[Federal Register Volume 73, Number 57 (Monday, March 24, 2008)]
[Proposed Rules]
[Pages 15459-15468]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-5670]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 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. 73, No. 57 / Monday, March 24, 2008 / 
Proposed Rules  

[[Page 15459]]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 327

RIN 3064-AD27


Assessment Dividends

AGENCY: Federal Deposit Insurance Corporation (``FDIC'').

ACTION: Notice of proposed rulemaking.

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SUMMARY: The FDIC is proposing regulations to implement the assessment 
dividend requirements in the Federal Deposit Insurance Reform Act of 
2005 (``Reform Act'') and the Federal Deposit Insurance Reform 
Conforming Amendments Act of 2005 (``Amendments Act''). The proposed 
rule is the follow-up to the advanced notice of proposed rulemaking on 
assessment dividends the FDIC issued in September 2007 and the 
temporary final rule on assessment dividends the FDIC issued in October 
2006. The temporary final rule sunsets on December 31, 2008.

DATES: Comments must be received on or before May 23, 2008.

ADDRESSES: You may submit comments by any of the following methods:
     Agency Web Site: http://www.fdic.gov/regulations/laws/federal. Follow instructions for submitting comments on the Agency Web 
Site.
     E-mail: [email protected]. Please include ``Assessment 
Dividends'' in the subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429.
     Hand Delivery/Courier: Guard station at the rear of the 
550 17th Street Building (located on F Street) on business days between 
7 a.m. and 5 p.m. (EST).
     Federal eRulemaking Portal: http://www.regulations.gov. 
Please follow the instructions for submitting comments.
    Public Inspection: All comments received will be posted without 
change to http://www.fdic.gov/regulations/laws/federal including any 
personal information provided. Comments may be inspected and 
photocopied in the FDIC Public Information Center, 3501 North Fairfax 
Drive, Room E-1002, Arlington, VA 22226, between 9 a.m. and 5 p.m. 
(EST) on business days. Paper copies of public comments may be ordered 
from the Public Information Center by telephone at (877) 275-3342 or 
(703) 562-2200.

FOR FURTHER INFORMATION CONTACT: Munsell W. St. Clair, Chief, Banking 
and Regulatory Policy Section, Division of Insurance and Research, 
(202) 898-8967; Missy Craig, Program Analyst, Division of Insurance and 
Research, (202) 898-8724; Donna Saulnier, Division of Finance, Team 
Leader, Assessment Management, (703) 562-6167; or Joseph A. DiNuzzo, 
Counsel, Legal Division, (202) 898-7349.

SUPPLEMENTARY INFORMATION:

I. Background

A. Reform Act Requirements

    Section 7(e)(2) of the Federal Deposit Insurance Act (``FDI Act''), 
as amended by the Reform Act, requires the FDIC, under most 
circumstances, to declare dividends from the Deposit Insurance Fund 
(``DIF'') when the DIF reserve ratio (``Reserve Ratio'') at the end of 
a calendar year equals or exceeds 1.35 percent. When the Reserve Ratio 
equals or exceeds 1.35 percent, and is not higher than 1.50 percent, 
the FDIC generally must declare one-half of the amount in the DIF in 
excess of the amount required to maintain the Reserve Ratio at 1.35 
percent as dividends to be paid to insured depository institutions. The 
FDIC Board of Directors (``Board'') may suspend or limit dividends to 
be paid, however, if it determines in writing, after taking a number of 
statutory factors into account, that: \1\
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    \1\ The statutory factors that the Board must consider are:
    1. National and regional conditions and their impact on insured 
depository institutions;
    2. Potential problems affecting insured depository institutions 
or a specific group or type of depository institution;
    3. The degree to which the contingent liability of the 
Corporation for anticipated failures of insured institutions 
adequately addresses concerns over funding levels in the Deposit 
Insurance Fund; and
    4. Any other factors that the Board determines are appropriate.
    12 U.S.C. 1817(e)(2)(F).

    1. The DIF faces a significant risk of losses over the next 
year; and
    2. It is likely that such losses will be sufficiently high as to 
justify a finding by the Board that the Reserve Ratio should 
temporarily be allowed to grow without requiring dividends when the 
Reserve Ratio is between 1.35 and 1.50 percent or to exceed 1.50 
percent.\2\
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    \2\ This provision would allow the FDIC's Board to suspend or 
limit dividends in circumstances where the Reserve Ratio has 
exceeded 1.5 percent, if the Board made a determination to continue 
a suspension or limitation that it had imposed initially when the 
reserve ratio was between 1.35 and 1.5 percent.

    When the Reserve Ratio exceeds 1.50 percent at the end of a 
calendar quarter, the FDI Act requires the FDIC, absent certain limited 
circumstances (discussed in footnote 2), to declare a dividend equal to 
the excess of the amount required to maintain the Reserve Ratio at 1.50 
percent as dividends to be paid to insured depository institutions.
    If the Board decides to suspend or limit dividends, it must submit, 
within 270 days of making the determination, a report to the Committee 
on Banking, Housing, and Urban Affairs of the Senate and to the 
Committee on Financial Services of the House of Representatives. The 
report must include a detailed explanation for the determination and a 
discussion of the factors required to be considered.\3\
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    \3\ See section 5 of the Amendments Act. Public Law 109-173, 119 
Stat. 3601, which was signed into law by the President on February 
15, 2006.
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    The FDI Act directs the FDIC to consider each insured depository 
institution's relative contribution to the DIF (or any predecessor 
deposit insurance fund) when calculating such institution's share of 
any dividend. More specifically, when allocating dividends, the Board 
must consider:
    1. The ratio of the assessment base of an insured depository 
institution (including any predecessor) on December 31, 1996, to the 
assessment base of all eligible insured depository institutions on that 
date;
    2. The total amount of assessments paid on or after January 1, 
1997, by an insured depository institution (including any predecessor) 
to the DIF (and any predecessor fund); \4\
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    \4\ This factor is limited to deposit insurance assessments paid 
to the DIF (or previously to the Bank Insurance Fund (``BIF'') or 
the Savings Association Insurance Fund (``SAIF'')) and does not 
include assessments paid to the Financing Corporation (``FICO'') 
used to pay interest on outstanding FICO bonds, although the FDIC 
collects those assessments on behalf of FICO. Beginning in 1997, the 
FDIC collected separate FICO assessments from both SAIF and BIF 
members.

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[[Page 15460]]

    3. That portion of assessments paid by an insured depository 
institution (including any predecessor) that reflects higher levels of 
risk assumed by the institution; and
    4. Such other factors as the Board deems appropriate.
    The Reform Act expressly requires the FDIC to prescribe by 
regulation the method for calculating, declaring and paying dividends. 
The dividend regulation must include provisions allowing an insured 
depository institution a reasonable opportunity to challenge 
administratively the amount of dividends it is awarded. Under the 
Reform Act, any review by the FDIC pursuant to these administrative 
procedures is final and not subject to judicial review.

