[Federal Register Volume 62, Number 96 (Monday, May 19, 1997)]
[Rules and Regulations]
[Pages 27171-27177]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12587]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 327

RIN 3064-AB59


Assessments

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule.

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SUMMARY: The FDIC is preserving the current adjusted rate schedule for 
assessments paid to the Bank Insurance Fund (BIF) for the second 
semiannual period of 1997 (July-December), and for subsequent 
semiannual periods subject to review on a semiannual basis. Absent 
action by the FDIC, the BIF rates would revert to the base rates, which 
are 4 basis points higher. The resulting assessments would exceed the 
amount allowed by law.
    The FDIC is issuing the final rule without prior notice and comment 
under the procedure established by the FDIC's regulations for making 
limited adjustments to base assessment rates.
    The final rule removes obsolete provisions regarding the special 
assessment and pre-1997 rates, and clarifies other provisions without 
altering their substance.

EFFECTIVE DATE: Effective May 6, 1997.

FOR FURTHER INFORMATION CONTACT: Fred Carns, Assistant Director, 
Division of Insurance, (202) 898-3930; William Farrell, Chief, 
Assessment Management Section, Division of Finance, (202) 416-7156; 
Richard Osterman, Senior Counsel, (202) 898-3523, or Jules Bernard, 
Counsel, (202) 898-3731, Legal Division, Federal Deposit Insurance 
Corporation, Washington, D.C. 20429.

SUPPLEMENTARY INFORMATION:

I. The Final Rule

A. Background

    In accordance with section 7(b) of the Federal Deposit Insurance 
(FDI Act), 12 U.S.C. 1817(b), the FDIC has adopted a risk-based 
assessment program for the BIF. The program has two main components. 
The first component is a set of base rates that are appropriate for the 
BIF over the long term. These rates, which are presented in the BIF 
Base Assessment Schedule, see 12 CFR 327.9(a)(2)(i), will be changed 
only after full notice-and-comment rulemaking. The second component is 
a mechanism for making limited and relatively short-term adjustments to 
the BIF base rates. The adjustments are made by rulemaking without 
prior notice and comment, see id. 327.9(c), but are revisited by the 
FDIC on a semiannual basis. The adjusted rates are presented in the BIF 
Adjusted Assessment Schedule. See id. 327.9(b)(2)(i). The adjusted 
rates are the effective ones--that is, the rates that BIF-assessable 
institutions currently pay to the BIF.1
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    \1\ An institution that holds BIF-assessable deposits must also 
pay an assessment to the Financing Corporation (FICO) based on those 
deposits. 12 U.S.C. 1441(f)(2); see Deposit Insurance Funds Act of 
1996 (Funds Act), Pub. L. 104-208, section 2703, 110 Stat. 3009, 
3009-479 et seq. (Sept. 30, 1996). The FICO payment is separate 
from, and in addition to, the BIF assessment.
    The FDIC will continue to collect the FICO assessments on the 
FICO's behalf. The FDIC's quarterly invoices will reflect the 
current amount of the FICO assessment.
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    The BIF base assessment rates are appropriate, over the long term, 
to generate assessments that maintain the BIF's capitalization at the 
level prescribed by statute. The base rates reflect a thorough 
historical analysis of FDIC experience, including consideration of 
recent statutory changes that may moderate future deposit insurance 
losses (e.g., prompt corrective action authority and the least-cost 
resolution requirement). See 60 FR 42680 (Aug. 16, 1995). The BIF base 
rates range from 4 basis points (bp) for institutions in the best 
assessment risk classification (1A institutions) to 31 bp for 
institutions in the least favorable one. The final rule does not alter 
these rates.
    Over the short term, however, the BIF base rates would produce a 
continued rise in the Bank Insurance Fund reserve ratio (BIF reserve 
ratio)--that is, in the ratio of the BIF's net worth to the aggregate 
estimated deposits that the BIF insures. See 12 U.S.C. 1817(l)(6). The 
BIF reserve ratio is currently above the target ratio prescribed by 
statute, and is rising. (See discussion at I.B., below). The FDIC's 
Board of Directors (Board) has therefore adopted a temporary adjustment 
to the BIF base rates. See 61 FR 64609 (Dec. 6, 1996). The adjustment 
has lowered the base rates by 4 bps. The resulting adjusted rates 
(which are now in effect) range from zero to 27 bp.
    The adjustment only applies to the current semiannual period 
(January-June 1997), and expires at the end of it. See 12 CFR 
327.9(b)(2)(ii). Absent this final rule, the effective BIF rates would 
revert to the long-term rates set forth in the BIF Base Assessment 
Schedule.
    The final rule preserves the effective BIF rates at their current 
levels for the second semiannual period of 1997 (July-December) and 
indefinitely thereafter. The final rule does so by making an adjustment 
to the BIF Base Assessment Schedule in accordance with the procedure 
prescribed in id. 327.9(c). The adjustment lowers the rates in the BIF 
Base Assessment Schedule by four bp. The adjustment is of indefinite 
duration, but is reviewed semiannually.

