[Federal Register Volume 64, Number 173 (Wednesday, September 8, 1999)]
[Proposed Rules]
[Pages 48719-48721]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23266]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 64, No. 173 / Wednesday, September 8, 1999 / 
Proposed Rules  

[[Page 48719]]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 327

RIN 3064-AC31


Assessments

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Board of Directors of the FDIC (Board) is proposing 
several changes to the FDIC's regulation governing assessments. The 
Board is proposing to change the reporting date used to determine the 
capital component of the assessment risk classifications assigned to 
FDIC-insured depository institutions. The proposal is to move that date 
closer by one calendar quarter to the assessment period for which the 
capital component is assigned. This change would permit the FDIC to use 
more up-to-date information in determining institutions' assessment 
risk classifications. The proposed date would coincide with the date 
currently used to determine the supervisory component of the assessment 
risk classification.
    To permit the use of more up-to-date capital information, the Board 
is further proposing to shorten from 30 days to 15 days the prior 
notice that the FDIC sends to institutions advising them of their 
assessment risk classifications for the following semiannual assessment 
period. The same reduction is proposed for the invoice sent by the FDIC 
each quarter showing the amount of the assessment payment due for the 
next quarterly collection. At the other end of the process, the Board 
is proposing to increase from 30 days to 90 days the time within which 
an institution may request review of its assessment risk 
classification.
    Additionally, to reflect a shift of certain assessment functions 
within the FDIC, the Board is proposing to revise two of the references 
in the regulation to FDIC offices or officials. Finally, the proposal 
would correct a typographical error in the form of a misstated cross-
reference to another FDIC regulation.

DATES: Written comments must be received by the FDIC on or before 
October 25, 1999.

ADDRESSES: All written comments should be addressed to Robert E. 
Feldman, Executive Secretary, Attention: Comments/OES, Federal Deposit 
Insurance Corporation, 550 17th Street, NW, Washington, DC 20429. 
Comments may be hand-delivered to the guard station at the rear of the 
550 17th Street Building (located on F Street) between 7:00 a.m. and 
5:00 p.m. on business days. Comments may also be faxed to (202) 898-
3838, or sent via the Internet to [email protected]. Comments will be 
available for inspection and photocopying at the FDIC Public 
Information Center, Room 100, 801 17th Street, NW, between 9:00 a.m. 
and 4:30 p.m. on business days.

FOR FURTHER INFORMATION CONTACT: James W. Thornton, Senior Banking 
Analyst, Division of Insurance, (202) 898-6707; or Claude A. Rollin, 
Senior Counsel, Legal Division, (202) 898-8741, Federal Deposit 
Insurance Corporation, Washington, DC 20429.

SUPPLEMENTARY INFORMATION:

Capital Group Determination Date

    At present, the FDIC's risk-based assessments regulation specifies 
that the capital component of the assessment risk classification 
assigned to each FDIC-insured institution for each semiannual 
assessment period will be determined on the basis of data reported by 
an institution in its Consolidated Reports of Condition and Income, 
Thrift Financial Report, or Report of Assets and Liabilities of U.S. 
Branches and Agencies of Foreign Banks (collectively, call reports) for 
the quarter ending six months earlier (12 CFR 327.4(a)(1)). As a 
result, an institution's capital group is assigned on the basis of 
information that is approximately six months old when the assessment 
period begins. While the FDIC has long preferred to use more current 
information, it has been constrained from doing so because of the time 
needed to process the capital data submitted by institutions in their 
call reports.\1\ However, recent developments, such as improvements in 
the FDIC's internal processing procedures and an increase in the number 
of institutions filing reports electronically, now permit more rapid 
processing of the data. Accordingly, the Board is proposing to base 
capital group determinations on data reported by institutions in their 
call reports for the quarter ending three months before the beginning 
of the assessment period to which the determination will apply.
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    \1\ Institutions have 30 days (or 45 days for institutions with 
foreign branches) from quarter-end to file their call reports. Once 
the FDIC receives the reports, they are checked for obvious errors 
(such as omitted information) and then input into the FDIC's 
automated system. Only after this has been done can the calculations 
be performed to determine the appropriate capital group assignment 
for each of the more than 10,000 insured institutions. These 
functions must be performed in time to prepare and mail notices to 
eachinstitution before the beginning of the next semiannual 
assessment period.
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    For ease of reference, the dates for capital group determinations 
would be stated in terms of actual dates--that is, March 31 for the 
semiannual period beginning the following July 1, and September 30 for 
the semiannual period beginning the following January 1. At present, 
the capital date is described by reference to other dates rather than 
specifically stated.
    It is anticipated that this change would be effective beginning 
with the semiannual assessment period that commences July 1, 2000. For 
that period, the capital component of an institution's assessment risk 
classification would be determined based on data reported as of March 
31, 2000, rather than as of December 31, 1999.