B. The Temporary Final Rule on Assessment Dividends

    In compliance with the Reform Act requirement to issue regulations 
on assessment dividends within 270 days of the statute's enactment, in 
October 2006, the FDIC issued a temporary final rule to implement the 
dividend requirements of the Reform Act (``Temporary Final Rule''). 71 
FR 61385 (October 18, 2006).\5\
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    \5\ Prior to issuing the temporary final rule, the FDIC 
published and received comment on a proposed temporary final rule. 
71 FR 28804.
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    The Temporary Final Rule, which will expire on December 31, 2008, 
mirrors the dividend provisions of the Reform Act, provides definitions 
(including the definition of a ``predecessor'' depository institution) 
to implement the statute and details how an institution may request 
that the FDIC's Division of Finance (``DOF'') review an FDIC 
determination of the institution's dividend amount and how an 
institution may appeal the DOF's response to that request. In the 
Temporary Final Rule, the FDIC adopted a simple system for allocating 
any dividends that might be declared during the two-year duration of 
the regulation. Any dividends awarded before January 1, 2009, will be 
distributed simply in proportion to an institution's 1996 assessment 
base ratio, as determined pursuant to the one-time assessment credit 
rule. 12 CFR 327.53.
    In publishing the Temporary Final Rule, the FDIC stated its 
intention to initiate a second, more comprehensive notice-and-comment 
rulemaking on dividends beginning with an advanced notice of proposed 
rulemaking to explore alternative methods for distributing future 
dividends after the temporary dividend rules expired on December 31, 
2008. The publication of the assessment dividend advance notice of 
proposed rulemaking in September 2007 (``ANPR'') commenced that 
process. 72 FR 53181 (September 18, 2007).

C. The Advanced Notice of Proposed Rulemaking

    In the ANPR the FDIC presented two general approaches to allocating 
dividends--the fund balance method and the payments method.\6\
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    \6\ The sole focus of the ANPR was on the type of assessment 
dividend allocation method the FDIC should adopt. The ANPR indicated 
that whether and how the FDIC should retain or revise the other 
aspects of the Temporary Final Rule would be addressed in this 
proposed rule.
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The Fund Balance Method

    Under the fund balance method, every quarter, each institution 
would be assigned a dollar portion of the fund balance (its fund 
allocation), solely for purposes of determining the institution's 
dividend share. Each institution's most recent fund allocation (as a 
percentage of the fund balance) would determine its share of any 
dividend. The fund allocation would increase or decrease each quarter 
depending upon fund performance and assessments paid by each 
institution. Specifically:
     Initially, the December 31, 2006 fund balance would be 
divided up among institutions in proportion to 1996 assessment bases. 
Thus, initially, each institution's fund allocation would equal its 
1996 ratio times the December 31, 2006 fund balance.
     Thereafter, from quarter to quarter, fund allocations 
would grow or shrink depending upon the performance of the fund.
     In addition, each ``eligible'' premium would increase an 
institution's fund allocation, dollar for dollar. An ``eligible'' 
premium would be the portion of an institution's premium that would 
count toward increasing its share of dividends.
     Possible definitions for an eligible premium include: (1) 
All premiums charged; (2) premiums charged up to the lowest rate 
charged a Risk Category I institution; or (3) something in between, for 
example, premiums charged up to the maximum rate for a Risk Category I 
institution, in all cases minus any credit use.\7\ Ineligible premiums 
would be those paid through the use of credits or those paid in cash at 
rates in excess of the eligible premium rate.
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    \7\ However, an eligible premium would never be negative.
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The Payments Method

    Under the payments method an institution's share of any dividend 
would depend upon its (and its predecessors') 1996 assessment base, 
weighted in some manner, and its quarterly assessments. Specifically:
     At the start of the new assessments system, each 
institution's dividend share would depend upon its 1996 assessment base 
compared to all other institutions, weighted in some manner.
     The resulting value assigned to each institution based on 
its 1996 ratio could either remain unchanged or be assigned a declining 
weight over time.
     The possible definitions of an eligible (and an 
ineligible) premium are the same as those under the fund balance 
method. (However, under certain variations of this method discussed 
below, assessments offset through credit use could increase an 
institution's dividend share.)
     Cumulative eligible premiums paid into the fund since 1996 
would add to an institution's share.
     Alternatively, the FDIC could count only eligible premiums 
paid over some recent period, for example, the most recent 3, 5, 10 or 
15 years. In contrast, the fund balance method would necessarily take 
into account all assessment payments made under the new assessment 
system.
     Another variation would allow the FDIC to subtract 
dividends paid to an institution from its eligible premiums.
    The ANPR presented two illustrative variations of the payments 
method. Under Variation 1, the Board could, as under the fund balance 
method, initially divide the 2006 fund balance based on each 
institution's share of the December 1996 assessment base. Eligible 
premiums after 1996 would be added to that amount. Under Variation 2, 
only premiums paid over some prior period (such as the previous 15 
years) would be considered. When the prior period covered any year 
before 2007, the years 1997 through 2006 would be skipped, since the 
great majority of institutions paid no deposit insurance premiums then. 
Thus, for example, to determine dividend shares at the end of 2009, the 
method would consider premiums paid from 1985 through 1996 and from 
2007 through 2009. Premiums paid during 2007, 2008 and 2009 would 
include only eligible premiums. However, because the weight accorded 
the 1996 ratio would effectively decline to zero over time, eligible 
premiums after 2006 would include eligible premiums offset with 
credits. An eligible premium paid

[[Page 15461]]

in 1996 or any earlier year would be calculated as an institution's 
share of the 1996 assessment base times total deposit insurance fund 
assessment income in that year.\8\
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    \8\ For years prior to 1990, deposit insurance fund assessment 
income used to produce Chart 5 and Table 5 includes such income for 
both the FDIC and the Federal Savings and Loan Insurance 
Corporation.
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    The ANPR provided additional details and variations on the 
alternate allocation methods, addressing issues including: risk 
reduction incentives, the treatment of older versus newer institutions, 
simplicity, relative dividend shares, the treatment of institutions 
chartered in the future and remaining decision-making for the Board. 
The ANPR also included charts and tables on the alternate allocation 
methods as well as formulas for determining dividends under different 
scenarios.