B. Statutory and Regulatory Framework for Adjusting the Base Assessment 
Rates

1. Statutory Provisions
    The touchstone for setting a fund's assessments is the fund's 
reserve ratio. When that ratio is below the ``designated reserve 
ratio'' (DRR),2 the

[[Page 27172]]

FDIC must set assessments to increase the fund's reserve ratio to the 
DRR. When the reserve ratio is at or above the DRR--as is now the case 
for the BIF--the FDIC must set assessments to maintain the reserve 
ratio at the target DRR. 12 U.S.C. 1817(b)(2)(A)(i). The FDIC may not 
generally set assessments in excess of the amounts needed to meet these 
goals. Id. 1817(b)(2)(A)(iii). But the FDIC may set such assessments 
for institutions that exhibit financial, operational, or compliance 
weaknesses or are not well capitalized. Id. 
1817(b)(2)(A)(v).3
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    \2\ The DRR is a target ratio that has a fixed value for each 
year. The default value is 1.25 percent. The FDIC may set a higher 
value under certain conditions, but has not exercised that power. 
See 12 U.S.C. 1817(b)(2)(A)(iv).
    \3\ The FDIC has by regulation interpreted this provision to 
embrace institutions that have an assessment risk classification 
other than 1A. See 12 CFR 327.10.
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    In order to determine the aggregate amount to be collected for a 
fund, the FDIC must consider: (1) The fund's expected operating 
expenses; (2) the fund's case resolution expenditures and income; (3) 
the effect of assessments on the earnings and capital of fund members; 
and (4) any other factors that the FDIC deems appropriate. Id. 
1817(b)(2)(A)(ii).4
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    \4\ The FDIC must base a particular institution's semiannual 
assessment on the following factors: (1) The probability that the 
institution will cause a loss to the fund, (2) the likely amount of 
the loss, and (3) the fund's revenue needs. 12 U.S.C. 1817(b)(1)(C). 
To that end, the FDIC assigns every institution to an ``assessment 
risk classification,'' and sets rates for each of the 
classifications. See 12 CFR 327.4 and 327.9.
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2. Regulatory Provisions
    The FDIC has adopted a special procedure for making limited and 
relatively short-term adjustments to a fund's base rates in order to 
maintain the fund's reserve ratio at the target DRR. See 12 CFR 
327.9(c).
    Adjustments are subject to strict constraints. An adjustment must 
apply uniformly to every rate in the base assessment schedule. No 
adjustment may, when aggregated with prior adjustments, cause the 
adjusted rates to deviate at any time from the base rates by more than 
5 bp. No one adjustment may constitute an increase or decrease of more 
than 5 bp. And no adjustment may result in a negative assessment rate. 
Id. 327.9(c)(1).
    In line with the statutory requirements for setting assessments, an 
adjustment is determined by (1) the amount of assessment revenue 
necessary to maintain the fund's reserve ratio at the DRR, and (2) the 
assessment schedule that would provide the amount so needed considering 
the risk profile of the institutions that pay assessments to the fund. 
Id. To determine the assessment revenue needed for a fund, the FDIC 
considers the fund's expected operating expenses, its case resolution 
expenditures and income, the effect of assessments on the earnings and 
capital of the institutions paying assessments to the fund, and any 
other relevant factors. Id. 327.9(c)(2).

