billions of 

dollars]

DIF 

Reserve 

Ratio

[percent]

DIF Balance 

needed to reach 

1.35 percent 

reserve ratio

[billions of 

dollars]

Amount available 

to absorb losses and 

reach 1.35 percent 

reserve ratio

[billions of dollars]

2.5 10,835 1.56 145.7 23.7

3.0 11,279 1.50 151.7 17.7

3.5 11,739 1.44 157.9 11.5

4.0 12,215 1.39 164.3 5.1

4.5 12,708 1.33 170.9 (1.5)

It is reasonable that annual insured deposit growth could average less than 4.5 percent 

over the next 8 years for two main reasons. First, annualized growth has been less than 4.5 

percent or negative during most (57 percent) quarters since quarterly reporting was adopted in 

 25 For simplicity, the analysis shown in Table 2 assumes that: (1) the assessment base grows 4.5 percent, annually; 

(2) the average assessment rate remains at 4.0 basis points; (3) interest income on the deposit insurance fund balance 

is zero; and (4) operating expenses grow at 1 percent per year.
20

1991. Most importantly, as previously discussed, deposit growth could face downward pressure 

in the near-term based on economic conditions, as the consumption and investment patterns of 

individuals and households exhibit less precautionary behavior and as surge deposits are 

disbursed or leave the banking system, with growth rates normalizing over the next 8 years.

For example, if insured deposits grow at an annual rate of approximately 3.3 percent over 

the next 8 years, reflecting the flow of surge deposits out of the banking system and a return to 

normal consumer behavior, then the long-term growth rate (including extraordinary growth 

during the first two quarters of 2020) would equal the long-term average rate of 4.5 percent that 

the fund has experienced since the 1990s. Under this scenario, the table above shows that losses 

would have to exceed $11.5 billion to prevent the reserve ratio from reaching 1.35 percent in 8 

years.

Due to the uncertainties discussed elsewhere, losses from bank failures remain difficult to 

project. However, the banking industry is well capitalized, the problem bank list remains low, 

and the banking industry has appeared resilient to the early stages of the economic effects of the 

pandemic. As the effect of the pandemic on the banking industry becomes more apparent, the 

FDIC will reassess its analysis of insured deposit growth, potential losses, and other factors that 

affect the reserve ratio.

Semiannual Updates of Income and Loss Projections

It is the FDIC’s view that frequent updates are necessary because loss and reserve ratio 

projections made so far into the future are subject to considerable uncertainty. Losses could 

differ from projected amounts if economic conditions worsen or financial stresses facing IDIs 

prove more or less severe. For example, DIF loss projections may increase if the quality of IDI 

assets quickly deteriorates or capital markets become severely constrained, and income could be 
21

affected by the factors described previously. Insured deposit growth could be higher or lower 

based on future economic conditions and the response of fiscal and monetary authorities and 

depositors. 

Future updates to the Board may result in changes in assumptions that result in different 

assessment revenue needs. Consequently, in order to fulfill the statutory requirement to return 

the fund reserve ratio to 1.35 percent, the FDIC may need to adopt higher assessment rates than 

those included in the current assessment rate schedule. Under assessment regulations, the Board 

has the authority to adjust assessment rates for all IDIs by up to two basis points, without notice 

and comment, if conditions warrant such an increase.26 Any increase greater than two basis 

points would require notice and comment. Given the considerable uncertainty of long-range 

projections and because the statutory deadline is 8 years away, the Restoration Plan maintains 

the current assessment rate schedule for all IDIs.

Federal Deposit Insurance Corporation.

By order of the Board of Directors.

Dated at Washington, DC, on September 15, 2020.

James P. Sheesley,

Assistant Executive Secretary.

 26 The Board may increase or decrease the total base assessment rate schedule up to a maximum increase of 2 basis 

points or a fraction thereof or a maximum decrease of 2 basis points or a fraction thereof (after aggregating increases 

and decreases), as the Board deems necessary. See 12 CFR 327.10(f).