II. Comments on the ANPR

    We received five comment letters on the ANPR: two from banking 
trade associations; one from a trade association representing large 
financial services companies; one from a coalition of four insured 
depository institutions; and one from a single depository institution 
that also was a member of the coalition. As the single institution's 
comments and recommendations were virtually identical to the 
coalition's, its response is not included separately in the following 
summary.
    The two banking trade associations recommended that conservative 
fund management ensure that the fund be kept below the 1.35 percent 
statutory level that would trigger dividends. Both argued that low and 
steady premiums would limit the effect on both the old and new segments 
of the industry and not unfairly favor one set of institutions over the 
other. The financial services trade association concurred with the bank 
trade associations on the importance of keeping the fund balance below 
the level that would trigger dividends.
    The two banking trade associations took no position on either of 
the two proposed dividend allocation methods, the fund balance method 
or the payments method. The depository institution coalition 
recommended adopting a modified form of the ANPR's Variation 2 of the 
payments method: instead of a 15-year look-back period that would 
exclude the years 1997-2006, it recommended a shortened look-back 
period of 5 years, without skipping the years 1997-2006. Unlike the 
ANPR's Variation 2, it did not explicitly describe how, if at all, the 
1996 assessment base would be considered in determining an 
institution's dividends. The financial services trade association 
recommended that, if the FDIC is not able to maintain the fund below 
1.35 percent, it adopt the payments method, structured as simply as 
possible. Specifically, it supported a 3-5 year look-back period for 
premiums, with no weight given to the 1996 assessment base.
    The three trade associations recommended that eligible premiums be 
defined as premiums charged up to the maximum rate for a Risk Category 
I institution. The coalition did not explicitly discuss this aspect of 
the ANPR.\9\ The financial services association and the coalition 
recommended that premiums offset with credits be excluded from eligible 
premiums. One banking trade association argued that, if the fund 
balance method were adopted, premiums offset by credits should be 
excluded.
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    \9\ The coalition did, however, argue against skipping the 1997-
2006 period in determining the look-back period. During these years, 
however, only institutions that were not in what is now called Risk 
Category I would have paid premiums.
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    Respondents generally were interested in simplicity and 
transparency. One trade association cautioned that any method adopted 
should be simple, transparent, and not require constant FDIC 
intervention and decision-making.

III. Explanation of the Proposed Rule

A. Overview

    As part of the proposed rule, the FDIC, in accordance with 
requirements in the Reform Act, must establish the process for the 
Board's annual determination of whether a declaration of a dividend is 
required and whether circumstances indicate that a dividend should be 
limited or suspended. In addition, the FDIC must establish procedures 
for calculating the aggregate amount of any dividend, allocating that 
aggregate amount among insured depository institutions and paying 
dividends to individual insured depository institutions. The 
regulations also must allow an insured depository institution a 
reasonable opportunity to challenge the amount of its dividend.

B. Annual Determination of Whether Dividends Are Required/Declaration 
of Dividends

    The provisions in the proposed rule for the annual determination of 
whether dividends are required and the declaration of dividends are 
unchanged, with one minor exception, from the provisions in the 
Temporary Final Rule.
    Under the proposed rule, the FDIC would determine annually whether 
the Reserve Ratio at the end of the prior year equals or exceeds 1.35 
percent of estimated insured deposits or exceeds 1.50 percent, thereby 
triggering a dividend requirement. At the same time, if a dividend is 
triggered, the FDIC would determine whether it should limit or suspend 
the payment of dividends based on the statutory factors. Any 
determination to limit or suspend dividends would be reviewed annually 
and would have to be justified to renew or make a new determination to 
limit or suspend dividends. Each decision to limit or suspend dividends 
must be reported to Congress. As proposed, any declaration with respect 
to dividends would be made on or before May 10th for the preceding 
calendar year. The May 10th date for the declaration of dividends 
differs from the May 15th date in the Temporary Final Rule. This 
slightly revised timing still would provide enough time for the Board 
to consider final data for the end of the preceding year regarding the 
Reserve Ratio, as well as to perform an analysis of what amount is 
necessary to maintain the fund at the required level and whether 
circumstances warrant limiting or suspending the payment of dividends. 
In addition, the May 10th date would allow more time, operationally, 
for the notification and payment of dividends and the FDIC's handling 
of requests for review of dividend amounts.
    Under the proposed rule, if the FDIC does not limit or suspend the 
payment of dividends or does not renew such a determination, then the 
aggregate amount of the dividend would be determined as provided by the 
Reform Act. When the Reserve Ratio equals or exceeds 1.35 percent (but 
is not higher than 1.50 percent), then the FDIC generally is required 
to declare the amount that is equal to one-half the amount in excess of 
the amount required to maintain the Reserve Ratio at 1.35 percent as 
the aggregate amount of dividends to be paid to insured depository 
institutions. When the Reserve Ratio exceeds 1.50 percent, the FDIC 
generally is required to declare the amount in the DIF in excess of the 
amount required to maintain the Reserve Ratio at 1.50 percent as 
dividends to be paid to institutions.

C. Allocation of Dividends

    As noted, in the Temporary Final Rule the FDIC adopted a simple 
system for allocating dividends, which will remain in place until 
December 31,

[[Page 15462]]

2008, when the Temporary Final Rule terminates. Under that allocation 
method, any dividends awarded in 2007 or 2008 would have been 
distributed simply in proportion to an institution's 1996 assessment 
base ratio. However, no dividend was awarded in 2007 and none will be 
awarded in 2008 because the Reserve Ratio at the end of 2006 and 2007 
was less than 1.35 percent.
    After thoroughly considering the comments received, the FDIC is 
proposing a variation of the payments method for allocating future 
assessment dividends to FDIC-insured institutions. The proposed rule 
would divide the total dividend in any year into two parts. One of the 
two parts would be allocated based on the ratio of each institution's 
(including any predecessors') 1996 assessment base compared to the 
total of all existing eligible institutions' 1996 assessment bases (an 
institution's ``1996 assessment base share''). The other part of the 
total dividend would be allocated based on each institution's 
(including any predecessors') ratio of cumulative eligible premiums 
(defined below) over the previous five years to the total of cumulative 
eligible premiums paid by all existing institutions (or their 
predecessors) over the previous five years (an institution's ``eligible 
premium share''). The part of any potential dividend that would be 
allocated based upon 1996 assessment base shares would decline steadily 
from 100 percent to zero over 15 years; the part of any potential 
dividend that would be allocated based upon eligible premium shares 
would increase steadily over the same 15-year period from zero to 100 
percent. After the 15-year period, any dividend would be allocated 
solely based on eligible premium shares.
    The 15-year period would run from the end of 2006 to the end of 
2021 and would govern dividends based upon the Reserve Ratio at the end 
of the years 2008 through 2021.\10\ Actual dividends, if any, would be 
allocated and paid the following year. Table A shows the change in the 
allocation of potential dividends over time.