C. The BIF Adjusted Assessment Schedule

    For the reasons given below, the FDIC considers that there is no 
current need for assessment income to maintain the BIF's reserve ratio 
at the target DRR. Accordingly, the final rule adjusts the rates in the 
BIF Base Assessment Schedule by lowering each rate 4 bp, effective July 
1, 1997, thereby retaining the rates currently in effect. The adjusted 
rates are as follows:

                    BIF Adjusted Assessment Schedule                    
------------------------------------------------------------------------
                                                Supervisory subgroup    
               Capital group               -----------------------------
                                                A         B         C   
------------------------------------------------------------------------
1.........................................         0         3        17
2.........................................         3        10        24
3.........................................        10        24        27
------------------------------------------------------------------------

    1. Maintaining the BIF Reserve Ratio at the Target DRR. As of 
December 31, 1996 (unaudited), the latest date for which complete data 
are available, the BIF had a balance of $26.854 billion (see Table 3) 
and a reserve ratio of 1.34 percent. The industry's performance in 
recent months has been strong; the growth of the BIF reserve ratio has 
been robust. Accordingly, the near-term outlook for the BIF reserve 
ratio is favorable.
    Expected operating expenses. Operating expenses were approximately 
$505 million during 1996. They averaged $42 million per month for the 
year, but increased to an average of $55 million per month during the 
last quarter of 1996 (a full-year equivalent figure of $656 million). 
For 1997, operating expenses are projected to be $652 million. The 
savings from corporate downsizing is offset by a higher allocation of 
overhead expenses to corporate, a result of fewer receiverships.
    Case resolution expenditures and income. Expected case resolution 
expenditures and income are reflected in projected insurance losses, 
which consist of two components: a contingent liability for future 
failures, and an allowance for losses on institutions that have already 
failed. Using the FDIC's current estimates of failed-bank assets and a 
20 percent loss rate on such assets, the change in the contingent 
liability for future failures is estimated to be between $100 million 
(low estimate) and $300 million (high estimate) for calendar year 1997.
    While annual changes in the allowance for losses on past failures, 
as a percent of the estimated net recovery value of closed 
banks,5 have been as high as +13 percent and as low as -16 
percent over the last five years, the change in 1994 was -5.75 percent 
, +10.2 percent in 1995, and -3.0 percent in 1996. An estimated range 
of +5 percent to -5 percent was used in the projections detailed below.
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    \5\ The estimated recovery value of closed banks was $4.34 
billion as of December 31, 1996.
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    Table 1 summarizes the effect of these assumptions on projections 
of the provision for losses:

Table 1.--Changes in Contingent Liabilities and Allowance for Losses (1)
------------------------------------------------------------------------
                                                  Low loss    High loss 
                                                  estimate     estimate 
                                                 (million)    (million) 
------------------------------------------------------------------------
Contingent Liability for Future Cases.........         $100         $300
Allowance for Losses: Closed Banks (2)........        (200)          200
Total Provision for Losses....................        (100)         500 
------------------------------------------------------------------------
Notes:                                                                  
(1) Both projections assume a continuation of current economic          
  conditions during 1997.                                               
(2) Assumes a range of -5 percent to +5 percent of the estimated net    
  recovery value of closed banks ($4.34 billion as of 12/31/96).        


[[Page 27173]]

    Assessment Income. Based on the distribution of the assessment base 
across the BIF assessment rate matrix as of January 1, 1997, BIF 
assessment income for 1997 would be $23 million under the existing 
assessment rate schedule.
    Table 2 summarizes the distribution of institutions across the 
risk-based assessment matrix:

                                 Table 2.--BIF Assessment Base Distribution (1)                                 
      [Deposits as of December 31, 1996; Supervisory Subgroup and Capital Groups in Effect January 1, 1997]     
----------------------------------------------------------------------------------------------------------------
                                                              Supervisory subgroups                             
         Capital group          --------------------------------------------------------------------------------
                                       A         Percent          B         Percent          C         Percent  
----------------------------------------------------------------------------------------------------------------
1. Well:                                                                                                        
    Number.....................       9,362           95.0         304            3.1          57            0.6
    Base ($billion)............       2,597.0         98.3          29.4          1.1           2.4          0.1
2. Adequate:                                                                                                    
    Number.....................          84            0.9          17            0.2          15            0.2
    Base ($billion)............           9.7          0.4           1.2          0.1           1.2          0.1
3. Under:                                                                                                       
    Number.....................           0            0.0           2            0.0          11            0.1
    Base ($billion)............           0.0          0.0           0.4          0.0           0.8         0.0 
----------------------------------------------------------------------------------------------------------------
Estimated annual assessment revenue--$23 million                                                                
Assessment Base--$2,642 billion                                                                                 
Average annual assessment rate (bp)--0.09 bp                                                                    
Notes: (1) ``Number'' reflects the number of BIF members, including BIF-member Oakar institutions; ``Base''     
  reflects all BIF-assessable deposits.                                                                         

