[Federal Register Volume 75, Number 226 (Wednesday, November 24, 2010)]
[Proposed Rules]
[Pages 72612-72651]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-29138]



[[Page 72611]]

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Part IV





Federal Deposit Insurance Corporation





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12 CFR Part 327



Assessments, Large Bank Pricing; Proposed Rule

  Federal Register / Vol. 75 , No. 226 / Wednesday, November 24, 2010 / 
Proposed Rules  

[[Page 72612]]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 327

RIN 3064-AD66


Assessments, Large Bank Pricing

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Notice of proposed rulemaking and request for comment.

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SUMMARY: The FDIC proposes to revise the assessment system applicable 
to large insured depository institutions (IDIs or institutions) to 
better differentiate IDIs and take a more forward-looking view of risk; 
to better take into account the losses that the FDIC may incur if such 
an IDI fails; and to make technical and other changes to the rules 
governing the risk-based assessment system, including proposed changes 
to the assessment base necessitated by the Dodd-Frank Wall Street 
Reform and Consumer Protection Act.

DATES: Comments must be received on or before January 10, 2011.

ADDRESSES: You may submit comments on the notice of proposed 
rulemaking, identified by RIN number and the words ``Assessments, Large 
Bank Pricing NPR,'' by any of the following methods:
     Agency Web Site: http://www.FDIC.gov/regulations/laws/federal/propose.html. Follow the instructions for submitting comments 
on the Agency Web Site.
     E-mail: [email protected]. Include the RIN number 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: 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.
    Instructions: All submissions received must include the agency name 
and RIN for this rulemaking. Comments will be posted to the extent 
practicable and, in some instances, the FDIC may post summaries of 
categories of comments, with the comments themselves available in the 
FDIC's reading room. Comments will be posted at: http://www.fdic.gov/
regulations/laws/federal/propose.html, including any personal 
information provided with the comment.

FOR FURTHER INFORMATION CONTACT: Lisa Ryu, Chief, Large Bank Pricing 
Section, Division of Insurance and Research, (202) 898-3538; Christine 
Bradley, Senior Policy Analyst, Banking and Regulatory Policy Section, 
Division of Insurance and Research, (202) 898-8951; Brenda Bruno, 
Senior Financial Analyst, Division of Insurance and Research, (630) 
241-0359 x 8312; Robert L. Burns, Chief, Exam Support and Analysis, 
Division of Supervision and Consumer Protection (704) 333-3132 x 4215; 
Christopher Bellotto, Counsel, Legal Division, (202) 898-3801; Sheikha 
Kapoor, Counsel, Legal Division, (202) 898-3960.

SUPPLEMENTARY INFORMATION:

I. Background

Legal Authority

    The Federal Deposit Insurance Act (the FDI Act) requires that the 
deposit insurance assessment system be risk-based and allows the FDIC 
to define risk broadly.\1\ It defines a risk-based system as one based 
on an institution's probability of causing a loss to the Deposit 
Insurance Fund (the Fund or the DIF) due to the composition and 
concentration of the IDI's assets and liabilities, the likely amount of 
any such loss, and the revenue needs of the DIF. The FDI Act allows the 
FDIC to ``establish separate risk-based assessment systems for large 
and small members of the Deposit Insurance Fund.'' \2\
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    \1\ Section 7(b)(1)of the Federal Deposit Insurance Act (12 
U.S.C. 1817(b)).
    \2\ Section 7(b)(1)(D) of the Federal Deposit Insurance Act (12 
U.S.C. 1817(b)(1)(D)).
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2009 Assessments Rule

    Effective April 1, 2009, the FDIC amended its assessments rule to 
create the current assessment system. Under this system, the initial 
base assessment rate for a large Risk Category I institution is 
determined by either the financial ratios method (which is also 
applicable to all small IDIs) or, for IDIs with at least one long-term 
debt rating, by the large bank method.\3\ The financial ratios method 
uses a weighted average of CAMELS component ratings and certain 
financial ratios.\4\ The large bank method incorporates the financial 
ratios method into a financial ratios score and combines this score 
with the IDI's weighted average CAMELS component rating and its average 
long-term debt issuer rating to produce an assessment rate (the large 
bank method). Under the 2009 assessments rule, the FDIC may adjust 
initial assessment rates for large Risk Category I institutions up to 1 
basis point to ensure that the relative levels of risk posed by these 
institutions are consistently reflected in assessment rates; the 
adjustment is known as the large bank adjustment.\5\
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    \3\ In 2006, the FDIC adopted by regulation an assessment system 
that placed IDIs into risk categories (Risk Category I, II, III or 
IV) depending on supervisory ratings and capital levels. 71 FR 69282 
(Nov. 30, 2006).
    \4\ The financial ratios method applies to large institutions 
without at least one long-term debt rating (and all small IDIs). The 
2009 assessments rule added a new measure--the adjusted brokered 
deposit ratio--to the financial ratios that were considered under 
the previous assessments rule. The adjusted brokered deposit ratio 
measures the extent to which certain brokered deposits are used to 
fund rapid asset growth. The adjusted brokered deposit ratio 
excludes deposits that a Risk Category I institution receives 
through a deposit placement network on a reciprocal basis, such 
that: (1) for any deposit received, the institution (as agent for 
depositors) places the same amount with other insured depository 
institutions through the network; and (2) each member of the network 
sets the interest rate to be paid on the entire amount of funds it 
places with other network members (reciprocal deposits).
    \5\ 12 CFR 327.9(d)(4). 74 FR 9525, 9535-9536 (Mar. 4, 2009).
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The April 2010 Proposed Rule (April NPR)

    On April 13, 2010, the FDIC, using its statutory powers under 
section 7(b) of the FDI Act (12 U.S.C. 1817(b)), adopted a notice of 
proposed rulemaking with request for comment to revise the assessment 
system applicable to large IDIs to better capture risk at the time an 
IDI assumes the risk, to better differentiate IDIs during periods of 
good economic and banking conditions based on how they would fare 
during periods of stress or economic downturns, and to better take into 
account the losses that the FDIC may incur if an IDI fails (the April 
NPR).\6\ The FDIC sought comments on every aspect of the April NPR and 
specifically requested comment on several issues. The FDIC received 18 
written comments on the April NPR. Most commenters requested that the 
FDIC delay the implementation of the rulemaking until the effects of 
then pending comprehensive financial regulation bills were known.
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    \6\ 75 FR 23516 (May 3, 2010).
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    Congress subsequently adopted comprehensive financial regulation 
legislation in the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Dodd-Frank), which includes a provision directing the 
FDIC to amend its regulatory definition of ``assessment base'' for 
purposes of setting assessments for IDIs. As a result of Dodd-Frank, an 
IDI's assessment base will be calculated using its average consolidated 
total assets less its average tangible equity during the assessment 
period.\7\ The FDIC believes that the recent statutory change to the

[[Page 72613]]

assessment base constitutes a substantial revision to the deposit 
insurance system and, under the FDI Act (12 U.S.C. 1817(b)(1)(F)), such 
changes must be made after notice and opportunity to comment. 
Accordingly, the FDIC is issuing a separate notice of proposed 
rulemaking with request for comment on the Notice of Proposed 
Rulemaking on the Implementation of the Deposit Insurance Assessment 
Base (the Assessment Base NPR), which is being published concurrently 
with this NPR. Largely as a result of Dodd-Frank and the Assessment 
Base NPR, the FDIC is issuing this second proposal for public comment 
on large bank assessments, taking into account the comments received on 
the April NPR. The attached regulatory text includes proposed changes 
for this NPR, as well as the Assessment Base NPR.
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    \7\ Public Law 111-203, Sec.  331(b), 124 Stat. 1376, 1539 (to 
be codified at 12 U.S.C. 1817(b)). The Act will substitute the new 
assessment base for the current assessment base, which is closely 
related to domestic deposits. 12 CFR 327.5 (2010).
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II. Risk-based Assessment System for Large Insured Depository 
Institutions

    In this rulemaking, the FDIC proposes revising the assessment 
system applicable to large IDIs to better capture risk at the time an 
IDI assumes the risk, to better differentiate IDIs during periods of 
good economic and banking conditions based on how they would fare 
during periods of stress or economic downturns, and to better take into 
account the losses that the FDIC may incur if such an IDI fails.
    As in the April NPR, the FDIC proposes eliminating risk categories 
and the use of long-term debt issuer ratings in calculating risk-based 
assessments for large IDIs.\8\ The FDIC proposes using a scorecard 
method to calculate assessment rates for all large IDIs. The scorecard 
method combines CAMELS ratings and certain forward-looking financial 
measures to assess the risk a large IDI poses to the DIF. The scorecard 
uses quantitative measures that are readily available and useful in 
predicting a large IDI's long-term performance.\9\ Two separate 
scorecards are used: one for most large IDIs and another for 
institutions that are structurally and operationally complex or that 
pose unique challenges and risk in the case of failure (highly complex 
IDIs).
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    \8\ Dodd-Frank requires all federal agencies to review and 
modify regulations to remove reliance upon credit ratings and 
substitute an alternative standard of creditworthiness. Public Law 
111-203, Sec.  939A, 124 Stat. 1376, 1886 (to be codified at 15 
U.S.C. 78o-7 note).
    \9\ Most of the data are publicly available, but data elements 
to compute four scorecard measures--higher-risk assets, top 20 
counterparty exposures, the largest counterparty exposure, and 
criticized/classified items--are gathered during the examination 
process. The FDIC proposes that IDIs provide these data elements in 
the Consolidated Reports of Condition and Income (Call Report) or 
the Thrift Financial Report (TFR) beginning with the second quarter 
of 2011. See Section II, E of this proposal.
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    The FDIC believes that, since the risk measures used in the 
scorecards focus on long-term risk, they should mitigate the pro-
cyclicality of the current system. IDIs that pose higher risk over the 
long term would pay higher assessments when they assume these risks--
rather than paying large assessment rates when conditions deteriorate. 
Consequently, the proposed scorecard system should provide incentives 
for IDIs to avoid excessive risk during economic expansions.
    As shown in Chart 1, the proposed measures over the 2005 to 2008 
period were useful in predicting performance of large IDIs in 2009. The 
chart contrasts the predictive values of the proposed measures with 
weighted-average CAMELS component ratings and risk measures included in 
the existing financial ratios method. The proposed measures predict the 
proper rank ordering of risk for large IDIs as of the end of 2009 
(based on a consensus view of FDIC analysts) significantly better than 
do the other two risk measures and, thus, better than the current 
system used for most large Risk Category I institutions, which combines 
weighted-average CAMELS composite scores, the financial ratios method 
and long-term debt issuer ratings.\10\ For example, in 2006, the 
proposed measures would have predicted FDIC's year-end 2009 risk 
ranking of large IDIs more than twice as well as the risk measures in 
the existing financial ratios method, which applies to large IDIs 
without debt ratings.
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    \10\ Lack of historical debt ratings data for a significant 
percent of large IDIs makes it difficult to compare the predictive 
accuracy of proposed measures to risk measures included in the 
current large bank method. However, for a smaller sample with 
available debt ratings, adding debt ratings to other risk measures 
included in the current small bank model does not improve the 
predictive accuracy of the model.

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[GRAPHIC] [TIFF OMITTED] TP24NO10.341

    A ``large institution'' would continue to be defined as an IDI that 
has had $10 billion or more in total assets for at least four 
consecutive quarters. The proposal would apply to all large IDIs 
regardless of whether they are defined as new.\13\ Insured branches of 
foreign banks would not be included within the definition of a large 
institution.
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    \11\ The rank ordering for larg institutions as of the end of 
2009 (based on a consensus view of staff analysts) is largely based 
on the information available through the FDIC's Large Insured 
Depository Institution (LIDI) program. Large institutions that 
failed or received significant governemnt support over the perod are 
assigned the worst risk ranking and are included in the statistical 
analysis. Appendix 1 to the NPR describes the statistical analysis 
in detail.
    \12\ The percentage approximated by factors is based on the 
statistical model for that particual year. Actual weights assigned 
to each scorecard measure are largely based on the average 
coefficients for 2005 to 2008, and do not equal the weight implied 
by the coefficient for that particular year (See Appendix 1 to the 
NPR).
    \13\ In almost all cases, an IDI that has had $10 billion or 
more in total assets for four consecutive quarters will have a 
CAMELS rating; however, in the rare event that such an IDI has not 
yet received CAMELS ratings, it would be given a weighted average 
CAMELS rating of 2 for assessment purposes until actual CAMELS 
ratings are assigned.
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A. Scorecard for Large IDIs (Other Than Highly Complex IDIs)

    The FDIC proposes to use a scorecard method to calculate an initial 
assessment rate that reflects the risk that a large IDI poses to the 
DIF. The scorecard uses certain risk measures to produce two scores--a 
performance score and a loss severity score--that are ultimately 
combined and converted to an initial assessment rate.
    The performance score measures an IDI's financial performance and 
its ability to withstand stress. To arrive at a performance score, the 
scorecard combines weighted CAMELS ratings and financial measures into 
a single performance score between 0 and 100.
    The loss severity score measures the relative magnitude of 
potential losses to the FDIC in the event of an IDI's failure. The 
scorecard combines certain loss severity measures into a single loss 
severity score between 0 and 100. The loss severity score is converted 
into a loss severity factor that ranges between 0.8 and 1.2.
    Multiplying the performance score by the loss severity factor 
produces a combined score (total score) that is converted to an initial 
assessment rate. Under the proposal, an IDI's total score could not be 
less than 30 or more than 90. The FDIC would have a limited ability to 
alter an IDI's total score based on quantitative or qualitative 
measures not captured in the scorecard.
    Table 1 shows scorecard measures and their relative contribution to 
the performance score or loss severity score. The score for all 
scorecard measures is calculated based on the minimum and maximum 
cutoff values for each measure. Most of the minimum and maximum cutoff 
values are equal to the 10th and 90th percentile values for each 
measure, which are derived using data on large IDIs over a ten-year 
period beginning with the first quarter of 2000 through the fourth 
quarter of 2009--a period that includes both good and bad economic 
times.\14\ Appendix 1 to this Preamble shows selected percentile values 
of each scorecard measure over this period.
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    \14\ The detailed results of the statistical analysis used to 
select risk measures and the weights are provided in Appendix 1 to 
this Preamble and an online calculator will be available on the 
FDIC's Web site to allow insured institutions to determine how their 
assessment rates would be calculated under this NPR.
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    The score for each measure, other than the weighted average CAMELS 
rating, ranges between 0 and 100, where 100 equals the highest risk and 
0 equals the lowest risk for that measure. A value reflecting lower 
risk than the cutoff value receives a score of 0. A value reflecting 
higher risk than the cutoff value receives a score of 100. A risk 
measure value between the minimum and maximum cutoff values converts 
linearly to a score between 0 and 100, which is rounded to 3 decimal 
points. The weighted average CAMELS rating is converted to a score 
between 25 and 100 where 100 equals the highest risk and 25 equals the 
lowest risk.