             Table A.--Total DIF Dividend Distribution Table
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                                         Part of total DIF dividend
                                               determined by:
 Based upon the DIF reserve ratio  -------------------------------------
            at year-end              1996 Assessment    Eligible premium
                                       base shares           shares
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2006 \10\.........................         1 (100.0%)             0 (0%)
2007 \10\.........................      14/15 (93.3%)        1/15 (6.7%)
2008..............................      13/15 (86.7%)       2/15 (13.3%)
2009..............................        4/5 (80.0%)        1/5 (20.0%)
2010..............................      11/15 (73.3%)       4/15 (26.7%)
2011..............................        2/3 (66.7%)        1/3 (33.3%)
2012..............................        3/5 (60.0%)        2/5 (40.0%)
2013..............................       8/15 (53.3%)       7/15 (46.7%)
2014..............................       7/15 (46.7%)       8/15 (53.3%)
2015..............................        2/5 (40.0%)        3/5 (60.0%)
2016..............................        1/3 (33.3%)        2/3 (66.7%)
2017..............................       4/15 (26.7%)      11/15 (73.3%)
2018..............................        1/5 (20.0%)        4/5 (80.0%)
2019..............................       2/15 (13.3%)      13/15 (86.7%)
2020..............................        1/15 (6.7%)      14/15 (93.3%)
2021..............................             0 (0%)         1 (100.0%)
Thereafter........................                 0%            100.0%
------------------------------------------------------------------------
\10\ As discussed earlier, had dividends actually been awarded based
  upon the 2006 and 2007 reserve ratios, the dividends would have been
  allocated pursuant to the existing rule governing dividends.

    Thus, for example, if a dividend were awarded based upon the 
Reserve Ratio at the end of 2018, one-fifth of the total dividend would 
be allocated based upon 1996 assessment base shares and four-fifths of 
the total dividend would be allocated based upon eligible premium 
shares.\11\
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    \11\ The dividend would actually be awarded and paid in 2019.
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    The 15-year period over which the influence of 1996 assessment 
bases would decline represents a compromise between two legitimate, but 
opposing, arguments. On one hand, a 15-year period recognizes the 
significant contributions made by some institutions in the early 1990s 
to capitalize the deposit insurance fund and that the interest earned 
on this capital continues to help fund the FDIC. On the other hand, a 
15-year period does not give these institutions an advantage that could 
last indefinitely in obtaining dividends, as would occur under the fund 
balance method absent very large insurance losses. It is also 
consistent with an argument noted in a comment letter that the $4.7 
billion one-time assessment credit, which was awarded under the Reform 
Act and distributed according to the 1996 assessment base shares, was 
intended to compensate institutions that helped capitalize the 
insurance funds in the early 1990s.
    Cumulating eligible premiums over the 5-year period preceding the 
year of the dividend is consistent with the specific recommendations 
made by the large financial services company trade association and the 
coalition in their comment letters. A 5-year look-back period 
recognizes that the Reform Act enhances the FDIC's ability to control 
the growth of the fund over time through the level of assessment rates. 
Certain events, however, such as an unanticipated decline in estimated 
insured deposits or unexpectedly high investment income, could raise 
the fund over the 1.35 percent dividend threshold. Thus, assessments 
charged over some relatively short period preceding the unexpected 
events would have proven in retrospect to be too high, and the dividend 
would serve as a rebate of excess funds.\12\
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    \12\ One of the banking trade associations that commented on the 
ANPR cited essentially the same argument as a justification for 
adopting the payments method.
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Eligible Premiums
    Based upon the unanimous recommendations of all respondents

[[Page 15463]]

who commented specifically on the issue, the FDIC is proposing that an 
eligible premium be defined as the part of any actual assessment that 
is charged at no more than the maximum rate then applicable to a Risk 
Category I institution. Under the assessment rate schedule presently in 
effect, the minimum and maximum rates that can be charged a Risk 
Category I institution differ by two basis points. At present, the 
minimum annual rate applicable to a Risk Category I institution is 5 
basis points and the maximum rate is 7 basis points. Thus, the entire 
assessment of an institution charged anywhere between 5 and 7 basis 
points would be an eligible premium, but only 7/10 of the assessment of 
an institution in Risk Category II (charged 10 basis points under the 
current schedule) would be eligible so long as this rate schedule is in 
effect.\13\
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    \13\ If the year-end reserve ratio in 2009 or 2010 exceeds 1.35 
percent and the FDIC declares a dividend for that year, the 5-year 
look-back period would include years before 2007. Institutions in 
what is now termed Risk Category I (formerly the ``1A'' risk 
classification), however, were charged a zero rate from 1997 through 
2006. Thus, under the proposal, no premium paid before 2007 would be 
eligible.
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    Under the proposed rule, whether an institution paid its assessment 
in cash or offset it with assessment credits would not affect its 
eligible premiums. Thus, again assuming present assessment rates, the 
entire assessment of an institution charged 7 basis points would be an 
eligible premium, whether the institution paid in cash or offset its 
assessment liability with an assessment credit. The FDIC currently 
anticipates that the great bulk of assessment credits (over 95 percent) 
will have been used by the end of 2008.
    An institution's eligible premiums would include eligible premiums 
paid by a predecessor.
How the Dividend Allocation Method Would Affect Different Institutions
    The proposed dividend allocation method would affect institutions 
differently depending upon their 1996 assessment base and the amount of 
eligible premiums charged during the five years before a dividend is 
declared. Assume, for example, that a hypothetical dividend of $1 
billion were awarded based upon the 2018 Reserve Ratio. Of the $1 
billion total dividend, $200 million-one-fifth (20 percent)--would be 
allocated based upon 1996 assessment base shares and $800 million--
four-fifths (80 percent)--would be allocated based upon eligible 
premium shares.\14\ An institution that held 0.1 percent of the 1996 
assessment base and had made 0.05 percent of total eligible premiums 
from 2014 through 2018 would receive a dividend of $600,000 (0.1 
percent of $200 million--which equals $200,000--plus 0.05 percent of 
$800 million--which equals $400,000). An institution that had no 1996 
assessment base but had made the identical percentage (0.05 percent) of 
total eligible premiums from 2014 through 2018 would receive $400,000.
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    \14\ Again, the dividend would actually be awarded and paid in 
2019.
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    An institution that consistently paid the lowest rate applicable to 
Risk Category I would receive a smaller dividend than one that paid the 
highest rate applicable to Risk Category I, assuming identical future 
assessment bases and identical 1996 assessment base shares, since the 
institution paying the higher rate would have paid higher premiums and 
would have a larger eligible premium share. However, an institution 
that consistently paid a rate outside of Risk Category I (for example, 
the Risk Category II rate) would receive the same dividend as an 
institution that paid the highest rate applicable to Risk Category I, 
again assuming identical future assessment bases and identical 1996 
assessment base shares.
    An addendum explains the dividend allocation calculation in greater 
detail.
Predecessor Insured Depository Institutions
    Under the proposed rule, consistent with the requirements of the 
Reform Act, the allocation of dividends to an insured depository 
institution would in part be based on the 1996 assessment base ratio 
of, and the post-l996 assessments paid by, insured depository 
institutions of which the insured depository institution is the 
successor. As in the Temporary Final Rule, the proposed rule would 
define a predecessor insured depository institution by cross 
referencing the definition of successor insured depository institution 
in the one-time assessment credit rule. (See 12 CFR 327, subpart B.) In 
effect, a predecessor institution is the mirror image of a successor 
institution. Notably, the definition of successor in the one-time 
credit regulation includes a de facto rule, applicable in transactions 
in which an insured depository institution assumes substantially all of 
the deposit liabilities and acquires substantially all of the assets of 
another insured depository institution.