    With 99.0 percent of the number of institutions and 99.8 percent of 
the assessment base in the three lowest assessment risk classifications 
(1A, 1B and 2A), the current distribution in the matrix reflects little 
fundamental difference from the previous period when the percentages 
were 98.7 percent and 99.2 percent, respectively. The slightly lower 
number of institutions in these three categories (down 229) reflects 
continuation of industry consolidation trends, as the overall total 
declined by 247 institutions. There are only 102 institutions outside 
the three lowest assessment risk classifications compared to 120 during 
the previous period, and only 490 outside the 1A classification as 
compared with 561 in the previous period.
    Interest Income. Income from the estimated average investment 
portfolio of $24.5 billion is estimated at $1.485 billion for 1997 
(6.06 percent yield). Given a range of + or -19 bp for the yield (5.87 
percent to 6.25 percent) for 1997, based on a range for interest rate 
changes of + or -100 bp, interest income is projected to be between 
$1.438 billion and $1.531 billion.
    Table 3 summarizes the effects on the fund balance of the low and 
high estimates that define the ranges assumed for interest income and 
insurance losses:

                         Table 3.--Fund Balance                         
                             [$ in millions]                            
------------------------------------------------------------------------
                                           Low projected  High projected
                                             estimate        estimate   
------------------------------------------------------------------------
Revenue \1\:                                                            
    Assessments \2\.....................             $23             $23
    Interest Income \3\.................           1,438           1,531
                                         -------------------------------
      Total Revenue.....................           1,461           1,554
Expenses & Losses \1\:                                                  
    Operating Expenses..................             652             652
    Provision for Losses................             500           (100)
                                         -------------------------------
      Total Expenses & Losses...........           1,152             552
Net Income \1\..........................             309           1,002
Fund Balance (Unaudited)--12/31/96......          26,854          26,854
Projected Fund Balance--12/31/97........          27,163         27,856 
------------------------------------------------------------------------
Notes:                                                                  
\1\ Figures are for the full year ending December 31, 1997.             
\2\  Assumes that the current assessment rate schedule remains in effect
  through December 31, 1997.                                            
\3\ Portfolio yield is estimated to be between 5.87 percent (low) and   
  6.25 percent (high), reflecting variation of + or -100 bp in interest 
  rates. The average invested fund balance is estimated to be $24.5     
  billion.                                                              

    Growth of insured deposits. Insured deposit growth has been 
volatile. Since 1986, annual growth of BIF-insured deposits has been as 
high as 7.1 percent and annual shrinkage as much as 2.1 percent:

BILLING CODE 6714-01-P


[[Page 27174]]

[GRAPHIC] [TIFF OMITTED] TR19MY97.012



BILLING CODE 6714-01-C

    The recent trend has been toward growth. Over the last two years 
there have been only two quarters in which insured deposits have 
shrunk, and even then the shrinkage has been slight (.01 percent and 
.03 percent). It is difficult to determine whether this development 
primarily reflects the incentives created by reduced BIF assessment 
rates, including the incentive for deposit-shifting from the Savings 
Association Insurance Fund (SAIF) to the BIF, or whether it indicates a 
change in the pattern of BIF-insured deposit growth due to other 
causes. With the passage of the Funds Act and the recent revision of 
FDIC rules governing the allocation of deposit growth or shrinkage 
between the BIF and the SAIF, both of which should inhibit deposit-
shifting, the primary causes of recent BIF-insured deposit growth 
should become clearer. In the interim, considering the experience of 
the last five years taken together, the FDIC considers that BIF-insured 
deposits are likely to experience a growth rate in the range of -2 
percent to +5 percent between year-end 1996 and year-end 1997.
    Based on the projected BIF balance and the growth of the insured 
deposit base, the FDIC projects the BIF reserve ratio to be within the 
range of 1.29 to 1.42 at December 31, 1997:

                 Table 4.--Projected BIF Reserve Ratios                 
                             [$ in millions]                            
------------------------------------------------------------------------
                                                               December 
                                                               31, 1996 
------------------------------------------------------------------------
Fund Balance (Unaudited)...................................      $26,854
Estimated Insured Deposits.................................   $2,007,447
BIF Ratio..................................................         1.34
------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                                                                      Low Estimate \1\--    High Estimate \2\-- 
                                                                      December 31, 1997      December 31, 1997  
                                                                                                                
----------------------------------------------------------------------------------------------------------------
Projected Fund Balance............................................           $27,163                $27,856     
Estimated Insured Deposits........................................        $2,107,819             $1,967,298     
Estimated BIF Ratio...............................................              1.29                  1.42      
----------------------------------------------------------------------------------------------------------------
Notes:                                                                                                          
\1\ The low estimate refers to the scenario of lower interest income (portfolio yield: 5.87 percent), higher    
  insurance losses ($500 million) and a higher insured deposit growth rate (+5 percent).                        
\2\ The high estimate refers to the scenario of higher interest income (portfolio yield: 6.25 percent), a       
  reduction in insurance losses (-$100 million) and a shrinkage of the insured deposit base (-2 percent).       

    The low estimate produces a 5 bp decrease below the December 31, 
1996, ratio. It reflects an assumed increase in the insured deposit 
base (+5 percent for 1997) and a small offset from an increase in the 
fund balance. (The fund balance in the low-estimate scenario increases 
because the higher projected insurance losses still do not fully offset 
interest income.) The high-estimate scenario produces an 8 bp increase 
above the December 31, 1996, ratio. It reflects an assumed shrinkage of 
the BIF-insured deposit base (-2 percent for 1997) and a strong 
increase in the BIF balance due to low insurance losses and high 
interest income.
    In light of recent trends and current conditions in the banking 
industry, the FDIC considers that the low-estimate scenario is not 
likely to be realized. Even if it were, however, the current rate 
schedule still would be sufficient to maintain the BIF's reserve ratio 
at the DRR through year-end 1997.
    2. Impact on Institutions' Earnings and Capital
    The estimated annual costs to BIF-assessable institutions, before 
taxes, from the existing rate schedule is $23 million, down from the 
$43 million estimate based on July 1, 1996, classifications. This 
decline is largely due to the assessment base of 1A institutions 
increasing from 96.8 percent to 98.3 percent of the total. 
Additionally, the estimated total base increased $148.0 billion while 
the 1A base increased $181.3 billion.
    Institutions having approximately $45 billion in deposits, out of a 
total base of approximately $2,642.0 billion (1.7 percent), will be 
charged a non-zero risk-based assessment. Having considered the impact 
on these institutions' earnings and capital, the FDIC believes that the 
BIF adjusted rates will have no unwarranted adverse effects.
    3. Assessment Schedule Needed to Generate the Revenue
    The FDIC does not presently need to collect assessment revenues 
from 1A institutions in order to maintain the BIF reserve ratio at the 
DRR over the short term.6 The FDIC is therefore lowering the 
rates in the BIF Base Assessment Schedule by four bp. The adjustment 
results in an effective assessment rate for 1A institutions of zero bp. 
The BIF effective rates are set forth in the BIF Adjusted Assessment 
Schedule.
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    \6\ The assessments payable by non-1A institutions reflect the 
amounts needed to maintain a risk-based assessment system for the 
BIF.
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D. Technical Changes

1. Removal of Pre-1997 SAIF Adjusted Rates
    The final rule removes provisions pertaining to pre-1997 SAIF 
adjusted rates. These provisions are obsolete.

[[Page 27175]]