[[Page 72615]]

    Appendix B to Subpart A describes in detail how each scorecard 
measure is converted to a score.

                                        Table 1--Scorecard for Large IDIs
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                                                                                          Weights
                                                                                           within     Component
                                                          Scorecard measures             component     weights
                                                                                         (percent)    (percent)
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P.............................................                          Performance Score
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P.1...........................................  Weighted Average CAMELS Rating........          100           30
P.2...........................................  Ability to Withstand Asset-Related      ...........           50
                                                 Stress:.
                                                  Tier 1 Leverage Ratio                          10  ...........
                                                  Concentration Measure                          35  ...........
                                                  Core Earnings/Average Quarter-End              20  ...........
                                                Total Assets *
                                                  Credit Quality Measure                         35  ...........
P.3...........................................  Ability to Withstand Funding-Related                          20
                                                 Stress.
                                                  Core Deposits/Total Liabilities                60  ...........
                                                  Balance Sheet Liquidity Ratio                  40  ...........
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L.............................................                         Loss Severity Score
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L.1...........................................  Loss Severity.........................  ...........          100
                                                  Potential Losses/Total Domestic                75  ...........
                                                Deposits (loss severity measure)
                                                  Noncore Funding/Total Liabilities              25  ...........
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* Average of five quarter-end total assets (most recent and four prior quarters).

    The FDIC has made simplifying revisions to the scorecard proposed 
in the April NPR. These revisions do not materially reduce the 
scorecard's ability to differentiate among IDIs' risk profiles. 
Simplifying revisions include refining some risk measurements, 
eliminating the outlier add-ons, and allowing for an adjustment of an 
IDI's total score, up or down, a maximum 15 points higher or lower than 
the total score, rather than allowing for an adjustment of both the 
performance score and the loss severity score by up to 15 points each. 
The FDIC took these steps partly in response to comments on the April 
NPR expressing concerns about the complexity of the proposal. The FDIC 
recognizes that the scorecard and some risk measures in the scorecard 
continue to be somewhat complex; however, this complexity simply 
reflects the complexity of large IDIs. Further reducing the complexity 
would lead to considerably less accuracy in predicting risk.
    As in the April NPR and as shown in Appendix 1 to this Preamble, 
the FDIC has carefully selected risk measures that best predict how 
IDIs fared during the period of most recent stress. Some commenters 
expressed concern that the factors and assumptions reflect a backward 
looking analysis of the 2005 through 2009 period--a time of 
extraordinary stress--but the FDIC believes that the scorecard should 
differentiate risk based on how IDIs would fare during periods of 
economic stress. Periods of stress reveal risks that often remain 
hidden during periods of prosperity.
1. Performance Score
    The first component of the scorecard for large IDIs is the 
performance score. The performance score for large IDIs is the weighted 
average of three inputs: (1) Weighted average CAMELS rating; (2) 
ability to withstand asset-related stress measures; and (3) ability to 
withstand funding-related stress measures. Table 2 shows the weight 
given to each of these three inputs.

              Table 2--Performance Score Inputs and Weights
------------------------------------------------------------------------
                                                                Weight
                  Performance score inputs                    (percent)
------------------------------------------------------------------------
CAMELS Rating..............................................           30
Ability to Withstand Asset-Related Stress..................           50
Ability to Withstand Funding-Related Stress................           20
------------------------------------------------------------------------

a. Weighted Average CAMELS Score
    To derive the weighted average CAMELS score, a weighted average of 
the IDI's CAMELS component ratings is first calculated using the 
weights that are applied in the existing rule as shown in Table 3 
below.\15\
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    \15\ 12 CFR part 327, Subpt. A, App. A (2010).

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[GRAPHIC] [TIFF OMITTED] TP24NO10.342

    A weighted average CAMELS rating converts to a score that ranges 
from 25 to 100. A weighted average rating of 1 equals a score of 25 and 
a weighted average of 3.5 or greater equals a score of 100. Weighted 
average CAMELS ratings between 1 and 3.5 are assigned a score between 
25 and 100. The score increases at an increasing rate as the weighted 
average CAMELS rating increases. Appendix B to subpart A describes in 
detail how the weighted average CAMELS rating is converted to a score.
b. Ability To Withstand Asset-Related Stress Component
    The ability to withstand asset-related stress component contains 
measures that the FDIC finds most relevant to assessing a large IDI's 
ability to withstand such stress:
     Tier 1 leverage ratio;
     Concentration measure (the higher of the ratio of higher-
risk assets to the sum of Tier 1 capital and reserves or the growth-
adjusted portfolio concentrations measure);
     The ratio of core earnings to average quarter-end total 
assets; and
     Credit quality measure (the higher of the ratio of 
criticized and classified items to the sum of Tier 1 capital and 
reserves measure or the ratio of underperforming assets to the sum of 
Tier 1 capital and reserves measure).
    In general, these measures proved to be the most statistically 
significant measures of a large IDI's ability to withstand asset-
related stress, as described in Appendix 1 to this Preamble. Appendix A 
to subpart A describes these measures in detail and provides the source 
of the data used to determine them.
    The FDIC proposes to include the Tier 1 leverage ratio as a risk 
measure rather than the Tier 1 common ratio proposed in the April NPR 
so that capital would be defined consistently throughout the deposit 
insurance assessment rules to mean regulatory capital, whether it is 
for the calculating the risk-based assessment rate or for the defining 
the assessment base. Several commenters stated that the FDIC should 
delay the implementation of the rulemaking until the effect of the 
Basel Committee's efforts on changing the definition of Tier 1 capital 
is better known. The definition of regulatory capital will remain 
unchanged without further rulemaking, and the FDIC believes that the 
current regulatory capital ratio serves as a reasonable measure of 
capital adequacy until the Basel Committee's efforts are complete and 
the regulatory definition of Tier 1 capital has been changed. The FDIC 
plans to reevaluate the cutoffs for scorecard measures affected by any 
changes to the definition of regulatory capital once a new capital 
regulation is adopted and implemented.
    The concentration measure score equals the higher of the two scores 
that make up the concentration measure, as does the credit quality 
score.\16\ The concentration measure score is based on the higher of 
the higher-risk assets to Tier 1 capital and reserves score or the 
growth-adjusted portfolio concentrations measure score. Both measures 
are described in detail in Appendix C to Subpart A. The credit quality 
measure score is based upon the higher of the criticized and classified 
items to Tier 1 capital and reserves score or the underperforming 
assets to Tier 1 capital and reserves score.\17\
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    \16\ The ratio of higher-risk assets to Tier 1 capital and 
reserves gauges concentrations that are currently deemed to be high 
risk. The growth-adjusted portfolio concentration measure does not 
solely consider high-risk portfolios, but considers most loan 
portfolio concentrations.
    \17\ The criticized and classified items ratio measures 
commercial credit quality while the underperforming assets ratio is 
often a better indicator for consumer portfolios.
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    Table 4 shows the ability to withstand asset related stress 
measures, gives the cutoff values for each measure and shows the weight 
assigned to the measure to derive a score for an IDI's ability to 
withstand asset-related stress. Appendix B to subpart A describes how 
each of the risk measures is converted to a score between 0 and 100 
based upon the minimum and maximum cutoff values.\18\
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    \18\ Cutoff values are rounded to the nearest integer. Most of 
the minimum and maximum cutoff values for each risk measure equal 
the 10th and 90th percentile values of the measure among large IDIs 
based upon data from the period between the first quarter of 2000 
and the fourth quarter of 2009. The 10th and 90th percentiles are 
not used for the higher-risk assets to Tier 1 capital and reserves 
measure and the criticized and classified items ratio due to data 
availability. Data on the higher-risk assets to Tier 1 capital and 
reserves measure are available consistently since second quarter 
2008, while criticized and classified items are available 
consistently since first quarter 2007. The maximum cutoff value for 
the higher-risk assets to Tier 1 capital and reserves measure is 
close to but does not equal the 75th percentile. The maximum cutoff 
value for the criticized and classified items ratio is close to but 
does not equal the 80th percentile value. These alternative cutoff 
values are partly based on recent experience. Appendix 1 includes 
information regarding the percentile values for each risk measure.

[[Page 72617]]



   Table 4--Cutoff Values and Weights for Ability To Withstand Asset-
                         Related Stress Measures
------------------------------------------------------------------------
                                         Cutoff values
        Scorecard measures        --------------------------    Weight
                                     Minimum      Maximum     (percent)
------------------------------------------------------------------------
Tier 1 Leverage Ratio............            6           13           10
Concentration Measure............  ...........  ...........           35
    Higher--Risk Assets to Tier 1            0          135  ...........
     Capital and Reserves; or....
    Growth-Adjusted Portfolio                3           57  ...........
     Concentrations..............
Core Earnings/Average Quarter-End            0            2           20
 Total Assets *..................
Credit Quality Measure...........  ...........  ...........           35
    Criticized and Classified                8          100  ...........
     Items/Tier 1 Capital and
     Reserves; or................
    Underperforming Assets/Tier 1            2           37  ...........
     Capital and Reserves........
------------------------------------------------------------------------
* Average of five quarter-end total assets (most recent and four prior
  quarters).

    Each score is multiplied by its respective weight and the resulting 
weighted score for each measure is summed to arrive at an ability to 
withstand asset-related stress score, which could range from 0 to 100.
    The FDIC proposes to eliminate the outlier add-ons, which were used 
in the April NPR, to simplify the scorecard. Commenters to the April 
NPR argued that the ``all or nothing'' additions of the outlier add-ons 
were overly punitive and introduced a cliff effect. While the FDIC 
continues to believe that extreme values for certain risk measures make 
an IDI more vulnerable to stress, the FDIC recognizes that IDIs with 
such extreme values can be better addressed on a bank-by-bank basis 
using the large bank adjustment described in detail below.
    Table 5 illustrates how the ability to withstand asset-related 
stress score is calculated for a hypothetical bank, Bank A.

                     Table 5--Ability To Withstand Asset-Related Stress Component for Bank A
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                                                                                           Weight      Weighted
                     Scorecard measures                          Value       Score *     (percent)      score
----------------------------------------------------------------------------------------------------------------
Tier 1 Leverage Ratio.......................................         6.98        86.00           10         8.60
Concentration Measure.......................................  ...........       100.00           35        35.00
    Higher Risk Assets/Tier 1 Capital and Reserves; or......       162.00       100.00
    Growth-Adjusted Portfolio Concentrations................        43.62        75.22
Core Earnings/Average Quarter-End Total Assets..............         0.67        66.50           20        13.30
  Credit Quality Measure....................................  ...........       100.00           35        35.00
  Criticized and Classified Items/Tier 1 Capital and               114.00       100.00
   Reserves; or.............................................
    Underperforming Assets/Tier 1 Capital and Reserves......        34.25        92.14
                                                             ---------------------------------------------------
    Total ability to withstand asset-related stress score...  ...........  ...........  ...........        91.90
----------------------------------------------------------------------------------------------------------------
* In the example, scores are rounded to two decimal points for Bank A.

    Bank A's higher risk assets to Tier 1 capital and reserves score 
(100.00) is higher than its growth-adjusted portfolio concentration 
score (75.22). Thus, the higher risk assets to Tier 1 capital and 
reserves score is multiplied by the 35 percent weight to get a weighted 
score of 35.00 and the growth-adjusted portfolio concentrations score 
is ignored. Similarly, Bank A's criticized and classified items to Tier 
1 capital and reserves score (100) is higher than its underperforming 
assets to Tier 1 capital and reserves score (92.14). Therefore, the 
criticized and classified items to Tier 1 capital and reserves score is 
multiplied by the 35 percent weight to get a weighted score of 35.00 
and the underperforming assets to Tier 1 capital and reserves score is 
ignored. These weighted scores, along with the weighted scores for the 
Tier 1 leverage ratio (8.6) and core earnings to average quarter-end 
total assets ratio (13.30), are added together, resulting in the 
ability to withstand asset-related stress score of 91.90.
c. Ability to Withstand Funding-Related Stress
    The ability to withstand funding-related stress component contains 
two measures that are most relevant to assessing a large IDI's ability 
to withstand such stress--a core deposits to total liabilities ratio, 
and a balance sheet liquidity ratio, which measures the amount of 
highly liquid assets to cover potential cash outflows in the event of 
stress.\19\ These ratios are significant in predicting a large IDI's 
long-term performance in the statistical test described in Appendix 1 
to the preamble. Appendix A to subpart A describes these ratios in 
detail and provides the source of the data used to determine them. 
Appendix B to subpart A describes how each of these measures is 
converted to a score between 0 and 100.
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    \19\ The FDIC has modified data elements included in the liquid 
assets to short-term liability ration proposed in the April NPR, and 
termed it as the balance sheet liquidity ratio to better reflect 
what the ratio is designed to capture. See Appendix A for detailed 
description.
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    The ability to withstand funding-related stress component score is 
the weighted average of the two measure scores. Table 6 shows the 
cutoff values and weights for these measures. Weights assigned to each 
of these two risk measures are based on statistical analysis as 
described in detail in Appendix 1 to the preamble.