Change in Notice Dates for Assessment Risk Classifications and 
Quarterly Payment Invoices

    The Board also is proposing to shorten--from 30 days to 15 days--
the time between the date institutions are notified of their assessment 
risk classifications for the upcoming semiannual assessment period and 
the date the assessment is collected for the first quarter of that 
upcoming period. The same reduction is proposed, for both the first and 
second quarters of each semiannual assessment period, in the time 
between the date of the quarterly assessment invoice and the date the 
invoiced amount is collected.
    Currently, the FDIC's assessments regulation specifies that notice 
of the assessment risk classification applicable to a particular 
semiannual period is to

[[Page 48720]]

be provided to the institution at the same time as the invoice showing 
the amount of the assessment payment due from the institution for the 
first quarter of that semiannual period (12 CFR 327.4(a)). This invoice 
and notice are to be provided no later than 30 days before the first-
quarter payment date (12 CFR 327.3(c)). The regulation further requires 
that an invoice showing the amount of the assessment payment due for 
the second quarter of the semiannual period is to be provided no later 
than 30 days before the second-quarter payment date (12 CFR 327.3(d)).
    The Board is proposing to reduce to 15 days each of these 30-day 
periods. For the first-quarter notice and invoice, the reduction is 
necessary to permit the use of more current capital data in determining 
an institution's capital group and, based on that determination, to 
calculate the institution's first-quarter assessment payment.
    For example, if the date of the data used as a basis for capital 
group assignments for the assessment period beginning July 1 is changed 
from December 31 to March 31, and the prior-notice date remains May 30 
(which is 30 days before the June 30 payment date), the FDIC would have 
as little as 15 to 30 days to receive the data, scan the reports, input 
the information into the FDIC's system, perform capital group 
calculations for more than 10,000 institutions, and prepare and mail 
the assessment notices. Although the call report filing deadline for 
most institutions is 30 days after the end of the quarter (April 30 in 
this example), the deadline for institutions with foreign offices is 15 
days later (here, May 15). Although internal processing improvements 
and increased electronic filing allow the FDIC to perform these 
functions more quickly, the FDIC cannot perform them in 30 days.
    For consistency, the same reduction in the invoicing period is 
proposed for both the first-and second-quarter assessment payments.
    It is not anticipated that reduction of the notice and invoice 
periods would have a significantly adverse impact on insured 
institutions. The risk-based assessment system has been in place since 
1993 and the industry is quite familiar with it. Institutions typically 
know (or can anticipate with substantial certainty) the assessment risk 
classification and corresponding assessment rate \2\ they will be 
assigned for the next assessment period. For the second quarter of a 
semiannual period, institutions will have known their capital category 
for three months. An institution also knows the amount of its 
assessment base for each quarter, since that amount is calculated from 
data reported by the institution. By multiplying its rate by its 
assessment base, an institution can very closely estimate its payment 
well before it receives a FDIC assessment notice.
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    \2\ In the event the Board makes a limited adjustment to the 
assessment rate schedule pursuant to the FDIC's assessments 
regulation at 12 CFR 327.9(c), the adjustment is to be announced no 
later than 15 days before the assessment notice date (which under 
the existing regulations is, in turn, 30 days before the assessment 
payment date). Under the proposal to move the assessment notice date 
closer to the payment date, an adjustment announcement would come at 
least 30 days before the assessment payment date.
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    The proposed change should have little effect on the small number 
of institutions that believe they have received an incorrect assessment 
classification. Even with the existing notice and invoice dates, 
requests for review of assessment ratings that result in favorable 
changes for requesting institutions can only rarely be decided before 
the date on which the institution is required to pay the invoiced 
amount.
    Institutions are also able to anticipate their Financing 
Corporation (FICO) assessment, which the FDIC bills and collects on 
FICO's behalf. Although the FICO assessment rate varies from one 
quarter to the next, the variation is typically small. Thus, under 
normal circumstances, institutions can estimate with reasonable 
accuracy the amount of their assessment payments well in advance of the 
payment date. However, the Board recognizes that there might be some 
instances in which significant developments could reduce that accuracy, 
such as significant changes in the assessment base for one or both of 
the deposit insurance funds that might cause material changes in the 
FICO assessment rates. In these cases, the FDIC intends to provide 
notice as early as possible through such means as mailings to insured 
institutions.
    An example of a development expected to cause significant changes 
in FICO assessments is the statutory equalization of the FICO 
assessment rate applicable to deposits insured by the Bank Insurance 
Fund (BIF) with the rate for deposits insured by the Savings 
Association Insurance Fund (SAIF). However, under existing law, that 
change is to become effective on January 1, 2000, six months before the 
anticipated implementation of the changes proposed here. Thus, there 
would be sufficient time to adjust to the newer, equalized FICO rates 
before the shorter notice period is implemented.