D. Notification and Payment of Dividends

    Under the proposed rule, the FDIC would advise each institution of 
its dividend amount as soon as practicable after the Board's 
declaration of a dividend on or before May 10th. Individual dividend 
amounts would be paid to institutions no later than 45 days, or as soon 
as practicable, after the issuance of the special notice. This 
timeframe would allow the FDIC to freeze payment of an individual 
institution's dividend amount, if that amount is in dispute.
    Depending on the timing of the Board's declaration, which could 
occur prior to May 10th, and the expiration of the 30-day period for 
requesting review (explained below), it is possible that dividends 
could be paid at the same time as the collection of the quarterly 
assessment and would offset those payments. Dividends would be paid 
through the Automated Clearing House (``ACH''). If they are paid at the 
time of assessment payments, offsets would be made. If the institution 
owes assessments in excess of the dividend amount, there would be a net 
debit (resulting in payment to the FDIC). Conversely, if the FDIC owes 
an additional dividend amount in excess of the assessment to the 
institution, there would be a net credit (resulting in payment from the 
FDIC). The FDIC plans to notify institutions whether dividends would 
offset the next assessment payments with the next invoice.
    Under the proposed rule, the FDIC would freeze the payment of the 
disputed portion of dividend amounts involved in requests for review. 
In the absence of such action, institutions would receive the amount 
indicated on the notice. Any adjustment to an individual institution's 
dividend amount resulting from its request for review would be handled 
through ACH in the same manner as existing procedures for underpayment 
or overpayment of assessments.
    The FDIC intends, beginning no later than 2010, to include with its 
quarterly assessment invoices to insured depository institutions the 
institution's 1996 assessment base share and its rolling five-year 
eligible premium share.

E. Requests for Review

    The Reform Act requires the FDIC to include in its dividend 
regulations provisions allowing an insured depository institution a 
reasonable opportunity to challenge administratively the amount of its 
dividend. The FDIC's determination under such procedures is to be final 
and not subject to judicial review.
    The request-for-review provisions of the proposed rule, for 
dividend amounts, are similar to those in the Temporary Final Rule, but 
they reflect

[[Page 15464]]

the FDIC's intention to provide, beginning in 2010, quarterly dividend-
related information with each institution's assessment invoice. If a 
dividend were declared before 2010, an institution would have 30 days 
from the date of the notice advising it of its dividend amount to 
request review. Review could be requested if an institution disagrees 
with the computation of the dividend or if it believes that it does not 
accurately reflect appropriate adjustments to the institution's 1996 
assessment base ratio or eligible premium share, such as for a purchase 
and assumption transaction that triggers application of the de facto 
rule for purposes of determining any predecessor institutions. Once the 
quarterly invoice updates become available as contemplated under the 
proposed rule, an institution generally would have 90 days from the 
date of the invoice to request review of that dividend-related 
information, except in a year in which a dividend is declared. If the 
FDIC were to declare a dividend, the institution would have 30 days 
from the date of its notice of dividend amount to request review either 
of that amount or of any dividend-related information in its March 
invoice for that year; the institution would not have the full 90-day 
period following the March invoice to request review.
    An institution must timely request review of its dividend-related 
information and must request review within 90 days of the first invoice 
that fails to reflect accurate information. If an institution does not 
submit a timely request for review of its dividend-related information, 
it would be barred from subsequently requesting review of that 
information.
    The requirement that insured depository institutions monitor their 
dividend-related information quarterly and promptly request review is 
necessitated by the proposed timing for the payment of dividends. In 
the absence of such a strict quarterly requirement, the FDIC would need 
to reconsider both the timing of dividend payment and possibly the 
look-back period for calculating institutions' dividend shares, which 
at 5 years is longer than the 3-year recordkeeping requirement in the 
FDI Act and longer than the 3-year statute of limitations for bringing 
action on assessment underpayments and overpayments.
    As under the current rule, at the time of the request for review, 
the requesting institution also would be required to notify all other 
institutions of which it knew or had reason to believe would be 
directly and materially affected by granting the request for review and 
would be required to provide those institutions with copies of the 
request for review, supporting documentation, and the FDIC's procedures 
for these requests for review. In addition, the FDIC would make 
reasonable efforts, based on its official systems of records, to 
determine that such institutions have been identified and notified.
    These institutions would then have 30 days to submit a response and 
any supporting documentation to the FDIC's Division of Finance, copying 
the institution making the original request for review. If an 
institution notified through this process does not submit a timely 
response, that institution would be foreclosed from subsequently 
disputing the information submitted by any other institution on the 
transaction(s) at issue in the review process. Also under the proposed 
rule, the FDIC could request additional information as part of its 
review, and the institution from which such information is requested 
would be required to supply that information within 21 days of the date 
of the FDIC's request.
    The proposed rule would require a written response from the FDIC's 
Director of the Division of Finance (``Director''), or his or her 
designee, notifying the requesting institution and any materially 
affected institutions of the determination of the Director as to 
whether the requested change is warranted, whenever feasible: (1) 
Within 60 days of receipt by the FDIC of the request for revision; (2) 
if additional institutions are notified by the requesting institution 
or the FDIC, within 60 days of the date of the last response to the 
notification; or (3) if the FDIC has requested additional information, 
within 60 days of its receipt of the additional information, whichever 
is latest.
    If a requesting institution disagrees with the determination of the 
Director, that institution could appeal its dividend determination to 
the FDIC's Assessment Appeals Committee (``AAC''). Under the proposed 
rule, an appeal to the AAC must be filed within 30 calendar days of the 
date of the Director's written determination. Notice of the procedures 
applicable to appeals of the Director's determination to the AAC would 
be included with the written response. The AAC's determination would be 
final and not subject to judicial review.
    As noted, and as under the Temporary Final Rule, the FDIC proposes 
to freeze temporarily the distribution of the dividend amount in 
dispute for the institutions involved in the challenge until the 
challenge is resolved.