[[Page 72618]]



  Table 6--Cutoff Values and Weights for Ability To Withstand Funding-
                         Related Stress Measures
------------------------------------------------------------------------
                                         Cutoff values
        Scorecard measures        --------------------------    Weight
                                     Minimum      Maximum     (percent)
------------------------------------------------------------------------
Core Deposits/Total Liabilities..            3           79           60
Balance Sheet Liquidity Ratio....            7          188           40
------------------------------------------------------------------------

    Table 7 illustrates how the ability to withstand funding-related 
stress score is calculated for a hypothetical bank, Bank A.

                    Table 7--Ability To Withstand Funding-Related Stress Component for Bank A
----------------------------------------------------------------------------------------------------------------
                                                                                           Weight      Weighted
                     Scorecard measures                          Value       Score *     (percent)      score
----------------------------------------------------------------------------------------------------------------
Core Deposits/Total Liabilities.............................        60.25        24.67           60        14.80
Balance Sheet Liquidity Ratio...............................        69.58        65.42           40        26.17
                                                             ---------------------------------------------------
    Total ability to withstand funding-related stress score.  ...........  ...........  ...........        40.97
----------------------------------------------------------------------------------------------------------------
* In the example, scores are rounded to 2 decimal points for Bank A.

d. Calculation of Performance Score
    The weighted average CAMELS score, the ability to withstand asset-
related stress score, and the ability to withstand funding-related 
stress score are then multiplied by their respective weights and the 
results are summed to arrive at the performance score. This score 
cannot be less than 0 or more than 100 under the proposal. In the 
example in Table 8, Bank A's performance score would be 69.33, assuming 
that Bank A has a weighted average CAMELS score of 50.6, which results 
from a weighed average CAMELS rating of 2.2.

                  Table 8--Performance Score for Bank A
------------------------------------------------------------------------
                                      Weight                   Weighted
   Performance score components     (percent)      Score        score
------------------------------------------------------------------------
Weighted Average CAMELS Score....           30        50.60        15.18
Ability to Withstand Asset-                 50        91.90        45.95
 Related Stress Score............
Ability to Withstand Funding-               20        40.97         8.20
 Related Stress Score............
                                  --------------------------------------
    Total Performance Score......  ...........  ...........        69.33
------------------------------------------------------------------------

2. Loss Severity Score
    The loss severity score measures the relative magnitude of 
potential losses to the FDIC in the event of an IDI's failure. It is 
based on two measures that are most relevant to assessing an IDI's 
potential losses--a loss severity measure and a ratio of noncore 
funding to total liabilities.
    The loss severity measure applies a standardized set of assumptions 
based on recent failures regarding liability runoffs and the recovery 
value of asset categories to calculate possible losses to the FDIC. 
(Appendix D to subpart A describes the calculation of this measure in 
detail.) Two commenters to the April NPR questioned the liability run-
off rate assumptions and asset loss rate assumptions used in the loss 
severity model given that no statistical support was provided in the 
April NPR. Asset loss rate assumptions are based on estimates of 
recovery values for IDIs that either failed or came close to a failure 
during the 12 months preceding the issuance of the April NPR. Deposit 
run-off assumptions are based on the actual experience of large IDIs 
that either failed or came close to a failure during the 2007 through 
2009 period.
    The FDIC believes that heavy reliance on secured liabilities or 
other types of noncore funding reduces an IDI's potential franchise 
value, thereby increasing the FDIC's potential loss in the event of 
failure. Under the proposal, the FDIC includes a ratio of noncore 
funding to total liabilities as a risk measure in the loss severity 
scorecard. Both measures are quantitative measures that are derived 
from readily available data. Appendix A to subpart A defines these 
measures and provides the source of the data used to calculate them. 
Appendix B to Subpart A describes how each of these risk measures is 
converted to a score between 0 and 100.
    The loss severity score is the weighted average of the loss 
severity measure and the noncore funding to total liability ratio. 
Table 9 shows cutoff values and weights for these measures. The loss 
severity score cannot be less than 0 or more than 100 under the 
proposal.
    The FDIC proposes that a 75 percent weight be assigned to the loss 
severity measure and a 25 percent weight to the noncore funding to 
total liability ratio. The April NPR considered two measures--the ratio 
of potential losses to total domestic deposits and the ratio of secured 
liabilities to total domestic deposits--assigning an equal weight to 
each measure to calculate the loss severity score. A commenter on the 
April NPR stated that the loss severity measure should have a greater 
weight in the loss severity score, arguing that the loss severity 
measure directly measures the potential effect of an IDI's failure on 
the DIF. The FDIC agrees. This proposal also replaces the secured 
liabilities to total domestic deposits ratio with the noncore funding 
to total liabilities ratio. The FDIC believes that noncore funding, 
which, among others, includes brokered deposits, large time deposits 
and foreign deposits in addition to secured liabilities, is a better 
predictor of

[[Page 72619]]

potential franchise value than secured liabilities alone.

   Table 9--Cutoff Values and Weights for Loss Severity Score Measures
------------------------------------------------------------------------
                                         Cutoff values
        Scorecard measures        --------------------------    Weight
                                     Minimum      Maximum     (percent)
------------------------------------------------------------------------
Potential Losses/Total Domestic              0           29           75
 Deposits (Loss Severity Measure)
Noncore Funding/Total Liabilities           21           97           25
------------------------------------------------------------------------

    In the example in Table 10, Bank A's loss severity score would be 
68.57.

                                    Table 10--Loss Severity Score for Bank A
----------------------------------------------------------------------------------------------------------------
                                                                                           Weight      Weighted
                     Scorecard measures                          Ratio        Score      (percent)      score
----------------------------------------------------------------------------------------------------------------
Potential Losses/Total Domestic Deposits (Loss severity             23.62        81.49           75        61.09
 measure)...................................................
Noncore Funding/Total Liabilities...........................        43.76        29.95           25         7.49
                                                             ---------------------------------------------------
    Total Loss Severity Score...............................  ...........  ...........  ...........        68.57
----------------------------------------------------------------------------------------------------------------

3. Total Score
    Once the performance and loss severity scores are calculated, these 
scores are converted to a total score. Each IDI's total score is 
calculated by multiplying its performance score by a loss severity 
factor as follows:
    First, the loss severity score is converted into a loss severity 
factor that ranges from 0.8 (score of 5 or lower) to 1.2 (score of 85 
or higher). Scores that fall at or below the minimum cutoff of 5 
receive a loss severity measure of 0.8 and scores that fall at or above 
the maximum cutoff of 85 receive a loss severity score of 1.2. Again, a 
linear interpolation is used to convert loss severity scores between 
the cutoffs into a loss severity measure.
    The conversion is made using the following formula:

Loss Severity Factor = 0.8 + [0.005 * (Loss Severity Score -5)]

For example, if Bank A's loss severity score is 68.57, its loss 
severity factor would be 1.12, calculated as follows:

0.8 + (0.005 * (68.57 - 5)) = 1.12

    Next, the performance score is multiplied by the loss severity 
factor to produce a total score (total score = performance score * loss 
severity measure).
    Since the loss severity factor ranges from 0.8 to 1.2, the total 
score could be up to 20 percent higher or lower than the performance 
score. For example, if Bank A's performance score is 69.33 and its loss 
severity factor is 1.12, its total score would be calculated as 
follows:

69.33 * 1.12 = 77.65

    The resulting total score cannot be less than 30 or more than 90.
    The total score could be adjusted, up or down, by a maximum of 15 
points, based upon significant risk factors that are not adequately 
captured in the scorecard. The FDIC would use a process similar to the 
current large bank adjustment to determine the amount of the adjustment 
to the total score.\20\ This discretionary adjustment is discussed in 
more detail below.
---------------------------------------------------------------------------

    \20\ 12 CFR 327.9(d)(4) (2010).
---------------------------------------------------------------------------

4. Initial Base Assessment Rate
    A large IDI with a total score of 30 would pay the minimum initial 
base assessment rate and a large IDI with a total score of 90 would pay 
the maximum initial base assessment rate; for total scores between 30 
and 90, initial base assessment rates would rise at an increasing rate 
as the total score increased.21 22 The initial base 
assessment rate (in basis points) is calculated using the following 
formula: \23\
---------------------------------------------------------------------------

    \21\ The score of 30 and 90 equals about the 13th and about the 
99th percentile values, respectively, based on scorecard results as 
of first quarter 2006 through fourth quarter 2007.
    \22\ The rates that the FDIC proposes to apply to large and 
highly complex IDIs pursuant to the large bank assessment system are 
set out in the Assessment Base NPR, which is being published 
concurrently with this NPR. See the Notice of Proposed Rulemaking 
published elsewhere in this issue.
    \23\ The initial base assessment rate would be rounded to two 
decimal points.
[GRAPHIC] [TIFF OMITTED] TP24NO10.343

    The calculation of an initial base assessment rate is based on an 
approximated statistical relationship between an IDI's total score and 
its estimated three-year cumulative failure probability, as shown in 
Appendix 2 to the preamble.
    Chart 2 illustrates the initial base assessment rate for a range of 
total scores, assuming minimum and maximum initial base assessment 
rates of 5 basis points and 35 basis points, respectively.

[[Page 72620]]

[GRAPHIC] [TIFF OMITTED] TP24NO10.344

    The initial base assessment rate could be adjusted as a result of 
the unsecured debt adjustment, the depository institution debt 
adjustment, and the brokered deposit adjustment, as discussed in the 
Assessment Base NPR.

B. Scorecard for Highly Complex Institutions

    As mentioned above, those institutions that are structurally and 
operationally complex or that pose unique challenges and risks in case 
of failure (highly complex IDI) have a different scorecard under the 
proposal. A ``highly complex institution'' is defined as: (1) An IDI 
(excluding a credit card bank) that has had $50 billion or more in 
total assets for at least four consecutive quarters that either is 
controlled by a parent company that has had $500 billion or more in 
total assets for four consecutive quarters, or is controlled by one or 
more intermediate parent companies that are controlled by a holding 
company that has had $500 billion or more in assets for four 
consecutive quarters, or (2) a processing bank or trust company that 
has had $10 billion or more in total assets for at least four 
consecutive quarters.\24\ Under the proposal, highly complex IDIs have 
a scorecard with measures tailored to the risks they pose.
---------------------------------------------------------------------------

    \24\ A parent company would have the same meaning as 
``depository institution holding company'' in section 3(w) of the 
FDI Act. 12 U.S.C. 1813(w)(1)(2001). Control would have the same 
meaning as in section 2 of the Bank Holding Company Act of 1956. See 
12 U.S.C. 1841(a)(2)(2001). A credit card bank would be defined as a 
bank for which credit card plus securitized receivables exceed 50 
percent of assets plus securitized receivables. A processing bank or 
trust company would be defined as an institution whose last 3 years' 
non-lending interest income plus fiduciary revenues plus investment 
fees exceed 50 percent of total revenues (and last 3 year's 
fiduciary revenues are non-zero).
---------------------------------------------------------------------------

    The scorecard for a highly complex IDI is similar to the scorecard 
for other large IDIs. Like the scorecard for other large IDIs, the 
scorecard for highly complex IDIs contains a performance score and a 
loss severity score. Table 11 shows the scorecard measures and their 
relative contribution to the performance score or loss severity score. 
As with the scorecard for large IDIs, most of the minimum and maximum 
cutoff values for each scorecard measure used in the highly complex 
IDI's scorecard equal the 10th and 90th percentile values of the 
particular measure among these IDIs based upon data from the period 
between the first quarter of 2000 and the fourth quarter of 2009.\25\
---------------------------------------------------------------------------

    \25\ Some measures used in the highly complex IDI scorecard (and 
that are not used in the scorecard for other large IDIs) do not use 
the 10th and 90th percentile values as cutoffs due to lack of 
historical data. These measures include the following: Top 20 
counterparty exposures to Tier 1 capital and reserves, largest 
counterparty exposures to Tier 1 capital and reserves, and level 3 
trading assets measures. The cutoffs for the top 20 counterparty 
exposures to Tier 1 capital and reserves, largest counterparty 
exposures to Tier 1 capital and reserves, and level 3 trading assets 
measures are based partly upon recent experience, but the minimum 
cutoffs range from just under the 5th and 10th percentile values and 
the maximum cutoffs range from the 80th to 85th percentile values of 
these measures among only highly complex IDIs from the period 
between the first quarter of 2000 and the fourth quarter of 2009.

[[Page 72621]]



                               Table 11--Scorecard for Highly Complex Institutions
----------------------------------------------------------------------------------------------------------------
                                                                                          Weights
                                                                                           within     Component
                                                          Scorecard measures             component     weights
                                                                                         (percent)    (percent)
----------------------------------------------------------------------------------------------------------------
P.............................................                          Performance Score
----------------------------------------------------------------------------------------------------------------
P.1...........................................  Weighted Average CAMELS Rating........          100           30
P.2...........................................  Ability to Withstand Asset-Related      ...........           50
                                                 Stress.
                                                  Tier 1 Leverage Ratio                          10  ...........
                                                  Concentration Measure                          35  ...........
                                                  Core Earnings/Average Quarter-End              20  ...........
                                                Total Assets
                                                  Credit Quality Measure and Market              35  ...........
                                                Risk Measure
P.3...........................................  Ability to Withstand Funding-Related    ...........           20
                                                 Stress.
                                                  Core Deposits/Total Liabilities                50  ...........
                                                  Balance Sheet Liquidity Ratio                  30  ...........
                                                  Average Short-Term Funding/Average             20  ...........
                                                Total Assets
----------------------------------------------------------------------------------------------------------------
L.............................................                         Loss Severity Score
----------------------------------------------------------------------------------------------------------------
L.1...........................................  Loss Severity.........................  ...........          100
                                                  Potential Losses/Total Domestic                75  ...........
                                                Deposits (loss severity measure)
                                                  Noncore Funding/Total Liabilities              25  ...........
----------------------------------------------------------------------------------------------------------------

1. Performance Score
    Table 12 gives the weights associated with the three components of 
the performance scorecard for highly complex IDIs. The April NPR 
included a market indicator--senior bond spreads--as one of the 
performance score components for highly complex IDIs. While the FDIC 
continues to believe that market indicators provide valuable market 
perspectives on a highly complex IDI's performance, the FDIC thinks 
that market indicators may be best considered on a bank-by-bank case 
through the large bank adjustments, given concerns regarding market 
liquidity and other idiosyncratic factors.