Removing them simplifies and clarifies the current regulation.
    During the final calendar quarter of 1996, a particular group of 
SAIF-assessable institutions--namely, SAIF-member savings 
associations--were subject to a special interim set of adjusted rates. 
The interim rates expired on December 31, 1996. From the start of 1997 
forward, all SAIF-assessable institutions have been subject to the same 
SAIF adjusted rates. The references to the pre-1997 SAIF adjusted 
rates--and, in particular, to the special interim rates--are no longer 
needed.
    The final rule does not alter either the SAIF Base Assessment 
Schedule or the SAIF Adjusted Assessment Schedule now in effect, but 
merely republishes these schedules. The effective SAIF rates, which 
range from zero to 27 bp, remain at the current levels.
2. Removal of Special-Assessment Provisions
    The final rule eliminates subpart C of part 327, which is chiefly 
concerned with the special assessment imposed by the Funds Act. The 
FDIC has assessed and collected the special assessment. The vast 
majority of subpart C has therefore become obsolete.
    A few provisions of Subpart C--those that pertain to institutions 
that were exempted from the special assessment--have a continuing 
vitality. The Funds Act requires these institutions (and their 
successors) to pay SAIF assessments at the rates in effect on June 30, 
1995, for three years. Funds Act section 2702(f)(4)(A). The Funds Act 
also gives the institutions (and their successors) the power to 
terminate that obligation by paying a pro rata share of the amount 
otherwise due for the special assessment. Funds Act section 
2702(f)(4)(B). The final rule retains but relocates the provisions from 
subpart C that pertain to these matters.
3. Definitions
    The final rule adds an introductory phrase to 12 CFR 327.8, which 
sets forth definitions. The introductory phrase makes it clear that 
Sec. 327.8's definitions apply throughout part 327, and not just within 
subpart A.
    The final rule retains the provisions, heretofore found in subpart 
C, defining ``BIF'' and ``SAIF.''

E. Rulemaking Procedures; Effective Date

1. The BIF Rate Adjustment
    The Board is issuing this final rule in pursuant to id. 327.9(c), 
which enables the Board to adjust the rates in a fund's base assessment 
schedule without engaging in notice-and-comment rulemaking proceedings 
for each adjustment. The final rule is therefore effective immediately 
upon adoption. The adjustment made by the final rule, and the BIF 
adjusted rates specified in the final rule, apply during the second 
semiannual period of 1997 (July-December, 1997) and subsequent 
semiannual periods.
    The Board has found it necessary to establish this procedure 
because the FDIC must set ``semiannual'' assessments, see 12 U.S.C. 
1817(b)(2)(A), and therefore reviews the assessment schedule for each 
insurance fund every six months. Moreover, the FDIC ``shall set 
assessments when necessary, and only to the extent necessary'' to 
maintain an insurance fund's reserve ratio at the DRR, or to raise an 
insurance fund's reserve ratio to that level, id. 1817(b)(2)(A)(i); 
conversely, the FDIC ``shall not set assessment rates in excess of the 
amount needed'' for those purposes, id. 1817(b)(2)(A)(iii). These twin 
commands require the FDIC to respond quickly in order to keep each 
fund's assessments commensurate with its level of capitalization.
    As discussed in more detail in the Federal Register of December 24, 
1996, in which the FDIC established the current procedure for adjusting 
the base rates, and also in the Federal Register of August 16, 1995, in 
which the FDIC adopted its prior procedure for adjusting the BIF base 
rates temporarily by means of a Board resolution, the FDIC recognizes 
and understands the concern for the possibility of assessment rate 
increases without the benefit of full notice-and-comment rulemaking. 
See 61 FR 67687, 67693-67694 (Dec. 24, 1996); see also 60 FR 42680, 
42739-42740 (Aug. 16, 1995). Nevertheless, for the reasons given below, 
the FDIC considers that notice and public participation with respect to 
the adjustment made by this final rule would generally be 
``impracticable, unnecessary, or contrary to the public interest'' 
within the meaning of 5 U.S.C. 553(b). For the same reasons, the FDIC 
considers that it has ``good cause'' within the meaning of id. 553(d) 
to make the final rule effective immediately, and not after a 30-day 
delay.
    Notice-and-comment rulemaking procedures are ``unnecessary'' in 
this case because BIF-assessable institutions are already on notice 
with respect to: (1) The benchmark rates that are set forth in the BIF 
Base Assessment Schedule; (2) the need for making routine semiannual 
adjustments to those rates; and (3) the maximum amount of the 
adjustment. In short, institutions are fully aware that the effective 
rates are subject to some limited amount of variability, and that any 
variations in the rates are directly tied to the capitalization of the 
BIF.
    Notice-and-comment rulemaking procedures are also ``unnecessary'' 
because they would not provide additional relevant information. 
Institutions provide part of the needed information in their quarterly 
reports of condition. The FDIC generates the rest of the information 
internally: e.g., the current balance and expected operating expenses 
of the BIF, and the BIF's case resolution expenditures and income.
    Notice-and-comment rulemaking procedures are ``impracticable'' and 
``contrary to the public interest'' in this case because they are not 
compatible with the need to satisfy two competing interests. On one 
hand, the FDIC must comply with the statutory directive to maintain the 
BIF's reserve ratio at the target DRR. The FDIC must monitor the BIF 
closely, and must use data that are as current as possible to set BIF 
assessments on a semiannual basis. On the other hand, the FDIC must 
give institutions adequate notice of those assessments. In the current 
case, the assessment is due on June 30. See 12 CFR 327.3(c)(2). The 
FDIC must issue invoices by May 31. See id. 327.3(d)(1). The FDIC must 
announce the rates--and therefore must adopt the final rule--by May 16. 
See id. 327.9(c)(4). Notice-and-comment procedures entail delays that 
are incompatible with these tight scheduling requirements.
2. Other Changes
    The other changes made by the final rule are ``housekeeping'' 
measures of a purely interpretative nature. Neither prior notice and 
comment, nor a delayed effective date, are required for such rules. 5 
U.S.C. 553(b) and (d).