IV. Request for Comments

    The FDIC requests comments on all aspects of the proposed rule. 
Comments are specifically requested on the proposed dividend allocation 
method.

V. Regulatory Analysis and Procedure

A. Solicitation of Comments on Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, 113 
Stat. 1338, 1471 (Nov. 12, 1999), requires the Federal banking agencies 
to use plain language in all proposed and final rules published after 
January 1, 2000. We invite your comments on how to make this proposal 
easier to understand. For example:
     Have we organized the material to suit your needs? If not, 
how could this material be better organized?
     Are the requirements in the proposed regulation clearly 
stated? If not, how could the regulation be more clearly stated?
     Does the proposed regulation contain language or jargon 
that is not clear? If so, which language requires clarification?
     Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the regulation easier to 
understand? If so, what changes to the format would make the regulation 
easier to understand?
     What else could we do to make the regulation easier to 
understand?

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') requires a federal agency 
publishing a notice of proposed rulemaking to prepare and make 
available for public comment an initial regulatory flexibility analysis 
that describes the impact of the proposed rule on small entities. 5 
U.S.C. 603(a). Pursuant to regulations issued by the Small Business 
Administration (13 CFR 121.201), a ``small entity'' includes a bank 
holding company, commercial bank or savings association with assets of 
$165 million or less (collectively, small banking organizations). The 
RFA provides that an agency is not required to prepare and publish a 
regulatory flexibility analysis if the agency certifies that the 
proposed rule would not have a significant impact on a substantial 
number of small entities. 5 U.S.C. 605(b).
    Pursuant to section 605(b) of the RFA, the FDIC certifies that the 
proposed rule would not have a significant economic impact on a 
substantial number of small entities. The proposed rule, if adopted in 
final form, would provide the procedures for the FDIC's declaration,

[[Page 15465]]

distribution, and payment of dividends to insured depository 
institutions under the circumstances set forth in the FDI Act. While 
each insured depository institution would have the opportunity to 
request review of the amount of its dividend each time a dividend is 
declared, the proposed rule would rely on information already collected 
and maintained by the FDIC in the regular course of business. The 
proposed rule, if adopted, would not directly or indirectly impose any 
reporting, recordkeeping or compliance requirements on insured 
depository institutions.

C. Paperwork Reduction Act

    No collections of information pursuant to the Paperwork Reduction 
Act (44 U.S.C. Ch. 3501 et seq.) are contained in the proposed rule.

D. The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

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

Addendum

    The illustrations below provide a more detailed description of the 
dividend allocation calculation. Both illustrations again assume that a 
hypothetical dividend of $1 billion is awarded based upon a 
hypothetical 2018 Reserve Ratio. In the illustrations, Institution A 
and Institution B are assumed to be identical except that A has a 1996 
assessment base, and B does not. They both pay Risk Category I premiums 
at the same rate. Institution C is identical to Institution A (it has a 
1996 assessment base), but it differs from both A and B in that it pays 
the higher Risk Category II assessment rate.

                       Illustration 1.--Dividend of $1 Billion Based on 2018 Reserve Ratio
                    20 percent ($200 million) allocated based on 1996 assessment base shares
                     80 percent ($800 million) allocated based upon eligible premium shares
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Bank A's 1996 assessment base = $400 million (0.01203% of industry total).......................................
Bank B's 1996 assessment base = $0..............................................................................
Banks have identical assessment bases and pay the lowest assessment rate applicable to Risk Category I (assumed
 to be 2 basis points) \15\.....................................................................................
----------------------------------------------------------------------------------------------------------------
                Year                   Assessment base      Rate (B.P.)       Premium ($000)    Eligible premium
                                            ($000)                                                   ($000)
----------------------------------------------------------------------------------------------------------------
2014................................            500,000                  2                100                100
2015................................            522,500                  2                105                105
2016................................            546,013                  2                109                109
2017................................            570,583                  2                114                114
2018................................            596,259                  2                119                119
----------------------------------------------------------------------------------------------------------------
5-year sum...................................................................................                547
Industry 5-year sum..........................................................................         12,000,000
Each bank's share of industry 5-year eligible premium........................................           0.00456%
Bank A's dividend ($000) = 0.01203% of $200 million + 0.00456% of $800 million:..............             60.531
Bank B's dividend ($000) = 0.0456% of $800 million:..........................................             36.471
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------

    \15\ The illustrations assume that assessment rates charged in 
2014-2018 equal the base assessment rates adopted by the Board at 
the end of 2006: 2-4 basis points for Risk Category I and 7 basis 
points for Risk Category II.

                       Illustration 2.--Dividend of $1 Billion Based on 2018 Reserve Ratio
                   [20 percent ($200 million) allocated based on 1996 assessment base shares]
                    [80 percent ($800 million) allocated based upon eligible premium shares]
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
                   Bank C's 1996 assessment base = $400 million (0.01203% of industry total).
                  Bank C's 1996 assessment base is identical to Banks A and B (Illustration 1).
                    Pays rate applicable to Risk Category II (assumed to be 7 basis points).
----------------------------------------------------------------------------------------------------------------
                Year                   Assessment base      Rate (B.P.)       Premium ($000)    Eligible premium
                                            ($000)                                                   ($000)
----------------------------------------------------------------------------------------------------------------
2014................................            500,000                  7                350                200
2015................................            522,500                  7                366                209
2016................................            546,013                  7                382                218
2017................................            570,583                  7                417                239
2018................................            596,259                  7                417                239
----------------------------------------------------------------------------------------------------------------
5-year sum...................................................................................              1,094
Industry 5-year sum..........................................................................         12,000,000
Bank C's share of industry 5-year eligible premium...........................................           0.00912%
Bank C's dividend ($000) = 0.01203% of $200 million + 0.00912% of $800 million:..............             97.003
----------------------------------------------------------------------------------------------------------------


[[Page 15466]]

List of Subjects in 12 CFR Part 327

    Bank deposit insurance, Banks, Banking, Savings associations.

Authority and Issuance

    For the reasons set forth in the preamble, chapter III of title 12 
of the Code of Federal Regulations is amended by revising subpart C to 
read as follows:

PART 327--ASSESSMENTS

Subpart C--Implementation of Dividend Requirements

Sec.
327.50 Purpose and scope.
327.51 Definitions.
327.52 Annual dividend determination.
327.53 Allocation and payment of dividends.
327.54 Requests for review.