           Table 12--Performance Score Components and Weights
------------------------------------------------------------------------
                                                                Weight
                Performance score components                  (percent)
------------------------------------------------------------------------
Weighted Average CAMELS Rating.............................           30
Ability to Withstand Asset-Related Stress..................           50
Ability to Withstand Funding-Related Stress................           20
------------------------------------------------------------------------

a. Weighted Average CAMELS Score
    The weighted average CAMELS score for highly complex IDIs is 
derived in the same manner as in the scorecard for large IDIs.
b. Ability to Withstand Asset-Related Stress Component
    The ability to withstand asset-related stress component contains 
measures that the FDIC finds most relevant to assessing a highly 
complex IDI's ability to withstand such stress:
     Tier 1 leverage ratio;
     Concentration measure (the higher of the ratio of higher-
risk assets to the sum of Tier 1 capital and reserves, the ratio of top 
20 counterparty exposure to Tier 1 capital and reserves, or the ratio 
of the largest counterparty exposure to Tier 1 capital and reserves);
     The ratio of core earnings to average quarter-end total 
assets;
     Credit quality measure (the higher of the ratio of 
criticized and classified items to the sum of Tier 1 capital and 
reserves measure or the ratio of underperforming assets to the sum of 
Tier 1 capital and reserves measure), and market risk measure (the 
weighted average of a ratio of four-quarter trading revenue volatility 
to Tier 1 capital, a ratio of market risk capital to Tier 1 capital, 
and a ratio of level 3 trading assets to Tier 1 capital).
    Two of the four measures used to assess a highly complex IDI's 
ability to withstand asset-related stress (the Tier 1 leverage ratio 
and the core earnings to average quarter-end total assets ratio) are 
determined in the same manner as in the scorecard for other large IDIs. 
However, the method used to calculate the other remaining measures--the 
concentration measure, and the credit quality and market risk measure--
differ and are discussed below.
    Concentration measure:
    As in the scorecard for large IDIs, the concentration measure for 
highly complex IDIs includes the higher-risk assets to Tier 1 capital 
and reserves ratio described in detail in Appendix C to Subpart A. 
However, the concentration measure in the highly complex institution 
scorecard considers the top 20 counterparty exposures to Tier 1 capital 
and reserves ratio and the largest counterparty exposure to Tier 1 
capital and reserves ratio instead of the growth-adjusted portfolio 
concentrations measure used in the scorecard for large IDIs (and in the 
April NPR) because recent experience shows that the concentration of a 
highly complex IDI's exposures to a small number of counterparties--
either through lending or derivatives activities--significantly 
increases a highly complex IDI's vulnerability to unexpected market 
events. The FDIC uses the top 20 counterparty exposure and the largest 
counterparty exposure to capture such risk.
    Credit quality measure and market risk measure:
    As in the scorecard for large IDIs, the ability to withstand asset-
related stress includes a credit quality measure. However, the highly 
complex institution scorecard also includes a market risk measure that 
consists of three risk measures--trading revenue volatility, market 
risk capital, and level 3 trading assets. All three risk measures are 
calculated relative to a highly complex IDI's Tier 1 capital and 
multiplied by their respective weights to calculate the market risk 
measure. All three measures can be calculated using data from an IDI's 
quarterly Consolidated Reports of Condition and Income (Call Reports) 
and Thrift Financial Reports (TFRs). The FDIC believes that combining 
these three risk measures better captures a highly complex IDI's market 
risk than any single measure.
    The trading revenue volatility measures the sensitivity of the 
IDI's trading revenue to market volatility. The market risk capital 
measure is largely

[[Page 72622]]

based on regulatory 10-day 99th percentile Value-at-Risk (VaR), but it 
incorporates specific market risk and a multiplication factor to 
determine the capital charge, which accounts for the number of days 
actual losses exceeded daily VaR measures, making the measure more 
comparable across highly complex IDIs.26 27 28 Also, model-
based risk metrics such as VaR that rely on historical market prices 
would not be a good measure of market risk if the IDI holds a large 
volume of hard-to-value trading assets. The more difficult it is to 
value an IDI's trading assets, the more approximations and substitutes 
are needed to calculate the VaR, making the model results much less 
relevant. The level 3 trading assets measure is a potential indicator 
of illiquidity in the trading book.
---------------------------------------------------------------------------

    \26\ Regulatory 10-day 99th percentile Value-at-Risk (VaR) is 
the estimate of the maximum amount that the value of covered 
positions could decline during a 10-day holding period within a 99th 
percent confidence level measured in accordance with section 4 of 
Appendix C of part 325 of the FDIC Rules and Regulations. http://www.fdic.gov/regulations/laws/rules/2000-4800.html#fdic2000appendixctopart325.
    \27\ Specific risk as defined in Appendix C of part 325 of the 
FDIC Rules and Regulations means changes in the market value of 
specific positions due to factors other than broad market movements 
and includes event and default risk as well as idiosyncratic 
variations. http://www.fdic.gov/regulations/laws/rules/2000-4800.html#fdic2000appendixctopart325.
    \28\ The multiplication factor is based on the number of 
exceptions based on backtesting--the number of business days for 
which the magnitude of the actual daily net trading loss, if any, 
exceeds the corresponding daily VAR measures. The backtesting 
compares each of the IDI's most recent 250 business days' actual net 
trading profit or loss with the corresponding daily VAR measures 
generated for internal risk measurement purposes and calibrated to a 
one-day holding period and a 99 percent, one-tailed confidence 
level. http://www.fdic.gov/regulations/laws/rules/2000-4800.html#fdic2000appendixctopart325.
---------------------------------------------------------------------------

    The FDIC recognizes that the relevance of credit risk and market 
risk in assessing a highly complex IDI's vulnerability to stress 
depends on the IDI's asset composition. An IDI with a significant 
amount of trading assets could be as risky as an IDI that focuses on 
lending even though the primary source of risk may differ. In order to 
treat both types of IDIs fairly, the FDIC proposes to assign a combined 
weight of 35 percent to the credit risk measure and the market risk 
measure. The relative weight between the two may vary depending on the 
ratio of average trading assets to the sum of average securities, 
loans, and trading assets (the trading asset ratio) as follows:
     Weight for Credit Quality Measure = (1 - Trading Asset 
Ratio) * 0.35
     Weight for Market Risk Measure = Trading Asset Ratio * 
0.35
    Table 14 shows cutoff values and weights for the ability to 
withstand asset-related stress measures.

           Table 14--Cutoff Values and Weights for Ability To Withstand Asset-Related Stress Measures
----------------------------------------------------------------------------------------------------------------
                                                  Cutoff values           Sub-
                                           --------------------------  component
            Scorecard measures                                           weight                Weight
                                              Minimum      Maximum     (percent)
----------------------------------------------------------------------------------------------------------------
Tier 1 Leverage Ratio.....................            6           13  ...........  10%
Concentration Measure.....................  ...........  ...........  ...........  35%
    Higher Risk Assets/Tier 1 Capital and             0          135               .............................
     Reserves;.
    Top 20 Counterparty Exposure/Tier 1               0          125               .............................
     Capital and Reserves; or
    Largest Counterparty Exposure/Tier 1              0           20  ...........  .............................
     Capital and Reserves
Core Earnings/Average Quarter-end Total               0            2  ...........  20%
 Assets
Credit Quality Measure *..................  ...........  ...........  ...........  35% * (1-Trading Asset Ratio)
    Criticized and Classified Items to                8          100  ...........  .............................
     Tier 1 Capital and Reserves; or
    Underperforming Assets/Tier 1 Capital             2           37  ...........  .............................
     and Reserves
Market Risk Measure *.....................  ...........  ...........  ...........  35% * Trading Asset Ratio
    Trading Revenue Volatility/Tier 1                 0            2           60  .............................
     Capital
    Market Risk Capital/Tier 1 Capital                0           10           20  .............................
    Level 3 Trading Assets/Tier 1 Capital             0           35           20  .............................
----------------------------------------------------------------------------------------------------------------
* Combined, the credit quality measure and the market risk measure will be assigned a 35 percent weight. The
  relative weight between the two measures will depend on the ratio of average trading assets to sum of average
  securities, loans and trading assets (trading asset ratio).

c. Ability to Withstand Funding-Related Stress Component
    The ability to withstand funding-related stress component contains 
three measures that are most relevant to assessing a highly complex 
IDI's ability to withstand such stress--a core deposits to total 
liabilities ratio, a balance sheet liquidity ratio, and an average 
short-term assets to average total assets ratio.\29\
---------------------------------------------------------------------------

    \29\ The FDIC has modified data elements included in the liquid 
assets to short-term liability ration proposed in the April NPR, and 
termed it as the balance sheet liquidity ratio to better reflect 
what the ratio is designed to capture. See Appendix A for detailed 
description.
---------------------------------------------------------------------------

    Two of the measures (the core deposits to total liabilities ratio 
and the balance sheet liquidity ratio) in the ability to withstand 
funding-related stress component are determined in the same manner as 
in the scorecard for large IDIs, although their weights differ. 
However, the ability to withstand funding-related stress component in 
the highly complex institution scorecard adds an additional measure--
the average short-term funding to average total assets ratio--because 
experience during the recent crisis shows that heavy reliance on short-
term funding significantly increases a highly complex IDI's 
vulnerability to unexpected adverse developments in the funding market.
    Table 15 shows cutoff values and weights for the ability to 
withstand funding-related stress measures.

[[Page 72623]]



  Table 15--Cutoff Values and Weights for Ability To Withstand Funding-
                         Related Stress Measures
------------------------------------------------------------------------
                                         Cutoff values
        Scorecard measures        --------------------------    Weight
                                     Minimum      Maximum     (percent)
------------------------------------------------------------------------
Core Deposits/Total Liabilities..            3           79           50
Balance Sheet Liquidity Ratio....            7          188           30
Average Short-term Funding/                  0           20           20
 Average Total Assets............
------------------------------------------------------------------------

d. Calculating the Performance Score
    To calculate the performance score for a highly complex IDI, the 
weighted average CAMELS score, the ability to withstand asset-related 
stress score, and the ability to withstand funding-related stress score 
are multiplied by their respective weights and the results are summed 
to arrive at the performance score. The performance score is capped at 
100 under the proposal.
2. The Loss Severity Score
    The loss severity score for highly complex IDIs is calculated the 
same way as the loss severity score for other large IDIs.
3. Total Score and Initial Base Assessment Rate
    The total score and the initial base assessment rate for highly 
complex IDIs are calculated in the same manner as for other large IDIs, 
as described above. As is the case for other large IDIs, the total 
score cannot be less than 30 or more than 90. The total score for 
highly complex IDIs could be adjusted, up or down, by a maximum of 15 
points, based upon significant risk factors that are not adequately 
captured in the scorecard. The resulting score, however, cannot be less 
than 30 or more than 90. The FDIC would use a process similar to the 
current large bank adjustment to determine the amount of any 
adjustments.\30\ This discretionary adjustment is discussed in more 
detail below.
---------------------------------------------------------------------------

    \30\ 12 CFR 327.9(d)(4) (2010).
---------------------------------------------------------------------------

    As in the case of other large IDIs, the initial base assessment 
rate could also be adjusted as a result of the unsecured debt 
adjustment, the depository institution debt adjustment, and the 
brokered deposit adjustment as discussed in the Assessment Base NPR.

C. Large Bank Adjustment to the Total Score

    Although the proposed scorecards should improve the relative risk 
ranking of large IDIs, the FDIC proposes that it have the ability to 
adjust the total score for all large IDIs, up or down, by a maximum of 
15 points, based upon significant risk factors that are not captured in 
the scorecard. This discretionary adjustment would be similar to the 
assessment rate adjustment that large IDIs and insured branches of 
foreign banks within Risk Category I are subject to under current 
rules.\31\ In the April NPR, the FDIC proposed that it have the ability 
to make discretionary adjustments to the performance score and loss 
severity score of up to 15 points each. A number of commenters stated 
that these potential discretionary adjustments were too large, too 
subjective, and not transparent.
---------------------------------------------------------------------------

    \31\ 12 CFR 327.9(d)(4) (2010).
---------------------------------------------------------------------------

    The FDIC believes that it is important that it have ability to 
consider idiosyncratic factors or other relevant risk factors that are 
not included in the scorecards when assessing the probability of 
failure and potential loss given failure. The FDIC acknowledges, 
however, that the discretionary adjustment process could be streamlined 
by applying the adjustment to the total score, rather than having 
potential adjustments to both the performance score and the loss 
severity score, while still providing the FDIC with flexibility to give 
sufficient weight to the idiosyncratic factors or other risk factors 
not included in the scorecard.
    In determining whether to make a large bank adjustment, the FDIC 
may consider such information as financial performance and condition 
information and other market or supervisory information. The FDIC would 
also consult with an IDI's primary federal regulator and, for state 
chartered institutions, state banking supervisor.
    The FDIC acknowledges the need to clarify its processes for making 
any adjustments to ensure fair treatment and accountability and plans 
to propose and seek comment on updated guidelines for evaluating 
whether assessment rate adjustments are warranted and the size of the 
adjustments. The FDIC will not adjust assessment rates until the 
updated guidelines are approved by the FDIC's Board. In addition, the 
FDIC will publish aggregate statistics on adjustments each quarter.
    In general, the adjustments to the total score would have a 
proportionally greater effect on the assessment rate of those IDIs with 
a higher total score since the assessment rate rises at an increasing 
rate as the total score rises as shown in Chart 1.