Extension of Period for Requesting Reclassification

    Another change proposed by the Board is to lengthen the period 
during which an institution may seek a change in its assessment risk 
classification. At present, the FDIC's assessments regulation requires 
that a request that the FDIC review an institution's classification be 
submitted within 30 days of the date of the notice by which the FDIC 
informs the institution of its classification (12 CFR 327.4(d)). Based 
on the FDIC's experience with the review process and the proposed 
reduction of the existing prior-notice period, the FDIC has concluded 
that a longer period would be beneficial. Thus, the Board is proposing 
to expand the time for requesting review to 90 days.

Redesignations Resulting From Internal FDIC Reorganization

    In order to reflect reorganizations within the FDIC, the Board is 
further proposing to amend the assessments regulation to provide that 
requests for review of assessment risk classifications be submitted to 
the Director of the Division of Insurance, instead of the Director of 
the Division of Supervision. Similarly, the Board proposes to move from 
the Director of the Division of Supervision to the Director of the 
Division of Insurance the existing delegation of authority in 12 CFR 
327.4(d) to act on most such requests. However, the authority to act on 
requests for changes in the supervisory subgroup assignment would 
remain with the Director of the Division of Supervision if the request 
is based on the appropriateness of that assignment as of the date set 
for determining supervisory subgroup assignments. This delineation of 
the delegated authority is represented by the phrase ``as appropriate'' 
in the proposed revision, which reads as follows: ``Upon completion of 
a review, the Director of the Division of Insurance (or designee) or 
the Director of the Division of Supervision (or designee), as 
appropriate, shall promptly notify the institution in writing of his or 
her determination of whether reclassification is warranted.''

Correction of Cross Reference

    Section 327.5(f) of the FDIC's assessments regulation imposes 
disclosure restrictions regarding the supervisory subgroup assigned by 
the FDIC. At present, this section gives an erroneous cross-reference 
to another, nonexistent, section of the FDIC's regulations to identify 
the category of exempt information into which the

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supervisory subgroup information fits. The proposal corrects this 
erroneous cross-reference.