Subpart C--Implementation of Dividend Requirements

    Authority: 12 U.S.C. 1817(e)(2), (4).


Sec.  327.50  Purpose and scope.

    (a) Scope. This subpart C of part 327 implements the dividend 
provisions of section 7(e)(2) of the Federal Deposit Insurance Act, 12 
U.S.C. 1817(e)(2), and applies to insured depository institutions.
    (b) Purpose. This subpart C of part 327 provides the rules for:
    (1) The FDIC's annual determination of whether to declare a 
dividend and the aggregate amount of any dividend;
    (2) The FDIC's determination of the amount of each insured 
depository institution's share of any declared dividend;
    (3) The time and manner for the FDIC's payments of dividends; and
    (4) An institution's appeal of the FDIC's determination of its 
dividend amount.


Sec.  327.51  Definitions.

    For purposes of this subpart:
    (a) Assessment base share means an insured depository institution's 
1996 assessment base ratio divided by the total of all existing, 
eligible insured depository institution's shares of the 1996 assessment 
base (rounded to seven decimal places).
    (b) Board has the same meaning as under subpart B of this part.
    (c) DIF means the Deposit Insurance Fund.
    (d) An eligible premium means an assessment paid by an insured 
depository institution (or its predecessor) that did not exceed, for 
the applicable assessment period, the maximum assessment applicable in 
that assessment period to a Risk Category 1 institution under subpart A 
of this part.
    (e) An insured depository institution's eligible premium share 
means that institution's cumulative eligible premiums over the previous 
five years (ending on December 31st of the year prior to the year in 
which the dividend is declared) divided by the cumulative total of all 
eligible premiums paid by all existing insured depository institutions 
or their predecessors over that five-year period (rounded to seven 
decimal places).
    (f) An insured depository institution's 1996 assessment base ratio 
means an institution's 1996 assessment base ratio, as determined 
pursuant to the Sec.  327.33 of subpart B of this part, adjusted as 
necessary to reflect subsequent transactions in which the institution 
succeeds to another institution's assessment base ratio, or a transfer 
of the assessment base ratio pursuant to Sec.  327.34. The 1996 
assessment base ratio shall be rounded to seven decimal places.
    (g) Predecessor, when used in the context of insured depository 
institutions, refers to the institution merged with or into a resulting 
institution or acquired by an institution under Sec.  327.33(c) of 
subpart B under the de facto rule, consistent with the definition of 
successor in section 327.31.


Sec.  327.52  Annual dividend determination.

    (a) On or before May 10th of each calendar year, beginning in 2007, 
the Board shall determine whether to declare a dividend based upon the 
reserve ratio of the DIF as of December 31st of the preceding year, and 
the amount of the dividend, if any.
    (b) Except as provided in paragraph (d) of this section, if the 
reserve ratio of the DIF equals or exceeds 1.35 percent of estimated 
insured deposits and does not exceed 1.50 percent, the Board shall 
declare the amount that is equal to one-half of the amount in excess of 
the amount required to maintain the reserve ratio at 1.35 percent as 
the aggregate dividend to be paid to insured depository institutions.
    (c) If the reserve ratio of the DIF exceeds 1.50 percent of 
estimated insured deposits, except as provided in paragraph (d), the 
Board shall declare the amount in excess of the amount required to 
maintain the reserve ratio at 1.50 percent as the aggregate dividend to 
be paid to insured depository institutions and shall declare a dividend 
under paragraph (b) of this section.
    (d) (1) The Board may suspend or limit a dividend otherwise 
required to be paid if the Board determines that:
    (i) A significant risk of losses to the DIF exists over the next 
one-year period; and
    (ii) It is likely that such losses will be sufficiently high as to 
justify the Board concluding that the reserve ratio should be allowed:
    (A) To grow temporarily without requiring dividends when the 
reserve ratio is between 1.35 and 1.50 percent; or
    (B) To exceed 1.50 percent.
    (2) In making a determination under this paragraph, the Board shall 
consider:
    (i) National and regional conditions and their impact on insured 
depository institutions;
    (ii) Potential problems affecting insured depository institutions 
or a specific group or type of depository institution;
    (iii) The degree to which the contingent liability of the FDIC for 
anticipated failures of insured institutions adequately addresses 
concerns over funding levels in the DIF; and
    (iv) Any other factors that the Board may deem appropriate.
    (3) Within 270 days of making a determination under this paragraph, 
the Board shall submit a report to the Committee on Financial Services 
and the Committee on Banking, Housing, and Urban Affairs, providing a 
detailed explanation of its determination, including a discussion of 
the factors considered.
    (e) The Board shall annually review any determination to suspend or 
limit dividend payments and must either:
    (1) Make a new finding justifying the renewal of the suspension or 
limitation under paragraph (d) of this section, and submit a report as 
required under paragraph (d)(3) of this section; or
    (2) Reinstate the payment of dividends as required by paragraph (b) 
or (c) of this section.


Sec.  327.53  Allocation and payment of dividends.

    (a) (1) The allocation of any dividend among insured depository 
institutions shall be based on the institution's 1996 assessment base 
share and the institution's eligible premium share.
    (2) As set forth in the following table, the part of a dividend 
allocated based upon an institution's 1996 assessment base share shall 
decline steadily from 100 percent to zero over fifteen years, and the 
part of a dividend allocated based upon an institution's eligible 
premium share shall increase steadily over the same fifteen-year period 
from zero to 100 percent. The 15-year period shall begin as if it had 
applied to a dividend based upon the reserve ratio at

[[Page 15467]]

the end of 2006 and shall end with respect to any dividend based upon 
the reserve ratio at the end of 2021. Dividends based upon the reserve 
ratio as of December 31, 2021, and thereafter shall be allocated among 
insured depository institutions based solely on eligible premium 
shares.