D. Appeals Process

    Notifications involving an upward adjustment to an IDI's assessment 
rate would be made in advance of implementing such an adjustment so 
that the IDI has an opportunity to respond to or address the FDIC's 
rationale for proposing an upward adjustment. Adjustments would be 
implemented after considering the IDI's response to the notification 
and considering any subsequent changes either to the inputs or other 
risk factors that relate to the FDIC's decision. Procedures and 
timetables for the appeals process are described in detail on the 
FDIC's Web site and can be found using the following link: http://www.fdic.gov/deposit/insurance/assessments/requests_review.html.

E. Data Source

    In most cases, the FDIC proposes to use data that are currently 
publicly available to compute scorecard measures. Data elements 
required to compute four scorecard measures--higher-risk assets, top 20 
counterparty exposures, the largest counterparty exposure and 
criticized/classified items--are currently gathered during the 
examination process. Rather than relying on the examination process as 
proposed in the April NPR, the FDIC proposes that the data elements for 
these four scorecard measures be collected directly from IDIs. The FDIC 
anticipates that the necessary changes would be made to Call Reports 
and TFRs beginning with second quarter of 2011. The data elements would 
remain confidential.

F. Updating the Scorecard

    The FDIC would have the flexibility to update the minimum and 
maximum cutoff values used in each scorecard annually without further 
rulemaking as long as the method of selecting cut-off values remains 
unchanged. As stated earlier, the cutoff values are generally based on 
the 10th and 90th percentile

[[Page 72624]]

values for the ten-year period ending in 2009. In particular, the FDIC 
could add new data for subsequent years to its analysis and could, from 
time to time, exclude some earlier years from its analysis. Updating 
the minimum and maximum cutoff values and weights will allow the FDIC 
to use the most recent data, thereby improving the accuracy of the 
scorecard method.
    On the other hand, if, as a result of its review and analysis, the 
FDIC concludes that additional or alternative measures should be used 
to determine risk-based assessments, that the method of selecting 
cutoff values should be revised, that the weights assigned to the 
scorecard measures should be recalibrated, or that a new method should 
be used to differentiate risk among large IDIs or highly complex IDIs, 
these changes would be made through a future rulemaking.
    Financial ratios for any given quarter will continue to be 
calculated from the Call Reports and TFRs filed by each IDI as of the 
last day of the quarter. CAMELS component rating changes will continue 
to be effective as of the date that the rating change is transmitted to 
the IDI for purposes of determining assessment rates.\32\
---------------------------------------------------------------------------

    \32\ Pursuant to existing supervisory practice, the FDIC does 
not assign a different component rating from that assigned by an 
institution's primary federal regulator, even if the FDIC disagrees 
with a CAMELS component assigned by an institution's primary federal 
regulator, unless: (1) The disagreement over the component rating 
also involves a disagreement over a CAMELS composite rating; and (2) 
the disagreement over the CAMELS composite rating is not a 
disagreement over whether the CAMELS composite rating should be a 1 
or a 2. The FDIC has no plans to alter this practice.
---------------------------------------------------------------------------

    Appendices 1 and 2 to the preamble will not appear in the Code of 
Federal Regulations.

Appendix 1 to Preamble--Statistical Analysis of Measures

    The risk measures included in the performance score and the weights 
assigned to those measures are generally based on the results of an 
ordinary least square (OLS) model, and in some cases, a logistic 
regression model. The OLS model estimates how well a set of risk 
measures in 2005 through 2008 can predict the FDIC's view, based on its 
experience and judgment, of the proper rank ordering of risk (the 
expert judgment ranking) for large institutions as of year-end 2009.
    The OLS model is specified as:
    [GRAPHIC] [TIFF OMITTED] TP24NO10.345
    
Where:

k is a risk measure;
n is the number of risk measures; and
t is the quarter that is being assessed

    The logistic regression model estimates how well the same set of 
risk measures in 2005 through 2008 can predict whether a large bank 
fails and it is specified as:
[GRAPHIC] [TIFF OMITTED] TP24NO10.346

Where

Fail is whether an institution i failed on or prior to year-end 2009 
or not.\33\
---------------------------------------------------------------------------

    \33\ For the purpose of regression analysis, large institutions 
that received significant government support or merged with another 
entity with government support.

    To select the risk measures for the scorecard, the FDIC first 
considered those measures deemed to be most relevant in assessing large 
institutions' ability to withstand stress. These candidate risk 
measures were converted to a score between 0 and 100, using specified 
minimum and maximum cutoff values, and then tested for statistical 
significance in both the expert judgment ranking and failure prediction 
models.
    Table 1.1 provides descriptive statistics for all risk measures 
used in the large institution scorecard and highly complex institution 
scorecard. As noted in Section II. A. 1., most but not all of the 
minimum and maximum cutoff values for each scorecard measure equal the 
10th and 90th percentile values among large institutions based upon 
data from 2000 through 2009.

[[Page 72625]]

[GRAPHIC] [TIFF OMITTED] TP24NO10.347

    Table 1.2 provides the average, median, and standard deviation for 
each of the scored risk measures used in the expert judgment ranking 
and failure prediction models.\34\ The figures are based on data from 
2005 through 2009. The loss severity and noncore funding measures (i.e. 
components of the total loss severity score) were excluded from the 
analysis, since neither of the dependent variables in the two 
regressions reflect the expected (or actual) loss given failure. Most 
of the performance measures, other than concentration and credit 
quality measures, are based on Call Report or TFR data and defined in 
Appendix A to subpart A. The concentration measure is described in 
detail in Appendix C to subpart A.
---------------------------------------------------------------------------

    \34\ The FDIC has conducted a number of robustness tests with 
alternative ratios for capital and earnings, a log transformation of 
several variables--the liquidity coverage ratio, the brokered 
deposit ratio and the growth-adjusted concentration ratio--and 
alternative dependent variables--CAMELS and the FDIC's internal risk 
ratings. These robustness tests show that the same set of variables 
are generally statistically significant in most models; that 
converting to a score from a raw ratio generally resolves any 
potential concern related to a nonlinear relationship between the 
dependent variable and several explanatory variables; and, finally, 
that alternative ratios for capital and earnings are not better in 
predicting expert judgment ranking or failure.

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[[Page 72626]]

[GRAPHIC] [TIFF OMITTED] TP24NO10.348

    OLS Model Results and Derivation of Weights:
    Table 1.3 shows the results of the OLS model using the above 
measures for years 2005 through 2008. The dependent variable for the 
model is an expert judgment ranking as of year-end 2009. All of the 
measures are statistically significant in several years at the 10 
percent level. Four of the seven measures--the weighted average CAMELS 
rating, concentration measure, credit quality measure, and core 
deposits ratio--are significant at the 5 percent level in all years.
[GRAPHIC] [TIFF OMITTED] TP24NO10.349

    The weight for each scorecard measure was generally based on the 
weight implied by coefficients for 2005 to 2008, with some adjustments 
to account for more recent experience. The implied weights are computed 
by dividing the average of scorecard measure coefficients for 2005 to 
2008 by the sum of the average coefficients. For example, the average 
coefficient on the weighted average CAMELS rating was 0.52, which is 
about 31 percent of the

[[Page 72627]]

coefficient sum for all measures (1.7). The current proposal assigns a 
weight of 30 percent to this measure. Similarly, the average 
coefficient of 0.36 on the concentration measure implies a weight of 21 
percent (0.36/1.7 = 0.21). The proposal effectively assigns a weight of 
17.5 percent (50 percent weight on the ability to withstand asset-
related stress score x 35 percent weight on the concentration measure). 
Table 1.4 shows the average coefficients and implied and actual 
weights.
[GRAPHIC] [TIFF OMITTED] TP24NO10.350

    Logistic Model Results:
    Table 1.5 shows the results of the logistic regression model, where 
the dependent variable for the model is whether an institution failed 
before year-end 2009. The weighted average CAMELS rating, Tier 1 
leverage ratio, core deposits ratio, and concentration measure are 
significant at the 5 percent level in all years. The core earnings 
ratio, credit quality measure, and balance sheet liquidity ratio are 
not statistically significant in several years.

[[Page 72628]]

[GRAPHIC] [TIFF OMITTED] TP24NO10.351

    OLS regression results: CAMELS and the Current Small Bank Financial 
Ratios:
    Table 1.5 shows the results of the OLS regression model with the 
weighted average CAMELS rating only. These results show that while the 
weighted average CAMELS rating is statistically significant in 
predicting an expert judgment ranking as of year-end 2009, it only 
explains a small percentage of the variation in the year-end 2009 
expert judgment ranking--particularly in models for 2005 (10 percent) 
through 2007 (19 percent).
[GRAPHIC] [TIFF OMITTED] TP24NO10.352

    Table 1.6 shows the results of the OLS regression model with a 
weighted average CAMELS rating and the current small bank financial 
ratios. These results show that adding the current small bank model 
financial ratios improves the ability to predict the year-end 2009 
expert judgment ranking; however, the improvement is not as

[[Page 72629]]

significant as in the model with proposed measures. For example, in 
2006, the model with current small bank financial ratios would have 
predicted slightly over 20 percent of the variation in the current 
expert judgment ranking. This compares to 47 percent for the model with 
proposed measures.
[GRAPHIC] [TIFF OMITTED] TP24NO10.353

Appendix 2 to Preamble--Conversion of Total Score Into Initial Base 
Assessment Rate

    The formula for converting an IDI's total score into an initial 
assessment rate is based on a single-variable logistic regression 
model, which uses an IDI's total score as of year-end 2006 to predict 
whether the IDI has failed on or before year-end 2009. The logistic 
model is estimated as:
[GRAPHIC] [TIFF OMITTED] TP24NO10.354

Where:

Fail is whether an IDI i failed on or before year-end 2009 or not; 
and \35\
---------------------------------------------------------------------------

    \35\ For the purpose of regression analysis, large institutions 
that received significant government support or merged with another 
entity with government support are deemed to have failed.
---------------------------------------------------------------------------

Score is an IDI i's total score as of year-end 2006.

    Chart 2.1 below shows that the total score can reasonably 
differentiate IDIs that failed after 2006. About the worst 12 percent 
of IDIs in terms of their total score as of year-end 2006 accounted for 
more than two-thirds of failures over the next three years.

[[Page 72630]]

[GRAPHIC] [TIFF OMITTED] TP24NO10.355

    The plotted points in Chart 2.2 show the estimated failure 
probabilities for the actual total scores using the logistic model and 
the results are nonlinear.

[[Page 72631]]

[GRAPHIC] [TIFF OMITTED] TP24NO10.356

    The proposed calculation of the initial assessment rates 
approximates this nonlinear relationship for scores between 30 and 
90.\36\ A score of 30 or lower results in the minimum initial base 
assessment rate and a score of 90 or higher results in the maximum 
initial base assessment rate. Assuming an assessment rate range of 40 
basis points, the initial base assessment rate for an IDI with a score 
greater than 30 and less than 90 is:
---------------------------------------------------------------------------

    \36\ The initial assessment rate formula is simplified while 
maintaining the nonlinear relationship.
[GRAPHIC] [TIFF OMITTED] TP24NO10.357

II. Request for Comments

    The FDIC seeks comment on every aspect of this proposed rule. In 
particular, the FDIC seeks comment on the questions set out below. The 
FDIC asks that commenters include reasons for their positions.\37\
---------------------------------------------------------------------------

    \37\ The FDIC may not address all of the questions posed in the 
current rulemaking in the final rule, but may consider the 
information gathered in future actions.
---------------------------------------------------------------------------

    1. Deposit Insurance Pricing System:
    (a) Should the risk categories be eliminated as proposed?
    (b) Should the two scorecards be combined?
    (c) Should highly complex institutions be defined as proposed?
    (d) Should the performance score and loss severity score be 
combined as proposed?
    (e) Should the initial base assessment rate be calculated as 
proposed?
    2. Performance Scorecard:
    (a) Are the proposed weights assigned to performance score 
components and measures appropriate?
    (b) Are the cutoff values for the risk measures appropriate?
    (c) The proposal eliminates debt ratings as an input in calculating 
a large IDI's assessment rate. In the April NPR, the FDIC proposed 
using a senior bond spread as a component of the highly complex IDI 
scorecard. The FDIC decided against retaining that component in this 
proposal because of comparability issues among IDIs. The FDIC 
considered including credit default swap (CDS) spreads in the highly 
complex IDI scorecard, but the proposal does not include them due to 
the limited number of trades. Is this concern serious enough not to 
include the CDS spreads in the scorecard? What other market-based 
measures (credit, equity or others), if any, would enhance the proposed 
pricing system? Should any other measures be added? Should any measures 
be removed or replaced?
    (d) Should the growth-adjusted portfolio concentration measure be 
computed as proposed? Are the risk weights assigned to each portfolio 
as

[[Page 72632]]

described in Appendix C to Subpart A appropriate?
    (e) For the higher-risk concentration measure, should 
concentrations in other portfolios be considered?
    (f) Should counterparty exposures be defined as proposed?
    (g) Should the balance sheet liquidity ratio be computed as 
proposed?
    (h) Should other risk measures be calculated as proposed?
    3. Loss Severity Scorecard:
    (a) Are asset haircuts and runoff assumptions for the loss severity 
measure as described in Appendix D to Subpart A appropriate?
    (b) Are asset adjustments due to liability runoff and capital 
reductions as described in Appendix D to Subpart A applied 
appropriately?
    (c) Are the proposed weights assigned to loss severity measures 
appropriate?
    (d) Are cut-off values for risk measures appropriate?
    (e) Should any other measures be added? Should any measures be 
removed or replaced?
    (f) Should other risk measures be calculated as proposed?
    4. Regulatory Matters:
    (a) What is the extent of regulatory burden of the proposed large 
bank deposit insurance pricing system?
    (b) Are the requirements in the proposed regulation clearly stated? 
If not, how could the regulation be more clearly stated?
    (c) Does the proposed regulation contain language or jargon that is 
not clear? If so, which language requires clarification?