Request for Comment

    The Board requests comment on the proposed regulatory amendments 
described above. In particular, comment is requested regarding any 
adverse impact the shorter notice periods might have. If it is believed 
that a 15-day notice period would be insufficient, comment is requested 
as to what period would be minimally sufficient to prove reasonable 
notice.
    Comment is further requested on any alternative means of permitting 
the use of more up-to-date capital data without shortening the notice 
periods. Possible alternatives might include, for example, moving the 
assessment payment date to a later date. It is requested that 
suggestions for alternative means to those proposed by the Board 
include a discussion of any benefits and disadvantages associated with 
the alternatives suggested.
    The comment period has been set at 45 days to allow the proposal, 
if adopted, to be implemented beginning with the second semiannual 
assessment period of 2000 and to give insured institutions as much time 
as possible before implementation to adjust to the changes. The Board 
wishes to address the proposal expeditiously because of its belief that 
the use of more current capital data would be of significant benefit 
for both the industry and the risk-based assessment system.

Regulatory Flexibility Act

    The Board hereby certifies that the proposed rule would not have a 
significant economic impact on a substantial number of small entities 
within the meaning of the Regulatory Flexibility Act (5 U.S.C. 601 et 
seq.). No new or increased reporting, recordkeeping, or other 
compliance requirements would be imposed by the proposed rule. Of the 
changes proposed, only one--lengthening the time for filing requests 
for review of assessment risk classifications--addresses actions to be 
initiated by insured institutions. The remaining proposals address 
actions to be undertaken by the FDIC. The proposal addressing actions 
to be initiated by institutions would relax an existing time 
restriction, and it is expected that any impact on insured 
institutions, of whatever size, would be positive rather than adverse.

Assessment of Impact of Federal Regulation on Families

    The FDIC has determined that this proposed amendment would not 
affect family well-being within the meaning of section 654 of the 
Treasury Department Appropriations Act, 1999, enacted as part of the 
Omnibus Consolidated and Emergency Supplemental Appropriations Act, 
1999 (Pub. L. 105-277, 112 Stat. 2681).

List of Subjects in 12 CFR Part 327

    Assessments, Bank deposit insurance, Banks, banking, Reporting and 
recordkeeping requirements, Savings associations.

    For the reasons stated in the preamble, the Board proposes to amend 
12 CFR part 327 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 327.3 is amended by removing the phrase ``30 days'' and 
adding in its place the phrase ``15 days'' in paragraphs (c)(1) and 
(d)(1), respectively.
    3. Section 327.4 is amended by removing the citation to 
``309.5(c)(8)'' in paragraph (e) and adding in its place the citation 
``309.5(g)(8)'', and by revising paragraphs (a)(1) introductory text 
and (d) to read as follows:


Sec. 327.4  Annual assessment rate.

    (a) * * *
    (1) Capital factors. Institutions will be assigned to one of the 
following three capital groups on the basis of data reported in the 
institution's Consolidated Reports of Condition and Income, Report of 
Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks, 
or Thrift Financial Report dated as of March 31 for the assessment 
period beginning the following July and as of September 30 for the 
assessment period beginning the following January 1.
* * * * *
    (d) Requests for review. An institution may submit a written 
request for review of its assessment risk classification. Any such 
request must be submitted within 90 days of the date of the assessment 
risk classification notice provided by the Corporation pursuant to 
paragraph (a) of this section. The request shall be submitted to the 
Corporation's Director of the Division of Insurance in Washington, DC, 
and shall include documentation sufficient to support the 
reclassification sought by the institution. If additional information 
is requested by the Corporation, such information shall be provided by 
the institution within 21 days of the date of the request for 
additional information. Any institution submitting a timely request for 
review will receive written notice from the Corporation regarding the 
outcome of its request. Upon completion of a review, the Director of 
the Division of Insurance (or designee) or the Director of the Division 
of Supervision (or designee), as appropriate, shall promptly notify the 
institution in writing of his or her determination of whether 
reclassification is warranted. Notice of the procedures applicable to 
reviews will be included with the assessment risk classification notice 
to be provided pursuant to paragraph (a) of this section.
* * * * *
    By order of the Board of Directors.

    Dated at Washington, DC, this 31st day of August, 1999.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 99-23266 Filed 9-7-99; 8:45 am]
BILLING CODE 6714-01-P