II. Paperwork Reduction Act

    No collections of information pursuant to section 3504(h) of the 
Paperwork Reduction Act of 1980 (44 U.S.C. 3501 et seq.) are contained 
in this rule. Accordingly, no information has been submitted to the 
Office of Management and Budget for review.

III. Regulatory Flexibility Analysis

    The Regulatory Flexibility Act (RFA), 5 U.S.C. 601 et seq., does 
not apply to this rule. The RFA defines ``rule'' to exclude ``a rule of 
particular applicability relating to rates''. Id. 601(2). The FDIC 
considers that the rule is governed by this exclusion.
    In addition, the legislative history of the RFA indicates that its 
requirements are inappropriate to this proceeding.

[[Page 27176]]

The RFA focuses on the ``impact'' that a rule will have on small 
entities. The legislative history shows that the ``impact'' at issue is 
a differential impact--that is, an impact that places a 
disproportionate burden on small businesses:

    Uniform regulations applicable to all entities without regard to 
size or capability of compliance have often had a disproportionate 
adverse effect on small concerns. The bill, therefore, is designed 
to encourage agencies to tailor their rules to the size and nature 
of those to be regulated whenever this is consistent with the 
underlying statute authorizing the rule. 126 Cong. Rec. 21453 (1980) 
(``Description of Major Issues and Section-by-Section Analysis of 
Substitute for S. 299'').

    The final rule does not impose a uniform cost or requirement on all 
institutions regardless of size. Rather, it imposes an assessment that 
is directly proportional to each institution's size. Nor does the rule 
cause an affected institution to incur any ancillary costs of 
compliance (such as the need to develop new recordkeeping or reporting 
systems, to seek out the expertise of specialized accountants, lawyers, 
or managers) that might cause disproportionate harm to small entities. 
As a result, the purposes and objectives of the RFA are not affected, 
and an initial regulatory flexibility analysis is not required.

IV. Riegle Community Development and Regulatory Improvement Act

    Section 302(b) of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (Riegle Act) requires that, as a general rule, 
new and amended regulations that impose additional reporting, 
disclosure, or other new requirements on insured depository 
institutions shall take effect on the first day of a calendar quarter. 
See 12 U.S.C. 4802(b). This restriction is inapplicable because the 
final rule would not impose such additional or new requirements. 
Nevertheless, the changes made by the final rule apply beginning July 
1, 1997, in line with the Riegle Act's specification.

V. Congressional Review

    As a general matter, when an agency adopts a final rule, the agency 
must submit to each House of Congress and to the Comptroller General a 
report containing a copy of the rule, a general statement relating to 
the rule, and the rule's proposed effective date. 5 U.S.C. 801(a)(1). 
But the term ``rule'' excludes ``any rule of particular applicability, 
including a rule that approves or prescribes for the future rates''. 
Id. 804(3). The final rule is governed by this exclusion, because the 
final rule sets assessment rates and relates to the computations 
associated with assessment rates. Accordingly, the reporting 
requirement of id. 801(a)(1), and the more general requirements of id. 
sections 801-808, do not apply.

List of Subjects in 12 CFR Part 327

    Assessments, Bank deposit insurance, Banks, banking, Financing 
Corporation, Savings associations.