III. 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. The FDIC invites your comments on how to make this 
proposal easier to understand. For example:
     Has the FDIC 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 the FDIC do to make the regulation easier 
to understand?

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires that each federal 
agency either certify that a proposed rule would not, if adopted in 
final form, have a significant economic impact on a substantial number 
of small entities or prepare an initial regulatory flexibility analysis 
of the rule and publish the analysis for comment.\38\ For RFA purposes 
a small institution is defined as one with $175 million or less in 
assets. As of June 30, 2010, of the 7,839 insured commercial banks and 
savings associations, there were 4,299 small insured depository 
institutions, as that term is defined for purposes of the RFA. The 
proposed rule, however, would apply only to institutions with $10 
billion or greater in total assets. Consequently, small institutions 
will experience no significant economic impact should the FDIC 
implement the proposed large bank assessment system.
---------------------------------------------------------------------------

    \38\ See 5 U.S.C. 603, 604 and 605.
---------------------------------------------------------------------------

C. Paperwork Reduction Act

    No collections of information pursuant to the Paperwork Reduction 
Act of 1995, 44 U.S.C. 3501-3521 (PRA), 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).

List of Subjects in 12 CFR Part 327

    Bank deposit insurance, Banks, Banking, Savings associations.
    For the reasons set forth in the preamble the FDIC proposes to 
amend chapter III of title 12 of the Code of Federal Regulations as 
follows:

PART 327--ASSESSMENTS

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

    Authority: 12 U.S.C. 1441, 1813, 1815, 1817-19, 1821.

    2. Amend Sec.  327.4 by revising paragraphs (c) and (f) to read as 
follows:


Sec.  327.4  Assessment rates.

* * * * *
    (c) Requests for review. An institution that believes any 
assessment risk assignment provided by the Corporation pursuant to 
paragraph (a) of this section is incorrect and seeks to change it must 
submit a written request for review of that risk assignment. An 
institution cannot request review through this process of the CAMELS 
ratings assigned by its primary federal regulator or challenge the 
appropriateness of any such rating; each federal regulator has 
established procedures for that purpose. An institution may also 
request review of a determination by the FDIC to assess the institution 
as a large, highly complex, or a small institution (Sec.  327.9(d)(9)) 
or a determination by the FDIC that the institution is a new 
institution (Sec.  327.9(d)(10)). Any request for review must be 
submitted within 90 days from the date the assessment risk assignment 
being challenged pursuant to paragraph (a) of this section appears on 
the institution's quarterly certified statement invoice. The request 
shall be submitted to the Corporation's Director of the Division of 
Insurance and Research in Washington, DC, and shall include 
documentation sufficient to support the change 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 and Research (or 
designee) or the Director of the Division of Supervision and Consumer 
Protection (or designee) or any successor divisions, as appropriate, 
shall promptly notify the institution in writing of his or her 
determination of whether a change is warranted. If the institution 
requesting review disagrees with that determination, it may appeal to 
the FDIC's Assessment Appeals Committee. Notice of the procedures 
applicable to appeals will be included with the written determination.
* * * * *
    (f) Effective date for changes to risk assignment. Changes to an 
insured institution's risk assignment resulting from a supervisory 
ratings change become effective as of the date of written notification 
to the institution by its primary federal regulator or state authority 
of its supervisory rating (even

[[Page 72633]]

when the CAMELS component ratings have not been disclosed to the 
institution), if the FDIC, after taking into account other information 
that could affect the rating, agrees with the rating. If the FDIC does 
not agree, the FDIC will notify the institution of the FDIC's 
supervisory rating; resulting changes to an insured institution's risk 
assignment become effective as of the date of written notification to 
the institution by the FDIC.
* * * * *
    3. Revise Sec.  327.5 to read as follows:


Sec.  327.5  Assessment base.

    (a) Assessment base for all insured depository institutions. Except 
as provided in paragraphs (b), (c), and (d) of this section, the 
assessment base for an insured depository institution shall equal the 
average consolidated total assets of the insured depository institution 
during the assessment period minus the average tangible equity of the 
insured depository institution during the assessment period.
    (1) Average consolidated total assets defined and calculated. 
Average consolidated total assets is defined in the schedule of 
quarterly averages in the Consolidated Reports of Condition and Income, 
using a daily averaging method. The amounts to be reported as daily 
averages are the sum of the gross amounts of consolidated total assets 
for each calendar day during the quarter divided by the number of 
calendar days in the quarter. For days that an office of the reporting 
institution (or any of its subsidiaries or branches) is closed (e.g., 
Saturdays, Sundays, or holidays), the amounts outstanding from the 
previous business day would be used. An office is considered closed if 
there are no transactions posted to the general ledger as of that date. 
For institutions that begin operating during the calendar quarter, the 
amounts to be reported as daily averages are the sum of the gross 
amounts of consolidated total assets for each calendar day the 
institution was operating during the quarter divided by the number of 
calendar days the institution was operating during the quarter.
    (2) Average tangible equity defined and calculated. Tangible equity 
is defined in the schedule of regulatory capital as Tier 1 capital. The 
definition of Tier 1 capital is to be determined pursuant to the 
definition the Report of Condition or Thrift Financial Report (or any 
successor reports) instructions as of the assessment period for which 
the assessment is being calculated.
    (i) Calculation of average tangible equity. Except as provided in 
paragraph (a)(2)(ii) of this section, average tangible equity shall be 
calculated using monthly averaging. Monthly averaging means the average 
of the three month-end balances within the quarter.
    (ii) Alternate calculation of average tangible equity. Institutions 
that reported less than $1 billion in quarter-end total consolidated 
assets on their March 31, 2011 Reports of Condition or Thrift Financial 
Reports may report average tangible equity using an end-of-quarter 
balance or may at any time opt permanently to report average tangible 
equity using a monthly average balance. An institution that reports 
average tangible equity using an end-of-quarter balance and reports 
average daily consolidated assets of $1 billion or more for two 
consecutive quarters shall permanently report average tangible equity 
using monthly averaging starting in the next quarter.
    (3) Consolidated subsidiaries.
    (i) Data for reporting from consolidated subsidiaries. Insured 
depository institutions may use data that are up to 93 days old for 
consolidated subsidiaries when reporting daily average consolidated 
total assets. Insured depository institutions may use either daily 
average asset values for the consolidated subsidiary for the current 
quarter or for the prior quarter (that is, data that are up to 93 days 
old), but, once chosen, insured depository institutions cannot change 
the reporting method from quarter to quarter. Similarly, insured 
depository institutions may use data for the current quarter or data 
that are up to 93 days old for consolidated subsidiaries when reporting 
tangible equity values. Once chosen, however, insured depository 
institutions cannot change the reporting method from quarter to 
quarter.
    (ii) Reporting for insured depository institutions with 
consolidated insured depository subsidiaries. Insured depository 
institutions that consolidate other insured depository institutions for 
financial reporting purposes shall report daily average consolidated 
total assets and tangible equity without consolidating their insured 
depository institution subsidiaries into the calculations. Investments 
in insured depository institution subsidiaries should be included in 
total assets using the equity method of accounting.
    (b) Assessment base for banker's banks. (1) Bankers bank defined. A 
banker's bank for purposes of calculating deposit insurance assessments 
shall meet the definition of banker's bank set forth in 12 U.S.C. 24.
    (2) Self-certification. Institutions that meet the requirements of 
paragraph (b)(1) of this section shall so certify each quarter on the 
Consolidated Reports of Condition and Income or Thrift Financial Report 
to that effect.
    (3) Assessment base calculation for banker's banks. A banker's bank 
shall pay deposit insurance assessments on its assessment base as 
calculated in paragraph (a) of this section provided that it conducts 
50 percent or more of its business with entities other than its parent 
holding company or entities other than those controlled either directly 
or indirectly (under the Bank Holding Company Act or Home Owners' Loan 
Act) by its parent holding company, the FDIC will exclude from that 
assessment base the daily average reserve balances passed through to 
the Federal Reserve, the daily average reserve balances held at the 
Federal Reserve for its own account, and the daily average amount of 
its federal funds sold, but in no case shall the amount excluded exceed 
the sum of the bank's daily average amount of total deposits of 
commercial banks and other depository institutions in the United States 
and the daily average amount of its federal funds purchased.
    (c) Assessment base for custodial banks. (1) Custodial bank 
defined. A custodial bank for purposes of calculating deposit insurance 
assessments shall be an insured depository institution with previous 
calendar-year custody and safekeeping assets of at least $50 billion or 
an insured depository institution that derived more than 50 percent of 
its total revenue from custody and safekeeping activities over the 
previous calendar year.
    (2) Assessment base calculation for custodial banks. A custodial 
bank shall pay deposit insurance assessments on its assessment base as 
calculated in paragraph (a) of this section, but the FDIC will exclude 
from that assessment base the daily average amount of highly liquid, 
short-term assets (i.e., assets with a Basel risk weighting of 20 
percent or less and a stated maturity date of 30 days or less), subject 
to the limitation that the daily average value of these assets cannot 
exceed the daily average value of the deposits identified by the 
institution as being held in a custody and safekeeping account.
    (d) Assessment base for insured branches of foreign banks. Average 
consolidated total assets for an insured branch of a foreign bank is 
defined as total assets of the branch (including net due from related 
depository institutions) in accordance with the schedule of assets and 
liabilities in the Report of Assets and Liabilities of U.S. Branches 
and Agencies of Foreign Banks as of the assessment period for which the

[[Page 72634]]

assessment is being calculated, but measured using the definition for 
reporting total assets in the schedule of quarterly averages in the 
Consolidated Reports of Condition and Income, and calculated using a 
daily averaging method. Tangible equity for an insured branch of a 
foreign bank is eligible assets (determined in accordance with Sec.  
347.210 of the FDIC's regulations) less the book value of liabilities 
(exclusive of liabilities due to the foreign bank's head office, other 
branches, agencies, offices, or wholly owned subsidiaries) calculated 
on a monthly or end-of-quarter basis.
    (e) Newly insured institutions. A newly insured institution shall 
pay an assessment for the assessment period during which it became 
insured. The FDIC will prorate the newly insured institution's 
assessment amount to reflect the number of days it was insured during 
the period.
    4. Revise Sec.  327.6 to read as follows:


Sec.  327.6  Mergers and consolidations; other terminations of 
insurance.

    (a) Final quarterly certified invoice for acquired institution. An 
institution that is not the resulting or surviving institution in a 
merger or consolidation must file a report of condition for every 
assessment period prior to the assessment period in which the merger or 
consolidation occurs. The surviving or resulting institution shall be 
responsible for ensuring that these reports of condition are filed and 
shall be liable for any unpaid assessments on the part of the 
institution that is not the resulting or surviving institution.
    (b) Assessment for quarter in which the merger or consolidation 
occurs. For an assessment period in which a merger or consolidation 
occurs, total consolidated assets for the surviving or resulting 
institution shall include the total consolidated assets of all insured 
depository institutions that are parties to the merger or consolidation 
as if the merger or consolidation occurred on the first day of the 
quarter. Tier 1 capital shall be reported in the same manner.
    (c) Other termination. When the insured status of an institution is 
terminated, and the deposit liabilities of such institution are not 
assumed by another insured depository institution--
    (1) Payment of assessments; quarterly certified statement invoices. 
The depository institution whose insured status is terminating shall 
continue to file and certify its quarterly certified statement invoice 
and pay assessments for the assessment period its deposits are insured. 
Such institution shall not be required to certify its quarterly 
certified statement invoice and pay further assessments after it has 
paid in full its deposit liabilities and the assessment to the 
Corporation required to be paid for the assessment period in which its 
deposit liabilities are paid in full, and after it, under applicable 
law, goes out of business or transfers all or substantially all of its 
assets and liabilities to other institutions or otherwise ceases to be 
obliged to pay subsequent assessments.
    (2) Payment of deposits; certification to Corporation. When the 
deposit liabilities of the depository institution have been paid in 
full, the depository institution shall certify to the Corporation that 
the deposit liabilities have been paid in full and give the date of the 
final payment. When the depository institution has unclaimed deposits, 
the certification shall further state the amount of the unclaimed 
deposits and the disposition made of the funds to be held to meet the 
claims. For assessment purposes, the following will be considered as 
payment of the unclaimed deposits:
    (i) The transfer of cash funds in an amount sufficient to pay the 
unclaimed and unpaid deposits to the public official authorized by law 
to receive the same; or
    (ii) If no law provides for the transfer of funds to a public 
official, the transfer of cash funds or compensatory assets to an 
insured depository institution in an amount sufficient to pay the 
unclaimed and unpaid deposits in consideration for the assumption of 
the deposit obligations by the insured depository institution.
    (3) Notice to depositors. (i) The depository institution whose 
insured status is terminating shall give sufficient advance notice of 
the intended transfer to the owners of the unclaimed deposits to enable 
the depositors to obtain their deposits prior to the transfer. The 
notice shall be mailed to each depositor and shall be published in a 
local newspaper of general circulation. The notice shall advise the 
depositors of the liquidation of the depository institution, request 
them to call for and accept payment of their deposits, and state the 
disposition to be made of their deposits if they fail to promptly claim 
the deposits.
    (ii) If the unclaimed and unpaid deposits are disposed of as 
provided in paragraph (c)(2)(i) of this section, a certified copy of 
the public official's receipt issued for the funds shall be furnished 
to the Corporation.
    (iii) If the unclaimed and unpaid deposits are disposed of as 
provided in paragraph (c)(2)(ii) of this section, an affidavit of the 
publication and of the mailing of the notice to the depositors, 
together with a copy of the notice and a certified copy of the contract 
of assumption, shall be furnished to the Corporation.
    (4) Notice to Corporation. The depository institution whose insured 
status is terminating shall advise the Corporation of the date on which 
it goes out of business or transfers all or substantially all of its 
assets and liabilities to other institutions or otherwise ceases to be 
obligated to pay subsequent assessments and the method whereby the 
termination has been effected.
    (d) Resumption of insured status before insurance of deposits 
ceases. If a depository institution whose insured status has been 
terminated is permitted by the Corporation to continue or resume its 
status as an insured depository institution before the insurance of its 
deposits has ceased, the institution will be deemed, for assessment 
purposes, to continue as an insured depository institution and must 
thereafter file and certify its quarterly certified statement invoices 
and pay assessments as though its insured status had not been 
terminated. The procedure for applying for the continuance or 
resumption of insured status is set forth in Sec.  303.248 of this 
chapter.
    5. Amend Sec.  327.8 by:
    A. Removing paragraphs (e) and (f);
    B. Redesignating paragraphs (g) through (s) as paragraphs (e) 
through (q) respectively;
    C. Revising newly redesignated paragraphs (e), (f), (g), (k), (l), 
(m), (n), (o), and (p);
    D. Adding new paragraphs (r), (s), (t), and (u) to read as follows:


Sec.  327.8  Definitions.