                  Total DIF Dividend Distribution Table
------------------------------------------------------------------------
                                         Part of total DIF dividend
                                               determined by:
 Based upon the DIF reserve ratio  -------------------------------------
            at year-end              1996 Assessment    Eligible premium
                                       base shares           shares
------------------------------------------------------------------------
2006..............................         1 (100.0%)             0 (0%)
2007..............................      14/15 (93.3%)        1/15 (6.7%)
2008..............................      13/15 (86.7%)       2/15 (13/3%)
2009..............................        4/5 (80.0%)        1/5 (20.0%)
2010..............................      11/15 (73.3%)       4/15 (26.7%)
2011..............................        2/3 (66.7%)        1/3 (33.3%)
2012..............................        3/5 (60.0%)        2/5 (40.0%)
2013..............................       8/15 (53.3%)       7/15 (46.7%)
2014..............................       7/15 (46.7%)       8/15 (53.3%)
2015..............................        2/5 (40.0%)        3/5 (60.0%)
2016..............................        1/3 (33.3%)        2/3 (66.7%)
2017..............................       4/15 (26.7%)      11/15 (73.3%)
2018..............................        1/5 (20.0%)        4/5 (80.0%)
2019..............................       2/15 (13.3%)      13/15 (86.7%)
2020..............................        1/15 (6.7%)      14/15 (93.3%)
2021..............................             0 (0%)         1 (100.0%)
Thereafter........................             0 (0%)           1 (100%)
------------------------------------------------------------------------

    The 15-year period shall be computed as if it had applied to 
dividends based upon the reserve ratios at the end of 2006 and 2007.
    (b) The FDIC shall notify each insured depository institution of 
the amount of such institution's dividend payment based on its share as 
determined pursuant to paragraph (a) of this section. Notice shall be 
given as soon as practicable after the Board's declaration of a 
dividend through a special notice of dividend.
    (c) The FDIC shall pay individual dividend amounts, unless they are 
the subject of a request for review under Sec.  327.54 of this subpart, 
to insured depository institutions no later than 45 days, or as soon as 
practicable thereafter, after the issuance of the special notices of 
dividend. The FDIC shall notify institutions whether dividends will 
offset the next collection of assessments at the time of the invoice. 
An institution's dividend amount may be remitted with that 
institution's assessment or paid separately. If remitted with the 
institution's assessment, any excess dividend amount will be a net 
credit to the institution and will be deposited into the deposit 
account designated by the institution for assessment payment purposes 
pursuant to subpart A of this part. If remitted with the institution's 
assessment and the dividend amount is less than the amount of 
assessment due, then the institution's account will be directly debited 
by the FDIC to reflect the net amount owed to the FDIC as an 
assessment.
    (d) If an insured depository institution's dividend amount is 
subject to review under Sec.  327.54, and that request is not finally 
resolved prior to the dividend payment date, the FDIC shall withhold 
the payment of the disputed portion of the dividend amount involved in 
the request for review. Adjustments to an individual institution's 
dividend amount based on the final determination of a request for 
review will be handled in the same manner as assessment underpayments 
and overpayments.


Sec.  327.54  Requests for review.

    (a) An insured depository institution may submit a request for 
review of the FDIC's determination of the institution's 1996 assessment 
base share and/or its eligible premium share as shown on the 
institution's quarterly assessment invoice. Such requests shall be 
subject to the provisions of Sec.  327.3(f)(3) of subpart A of this 
part, except for the invoice provided by the FDIC in March of any 
calendar year in which the FDIC declares a dividend. If the FDIC 
declares a dividend, any request for review of an institution's 1996 
assessment base share and/or its eligible premium share as shown on the 
institution's March quarterly assessment invoice must be filed within 
30 days of the date that the FDIC notifies the institution of its 
dividend amount. If an institution does not submit a timely request for 
review for the first invoice in which the dividend-related information 
that forms the basis for the request appears, the institution shall be 
barred from subsequently requesting review of that information.
    (b) An insured depository institution may submit a request for 
review of the FDIC's determination of the institution's dividend amount 
as shown on the special notice of dividend. Such review may be 
requested if:
    (1) The institution disagrees with the calculation of the dividend 
as stated on the special notice of dividend; or
    (2) The institution believes that the 1996 assessment base ratio 
attributed to the institution has not been adjusted to include the 1996 
assessment base ratio of an institution acquired by merger or transfer 
pursuant to Sec. Sec.  327.33 and 327.34 of subpart B of this part and 
Sec.  327.51(g) of this subpart, and the institution has not had a 
prior opportunity to request review or appeal under subpart B of this 
part or paragraph (a) of this section; or
    (3) The institution believes that the special notice does not fully 
or accurately reflect its eligible premiums or those of any of its 
predecessors and the institution has not had a prior opportunity to 
request review or appeal under subpart B of this part or paragraph (a) 
of this section.
    (c) Any such request for review under paragraph (b) of this section 
must be submitted within 30 days of the date of the special notice of 
dividend for which a change is requested. The request for review shall 
be submitted to the

[[Page 15468]]

Division of Finance and shall provide documentation sufficient to 
support the change sought by the institution. If an institution does 
not submit a timely request for review, that institution may not 
subsequently request review of its dividend amount, subject to 
paragraph (d) of this section. At the time of filing with the FDIC, the 
requesting institution shall notify, to the extent practicable, any 
other insured depository institution that would be directly and 
materially affected by granting the request for review and provide such 
institution with copies of the request for review, the supporting 
documentation, and the FDIC's procedures for requests under this 
subpart. The FDIC shall make reasonable efforts, based on its official 
systems of records, to determine that such institutions have been 
identified and notified.
    (d) During the FDIC's consideration of a request for review, the 
amount of dividend in dispute will not be available for use by any 
institution.
    (e) Within 30 days of receiving notice of the request for review 
under paragraph (b) of this section, those institutions identified as 
potentially affected by the request for review may submit a response to 
such request, along with any supporting documentation, to the Division 
of Finance, and shall provide copies to the requesting institution. If 
an institution that was notified under paragraph (c) of this section 
does not submit a response to the request for review, that institution 
may not subsequently:
    (1) Dispute the information submitted by any other institution on 
the transaction(s) at issue in that review process; or
    (2) Appeal the decision by the Director of the Division of Finance.
    (f) If additional information is requested of the requesting or 
affected institutions by the FDIC, such information shall be provided 
by the institution within 21 days of the date of the FDIC's request for 
additional information.
    (g) Any institution submitting a timely request for review under 
paragraph (b) of this section will receive a written response from the 
FDIC's Director of the Division of Finance (``Director''), or his or 
her designee, notifying the affected institutions of the determination 
of the Director as to whether the requested change is warranted, 
whenever feasible:
    (1) Within 60 days of receipt by the FDIC of the request for 
revision;
    (2) If additional institutions have been notified by the requesting 
institution or the FDIC, within 60 days of the date of the last 
response to the notification; or
    (3) If additional information has been requested by the FDIC, 
within 60 days of receipt of the additional information, whichever is 
later. Notice of the procedures applicable to appeals under paragraph 
(g) of this section will be included with the Director's written 
determination.
    (h) An insured depository institution may appeal the determination 
of the Director to the FDIC's Assessment Appeals Committee on the same 
grounds as set forth under paragraph (b) of this section. Any such 
appeal must be submitted within 30 calendar days from the date of the 
Director's written determination. The decision of the Assessment 
Appeals Committee shall be the final determination of the FDIC.

    Dated at Washington, DC, this 14th day of March, 2008.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
 [FR Doc. E8-5670 Filed 3-21-08; 8:45 am]
BILLING CODE 6714-01-P