    For the reasons set forth in the preamble, the Board of Directors 
of the Federal Deposit Insurance Corporation is amending part 327 of 
title 12 of the Code of Federal Regulations as follows:

PART 327--ASSESSMENTS

    1. The authority citation for part 327 continues to read as 
follows:

    Authority: 12 U.S.C. 1441, 1441b, 1813, 1815, 1817-1819; Pub. L. 
104-208, 110 Stat. 3009-479 (12 U.S.C. 1821).

    2. Section 327.8 is amended by adding introductory text and by 
revising paragraphs (f) and (g) to read as follows:


Sec. 327.8  Definitions.

    For the purpose of this part 327:
* * * * *
    (f) BIF; BIF member. (1) BIF. The term BIF means the Bank Insurance 
Fund.
    (2) BIF member. The term BIF member means a depository institution 
that is a member of the BIF.
    (g) SAIF; SAIF member. (1) SAIF. The term SAIF means the Savings 
Association Insurance Fund.
    (2) SAIF member. The term SAIF member means a depository 
institution that is a member of the SAIF.
* * * * *
    3. Section 327.9 is amended by revising paragraph (b) to read as 
follows:


Sec. 327.9  Assessment schedules.

* * * * *
    (b) Adjusted assessment schedules--(1) In general. Except as 
provided in paragraph (b)(3)(ii) of this section, institutions shall 
pay semiannual assessments at the rates specified in this paragraph (b) 
whenever such rates have been prescribed by the Board.
    (2) Adjusted rates for BIF members. The Board has adjusted the BIF 
Base Assessment Schedule by reducing each rate therein by 4 basis 
points for the first semiannual period of 1997 and thereafter. 
Accordingly, the following adjusted assessment schedule applies to BIF 
members:

                    BIF Adjusted Assessment Schedule                    
------------------------------------------------------------------------
                                                Supervisory subgroup    
               Capital group               -----------------------------
                                                A         B         C   
------------------------------------------------------------------------
1.........................................         0         3        17
2.........................................         3        10        24
3.........................................        10        24        27
------------------------------------------------------------------------

    (3) Adjusted rates for SAIF members--(i) In general. The Board has 
adjusted the SAIF Base Assessment Schedule by reducing each rate 
therein by 4 basis points for the first semiannual period of 1997 and 
thereafter. Accordingly, except as provided in paragraph (b)(3)(ii) of 
this section, the following adjusted assessment schedule applies to 
SAIF members:

                    SAIF Adjusted Assessment Schedule                   
------------------------------------------------------------------------
                                                Supervisory subgroup    
               Capital group               -----------------------------
                                                A         B         C   
------------------------------------------------------------------------
1.........................................         0         3        17
2.........................................         3        10        24

[[Page 27177]]

                                                                        
3.........................................        10        24        27
------------------------------------------------------------------------

    (ii) Institutions exempt from the special assessment--(A) Rate 
schedule. An institution that, pursuant to former Sec. 327.43 (a) or 
(b) as in effect on November 27, 1996 (See 12 CFR 327.43 as revised 
January 1, 1997.), was exempt from the special assessment prescribed by 
12 U.S.C. 1817 Note shall pay regular semiannual assessments to the 
SAIF from the first semiannual period of 1996 through the second 
semiannual period of 1999 according to the schedule of rates specified 
in former Sec. 327.9(d)(1) as in effect for SAIF members on June 30, 
1995 (See 12 CFR 327.9 as revised January 1, 1996.), as follows:

------------------------------------------------------------------------
                                                Supervisory subgroup    
               Capital group               -----------------------------
                                                A         B         C   
------------------------------------------------------------------------
1.........................................        23        26        29
2.........................................        26        29        30
3.........................................        29        30        31
------------------------------------------------------------------------

    (B) Termination of special rate schedule. An institution that makes 
a pro-rata payment of the special assessment shall cease to be subject 
to paragraph (b)(3)(ii)(A) of this section. The pro-rata payment must 
be equal to the following product: 16.7 percent of the amount the 
institution would have owed for the special assessment, multiplied by 
the number of full semiannual periods remaining between the date of the 
payment and December 31, 1999.
* * * * *

Subpart C--[Removed]

    4. Subpart C is removed.

    By order of the Board of Directors.

    Dated at Washington, DC, this 6th day of May 1997.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Deputy Executive Secretary.
[FR Doc. 97-12587 Filed 5-16-97; 8:45 am]
BILLING CODE 6714-01-P