* * * * *
    (e) Small Institution. An insured depository institution with 
assets of less than $10 billion as of December 31, 2006, and an insured 
branch of a foreign institution shall be classified as a small 
institution. If, after December 31, 2006, an institution classified as 
large under paragraph (f) of this section (other than an institution 
classified as large for purposes of Sec.  327.9(d)(9)) reports assets 
of less than $10 billion in its quarterly reports of condition for four 
consecutive quarters, the FDIC will reclassify the institution as small 
beginning the following quarter.
    (f) Large Institution. An institution classified as large for 
purposes of Sec.  327.9(d)(9) or an insured depository institution with 
assets of $10 billion or more as of December 31, 2006 (other than an 
insured branch of a foreign bank or a highly complex institution) shall 
be classified as a large institution. If, after December 31, 2006, an 
institution

[[Page 72635]]

classified as small under paragraph (e) of this section reports assets 
of $10 billion or more in its quarterly reports of condition for four 
consecutive quarters, the FDIC will reclassify the institution as large 
beginning the following quarter.
    (g) Highly Complex Institution. A highly complex institution is an 
insured depository institution (excluding a credit card bank) with 
greater than $50 billion in total assets for at least four consecutive 
quarters that is controlled by a parent company with more than $500 
billion in total assets for four consecutive quarters, or controlled by 
one or more intermediate parent companies that are controlled by a 
holding company with more than $500 billion in assets for four 
consecutive quarters, or a processing bank or trust company that has 
had $10 billion or more in total assets for at least four consecutive 
quarters. If, after December 31, 2010, an institution classified as 
highly complex falls below $50 billion in total assets in its quarterly 
reports of condition for four consecutive quarters, or its parent 
company or companies fall below $500 billion in total assets for four 
consecutive quarters, or a processing bank or trust company falls below 
$10 billion in total assets in its quarterly reports of condition for 
four consecutive quarters, the FDIC will reclassify the institution 
beginning the following quarter.
* * * * *
    (k) Established depository institution. An established insured 
depository institution is a bank or savings association that has been 
federally insured for at least five years as of the last day of any 
quarter for which it is being assessed.
    (1) Merger or consolidation involving new and established 
institution(s). Subject to paragraphs (k)(2), (3), (4), and (5) of this 
section and Sec.  327.9(d)(10)(iii), (iv), when an established 
institution merges into or consolidates with a new institution, the 
resulting institution is a new institution unless:
    (i) The assets of the established institution, as reported in its 
report of condition for the quarter ending immediately before the 
merger, exceeded the assets of the new institution, as reported in its 
report of condition for the quarter ending immediately before the 
merger; and
    (ii) Substantially all of the management of the established 
institution continued as management of the resulting or surviving 
institution.
    (2) Consolidation involving established institutions. When 
established institutions consolidate, the resulting institution is an 
established institution.
    (3) Grandfather exception. If a new institution merges into an 
established institution, and the merger agreement was entered into on 
or before July 11, 2006, the resulting institution shall be deemed to 
be an established institution for purposes of this part.
    (4) Subsidiary exception. Subject to paragraph (k)(5) of this 
section, a new institution will be considered established if it is a 
wholly owned subsidiary of:
    (i) A company that is a bank holding company under the Bank Holding 
Company Act of 1956 or a savings and loan holding company under the 
Home Owners' Loan Act, and:
    (A) At least one eligible depository institution (as defined in 12 
CFR 303.2(r)) that is owned by the holding company has been chartered 
as a bank or savings association for at least five years as of the date 
that the otherwise new institution was established; and
    (B) The holding company has a composite rating of at least ``2'' 
for bank holding companies or an above average or ``A'' rating for 
savings and loan holding companies and at least 75 percent of its 
insured depository institution assets are assets of eligible depository 
institutions, as defined in 12 CFR 303.2(r); or
    (ii) An eligible depository institution, as defined in 12 CFR 
303.2(r), that has been chartered as a bank or savings association for 
at least five years as of the date that the otherwise new institution 
was established.
    (5) Effect of credit union conversion. In determining whether an 
insured depository institution is new or established, the FDIC will 
include any period of time that the institution was a federally insured 
credit union.
    (l) Risk assignment. For all small institutions and insured 
branches of foreign banks, risk assignment includes assignment to Risk 
Category I, II, III, or IV, and, within Risk Category I, assignment to 
an assessment rate or rates. For all large institutions and highly 
complex institutions, risk assignment includes assignment to an 
assessment rate or rates.
    (m) Unsecured debt--For purposes of the unsecured debt adjustment 
as set forth in Sec.  327.9(d)(6) and the depository institution debt 
adjustment as set forth in Sec.  327.9(d)(7), unsecured debt shall 
include senior unsecured liabilities and subordinated debt.
    (n) Senior unsecured liability--For purposes of the unsecured debt 
adjustment as set forth in Sec.  327.9(d)(6) and the depository 
institution debt adjustment as set forth in Sec.  327.9(d)(7), senior 
unsecured liabilities shall be the unsecured portion of other borrowed 
money as defined in the quarterly report of condition for the reporting 
period as defined in paragraph (b) of this section, but shall not 
include any senior unsecured debt that the FDIC has guaranteed under 
the Temporary Liquidity Guarantee Program, 12 CFR Part 370.
    (o) Subordinated debt--For purposes of the unsecured debt 
adjustment as set forth in Sec.  327.9(d)(6) and the depository 
institution debt adjustment as set forth in Sec.  327.9(d)(7), 
subordinated debt shall be as defined in the quarterly report of 
condition for the reporting period; however, subordinated debt shall 
also include limited-life preferred stock as defined in the quarterly 
report of condition for the reporting period.
    (p) Long-term unsecured debt--For purposes of the unsecured debt 
adjustment as set forth in Sec.  327.9(d)(6) and the depository 
institution debt adjustment as set forth in Sec.  327.9(d)(7), long-
term unsecured debt shall be unsecured debt with at least one year 
remaining until maturity.
* * * * *
    (r) Parent holding company--A parent holding company is a bank 
holding company under the Bank Holding Company Act of 1956 or a savings 
and loan holding company under the Home Owners' Loan Act.
    (s) Processing bank or trust company--A processing bank or trust 
company is an institution whose non-lending interest income, fiduciary 
revenues, and investment banking fees, combined, exceed 50 percent of 
total revenues (and its fiduciary revenues are non-zero), and has had 
$10 billion or more in total assets for at least four consecutive 
quarters.
    (t) Credit Card Bank - A credit card bank is a bank for which 
credit card plus securitized receivables exceed 50 percent of assets 
plus securitized receivables.
    (u) Control--Control has the same meaning as in section 2 of the 
Bank Holding Company Act of 1956, 12 U.S.C. 1841(a)(2).
    6. Revise Sec.  327.9 to read as follows:


Sec.  327.9  Assessment risk categories and pricing methods.

    (a) Risk Categories.--Each small insured depository institution and 
each insured branch of a foreign bank shall be assigned to one of the 
following four Risk Categories based upon the institution's capital 
evaluation and supervisory evaluation as defined in this section.

[[Page 72636]]

    (1) Risk Category I. Small institutions in Supervisory Group A that 
are Well Capitalized;
    (2) Risk Category II. Small institutions in Supervisory Group A 
that are Adequately Capitalized, and institutions in Supervisory Group 
B that are either Well Capitalized or Adequately Capitalized;
    (3) Risk Category III. Small institutions in Supervisory Groups A 
and B that are Undercapitalized, and institutions in Supervisory Group 
C that are Well Capitalized or Adequately Capitalized; and
    (4) Risk Category IV. Small institutions in Supervisory Group C 
that are Undercapitalized.
    (b) Capital evaluations. Each small institution and each insured 
branch of a foreign bank will receive one of the following three 
capital evaluations 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 preceding January 1; dated as of June 30 for the 
assessment period beginning the preceding April 1; dated as of 
September 30 for the assessment period beginning the preceding July 1; 
and dated as of December 31 for the assessment period beginning the 
preceding October 1.
    (1) Well Capitalized. (i) Except as provided in paragraph 
(b)(1)(ii) of this section, a Well Capitalized institution is one that 
satisfies each of the following capital ratio standards: Total risk-
based ratio, 10.0 percent or greater; Tier 1 risk-based ratio, 6.0 
percent or greater; and Tier 1 leverage ratio, 5.0 percent or greater.
    (ii) For purposes of this section, an insured branch of a foreign 
bank will be deemed to be Well Capitalized if the insured branch:
    (A) Maintains the pledge of assets required under Sec.  347.209 of 
this chapter; and
    (B) Maintains the eligible assets prescribed under Sec.  347.210 of 
this chapter at 108 percent or more of the average book value of the 
insured branch's third-party liabilities for the quarter ending on the 
report date specified in paragraph (b) of this section.
    (2) Adequately Capitalized. (i) Except as provided in paragraph 
(b)(2)(ii) of this section, an Adequately Capitalized institution is 
one that does not satisfy the standards of Well Capitalized under this 
paragraph but satisfies each of the following capital ratio standards: 
Total risk-based ratio, 8.0 percent or greater; Tier 1 risk-based 
ratio, 4.0 percent or greater; and Tier 1 leverage ratio, 4.0 percent 
or greater.
    (ii) For purposes of this section, an insured branch of a foreign 
bank will be deemed to be Adequately Capitalized if the insured branch:
    (A) Maintains the pledge of assets required under Sec.  347.209 of 
this chapter; and
    (B) Maintains the eligible assets prescribed under Sec.  347.210 of 
this chapter at 106 percent or more of the average book value of the 
insured branch's third-party liabilities for the quarter ending on the 
report date specified in paragraph (b) of this section; and
    (C) Does not meet the definition of a Well Capitalized insured 
branch of a foreign bank.
    (3) Undercapitalized. An undercapitalized institution is one that 
does not qualify as either Well Capitalized or Adequately Capitalized 
under paragraphs (b)(1) and (b)(2) of this section.
    (c) Supervisory evaluations. Each small institution and each 
insured branch of a foreign bank will be assigned to one of three 
Supervisory Groups based on the Corporation's consideration of 
supervisory evaluations provided by the institution's primary federal 
regulator. The supervisory evaluations include the results of 
examination findings by the primary federal regulator, as well as other 
information that the primary federal regulator determines to be 
relevant. In addition, the Corporation will take into consideration 
such other information (such as state examination findings, as 
appropriate) as it determines to be relevant to the institution's 
financial condition and the risk posed to the Deposit Insurance Fund. 
The three Supervisory Groups are:
    (1) Supervisory Group ``A.'' This Supervisory Group consists of 
financially sound institutions with only a few minor weaknesses;
    (2) Supervisory Group ``B.'' This Supervisory Group consists of 
institutions that demonstrate weaknesses which, if not corrected, could 
result in significant deterioration of the institution and ncreased 
risk of loss to the Deposit Insurance Fund; and
    (3) Supervisory Group ``C.'' This Supervisory Group consists of 
institutions that pose a substantial probability of loss to the Deposit 
Insurance Fund unless effective corrective action is taken.
    (d) Determining Assessment Rates for Insured Depository 
Institutions. A small insured depository institution in Risk Category I 
shall have its initial base assessment rate determined using the 
financial ratios method set forth in paragraph (d)(1) of this section. 
An insured branch of a foreign bank in Risk Category I shall have its 
assessment rate determined using the weighted average ROCA component 
rating method set forth in paragraph (d)(2) of this section. A large 
insured depository institution shall have its initial base assessment 
rate determined using the large institution method set forth in 
paragraph (d)(3) of this section. A highly complex insured depository 
institution shall have its initial base assessment rate determined 
using the highly complex institution method set forth at paragraph 
(d)(4) of this section.
    (1) Financial ratios method. (i) Under the financial ratios method 
for small Risk Category I institutions, each of six financial ratios 
and a weighted average of CAMELS component ratings will be multiplied 
by a corresponding pricing multiplier. The sum of these products will 
be added to a uniform amount. The resulting sum shall equal the 
institution's initial base assessment rate; provided, however, that no 
institution's initial base assessment rate shall be less than the 
minimum initial base assessment rate in effect for Risk Category I 
institutions for that quarter nor greater than the maximum initial base 
assessment rate in effect for Risk Category I institutions for that 
quarter. An institution's initial base assessment rate, subject to 
adjustment pursuant to paragraphs (d)(6), (7), and (8) of this section, 
as appropriate (resulting in the institution's total base assessment 
rate, which in no case can be lower than 50 percent of the 
institution's initial base assessment rate), and adjusted for the 
actual assessment rates set by the Board under Sec.  327.10(f), will 
equal an institution's assessment rate. The six financial ratios are: 
Tier 1 Leverage Ratio; Loans past due 30-89 days/gross assets; 
Nonperforming assets/gross assets; Net loan charge-offs/gross assets; 
Net income before taxes/risk-weighted assets; and the Adjusted brokered 
deposit ratio. The ratios are defined in Table A.1 of Appendix A to 
this subpart. The ratios will be determined for an assessment period 
based upon information contained in an institution's report of 
condition filed as of the last day of the assessment period as set out 
in Sec.  327.9(b). The weighted average of CAMELS component ratings is 
created by multiplying each component by the following percentages and 
adding the products: Capital adequacy--25%, Asset quality--20%, 
Management--25%, Earnings--10%, Liquidity--10%, and Sensitivity to

[[Page 72637]]

market risk--10%. The following table sets forth the initial values of 
the pricing multipliers:

------------------------------------------------------------------------
                                                              Pricing
                    Risk measures \*\                       multipliers
                                                               \**\
------------------------------------------------------------------------
Tier 1 Leverage Ratio...................................         (0.056)
Loans Past Due 30-89 Days/Gross Assets..................           0.575
Nonperforming Assets/Gross Assets.......................           1.074
Net Loan Charge-Offs/Gross Assets.......................           1.210
Net Income Before Taxes/Risk-Weighted Assets............         (0.764)
Adjusted Brokered Deposit Ratio.........................           0.065
Weighted Average CAMELS Component Rating................           1.095
------------------------------------------------------------------------
\*\ Ratios are expressed as percentages.
\**\ Multipliers are rounded to three decimal places.

    (ii) The six financial ratios and the weighted average CAMELS 
component rating will be multiplied by the respective pricing 
multiplier, and the products will be summed. To this result will be 
added the uniform amount. The resulting sum shall equal the 
institution's initial base assessment rate; provided, however, that no 
institution's initial base assessment rate shall be less than the 
minimum initial base assessment rate in effect for Risk Category I 
institutions for that quarter nor greater than the maximum initial base 
assessment rate in effect for Risk Category I institutions for that 
quarter.
    (iii) Uniform amount and pricing multipliers. Except as adjusted 
for the actual assessment rates set by the Board under Sec.  327.10(f), 
the uniform amount shall be:
    (A) 4.861 whenever the assessment rate schedule set forth in Sec.  
327.10(a) is in effect;
    (B) 2.861 whenever the assessment rate schedule set forth in Sec.  
327.10(b) is in effect;
    (C) 1.861 whenever the assessment rate schedule set forth in Sec.  
327.10(c) is in effect; or
    (D) 0.861 whenever the assessment rate schedule set forth in Sec.  
327.10(d) is in effect.
    (iv) Implementation of CAMELS rating changes--(A) Changes between 
risk categories. If, during a quarter, a CAMELS composite rating change 
occurs that results in an institution whose Risk Category I assessment 
rate is determined using the financial ratios method moving from Risk 
Category I to Risk Category II, III or IV, the institution's initial 
base assessment rate for the portion of the quarter that it was in Risk 
Category I shall be determined using the supervisory ratings in effect 
before the change and the financial ratios as of the end of the 
quarter, subject to adjustment pursuant to paragraphs (d)(6), (7), and 
(8) of this section, as appropriate, and adjusted for the actual 
assessment rates set by the Board under Sec.  327.10(f). For the 
portion of the quarter that the institution was not in Risk Category I, 
the institution's initial base assessment rate, which shall be subject 
to adjustment pursuant to paragraphs (d)(6), (7), and (8), shall be 
determined under the assessment schedule for the appropriate Risk 
Category. If, during a quarter, a CAMELS composite rating change occurs 
that results in an institution moving from Risk Category II, III or IV 
to Risk Category I, and its initial base assessment rate will be 
determined using the financial ratios method, then that method shall 
apply for the portion of the quarter that it was in Risk Category I, 
subject to adjustment pursuant to paragraphs (d)(6), (7) and (8) of 
this section, as appropriate, and adjusted for the actual assessment 
rates set by the Board under Sec.  327.10(f). For the portion of the 
quarter that the institution was not in Risk Category I, the 
institution's initial base assessment rate, which shall be subject to 
adjustment pursuant to paragraphs (d)(6), (7), and (8) of this section 
shall be determined under the assessment schedule for the appropriate 
Risk Category.
    (B) Changes within Risk Category I. If, during a quarter, an 
institution's CAMELS component ratings change in a way that will change 
the institution's initial base assessment rate within Risk Category I, 
the initial base assessment rate for the period before the change shall 
be determined under the financial ratios method using the CAMELS 
component ratings in effect before the change, subject to adjustment 
pursuant to paragraphs (d)(6), (7), and (8) of this section, as 
appropriate. Beginning on the date of the CAMELS component ratings 
change, the initial base assessment rate for the remainder of the 
quarter shall be determined using the CAMELS component ratings in 
effect after the change, again subject to adjustment pursuant to 
paragraphs (d)(6), (7), and (8) of this section, as appropriate.
    (2) Assessment rate for insured branches of foreign banks--(i) 
Insured branches of foreign banks in Risk Category I. Insured branches 
of foreign banks in Risk Category I shall be assessed using the 
weighted average ROCA component rating.
    (ii) Weighted average ROCA component rating. The weighted average 
ROCA component rating shall equal the sum of the products that result 
from multiplying ROCA component ratings by the following percentages: 
Risk Management--35%, Operational Controls--25%, Compliance--25%, and 
Asset Quality--15%. The weighted average ROCA rating will be multiplied 
by 5.076 (which shall be the pricing multiplier). To this result will 
be added a uniform amount. The resulting sum--the initial base 
assessment rate--will equal an institution's total base assessment 
rate; provided, however, that no institution's total base assessment 
rate will be less than the minimum total base assessment rate in effect 
for Risk Category I institutions for that quarter nor greater than the 
maximum total base assessment rate in effect for Risk Category I 
institutions for that quarter.
    (iii) Uniform amount. Except as adjusted for the actual assessment 
rates set by the Board under Sec.  327.10(f), the uniform amount for 
all insured branches of foreign banks shall be:
    (A) -3.127 whenever the assessment rate schedule set forth in Sec.  
327.10(a) is in effect;
    (B) -5.127 whenever the assessment rate schedule set forth in Sec.  
327.10(b) is in effect;
    (C) -6.127 whenever the assessment rate schedule set forth in Sec.  
327.10(c) is in effect; or
    (D) -7.127 whenever the assessment rate schedule set forth in Sec.  
327.10(d) is in effect.
    (iv) No insured branch of a foreign bank in any risk category shall 
be subject to the adjustments in paragraphs (d)(5), (d)(6), or (d)(8) 
of this section.
    (v) Implementation of changes between Risk Categories for insured 
branches of foreign banks. If, during a quarter, a ROCA rating change 
occurs that results in an insured branch of a foreign bank moving from 
Risk Category I to Risk Category II, III or IV, the institution's 
initial base assessment rate for the portion of the quarter that it was 
in Risk Category I shall be determined using the weighted average ROCA 
component rating. For the portion of the quarter that the institution 
was not in Risk Category I, the institution's initial base assessment 
rate shall be determined under the assessment schedule for the 
appropriate Risk Category. If, during a quarter, a ROCA rating change 
occurs that results in an insured branch of a foreign bank moving from 
Risk Category II, III or IV to Risk Category I, the institution's 
assessment rate for the portion of the quarter that it was in Risk 
Category I shall equal the rate determined as provided using the 
weighted average ROCA component rating. For the portion of the quarter 
that the institution was not in Risk Category I, the institution's 
initial base

[[Page 72638]]

assessment rate shall be determined under the assessment schedule for 
the appropriate Risk Category.
    (vi) Implementation of changes within Risk Category I for insured 
branches of foreign banks. If, during a quarter, an insured branch of a 
foreign bank remains in Risk Category I, but a ROCA component rating 
changes that will affect the institution's initial base assessment 
rate, separate assessment rates for the portion(s) of the quarter 
before and after the change(s) shall be determined under this paragraph 
(d)(2) of this section.
    (3) Assessment scorecard for large institutions (other than highly 
complex institutions). (i) All large institutions other than highly 
complex institutions shall have their quarterly assessments determined 
using the scorecard for large institutions.

                                        Scorecard for Large Institutions
----------------------------------------------------------------------------------------------------------------
                                                                                          Weights
                                                                                           within     Component
                                                          Scorecard measures             component     weights
                                                                                         (percent)    (percent)
----------------------------------------------------------------------------------------------------------------
P.............................................                          Performance Score
----------------------------------------------------------------------------------------------------------------
P.1...........................................  Weighted Average CAMELS Rating........          100           30
P.2...........................................  Ability to Withstand Asset-Related      ...........           50
                                                 Stress:.
                                                  Tier 1 Leverage Ratio                          10  ...........
                                                  Concentration Measure                          35  ...........
                                                  Core Earnings/Average Quarter-End              20  ...........
                                                Total Assets
                                                  Credit Quality Measure                         35  ...........
P.3...........................................  Ability to Withstand Funding-Related    ...........           20
                                                 Stress:.
                                                  Core Deposits/Total Liabilities                60  ...........
                                                  Balance Sheet Liquidity Ratio                  40  ...........
----------------------------------------------------------------------------------------------------------------
L.............................................                         Loss Severity Score
----------------------------------------------------------------------------------------------------------------
L.1...........................................  Loss Severity.........................  ...........          100
                                                  Potential Losses/Total Domestic                75  ...........
                                                Deposits (loss severity measure)
                                                  Noncore Funding/Total Liabilities              25  ...........
----------------------------------------------------------------------------------------------------------------

     (ii) The large institution scorecard produces two scores: 
performance and loss severity.
    (A) Performance score. The performance score for large institutions 
is the weighted average of three inputs: weighted average CAMELS rating 
(30%); ability to withstand asset-related stress measures (50%); and 
ability to withstand funding-related stress measures (20%).
    (B) Weighted Average CAMELS score. (1) To derive the weighted 
average CAMELS score, a weighted average of an institution's CAMELS 
component ratings is calculated using the following weights:

------------------------------------------------------------------------
          CAMELS component                          Weight
------------------------------------------------------------------------
                        C                                 25%
                       A                                  20%
                       M                                  25%
                       E                                  10%
                       L                                  10%
                       S                                  10%
------------------------------------------------------------------------

    (2) A weighted average CAMELS rating is converted to a score that 
ranges from 25 to 100. A weighted average rating of 1 equals a score of 
25 and a weighted average of 3.5 or greater equals a score of 100. 
Weighted average CAMELS ratings between 1 and 3.5 are assigned a score 
between 25 and 100 according to the following equation:

S = 25 + [(20/3) \*\ (C\2\ - 1)],

Where:

S = the weighted average CAMELS score and
C = the weighted average CAMELS rating.

    (C) Ability to Withstand Asset-Related Stress. (1) The ability to 
withstand asset-related stress component contains four measures: Tier 1 
leverage ratio; Concentration measure (the higher of the higher-risk 
assets to Tier 1 capital and reserves or growth-adjusted portfolio 
concentrations measures); Core earnings to average quarter-end total 
assets; and Credit quality measure (the higher of the criticized and 
classified assets to Tier 1 capital and reserves or underperforming 
assets to Tier 1 capital and reserves). Appendices A and C define these 
measures in detail and give the source of the data used to determine 
them.
    (2) The concentration measure score is the higher of the scores of 
the two measures that make up the concentration measure score (higher-
risk assets to Tier 1 capital and reserves measure or growth-adjusted 
portfolio concentrations measure). The credit quality measure score is 
the higher of the criticized and classified items ratio score or the 
underperforming assets ratio score. Each asset related stress measure 
is assigned the following cutoff values and weights to derive a score 
for an institution's ability to withstand asset-related stress:

 Cutoff Values and Weights for Ability To Withstand Asset-Related Stress
                                Measures
------------------------------------------------------------------------
                                         Cutoff values
        Scorecard measures        --------------------------    Weight
                                     Minimum      Maximum     (percent)
------------------------------------------------------------------------
Tier 1 Leverage Ratio............            6           13           10
Concentration Measure:...........  ...........  ...........           35
    Higher-Risk Assets to Tier 1             0          135  ...........
     capital and Reserves; or....
    Growth-Adjusted Portfolio                3           57
     Concentrations..............
Core Earnings/Average Quarter-End            0            2           20
 Total Assets....................

[[Page 72639]]

 
Credit Quality Measure...........  ...........  ...........           35
    Criticized and Classified                8          100  ...........
     Items/Tier 1 capital and
     Reserves; or................
    Underperforming Assets/Tier 1            2           37  ...........
     capital and Reserves........
------------------------------------------------------------------------

     (3) For each of the risk measures within the ability to withstand 
asset-related stress portion of the scorecard, a value reflecting lower 
risk than the cutoff value that results in a score of 0 will also 
receive a score of 0, where 0 equals the lowest risk for that measure. 
A value reflecting higher risk than the cutoff value that results in a 
score of 100 will also receive a score of 100, where 100 equals the 
highest risk for that measure. A risk measure value between the minimum 
and maximum cutoff values is converted linearly to a score between 0 
and 100 as shown in Appendix B to this subpart. Each score is 
multiplied by a respective weight and the resulting weighted score for 
each measure is summed to arrive at an ability to withstand asset-
related stress score, which ranges from 0 to 100.
    (D) Ability to Withstand Funding-Related Stress. The ability to 
withstand funding-related stress component contains two risk measures: 
a core deposits to liabilities ratio, and a balance sheet liquidity 
ratio. Appendix A to this subpart describes these ratios in detail and 
gives the source of the data used to determine them. Appendix B to this 
subpart describes in detail how each of these measures is converted to 
a score. The ability to withstand funding-related stress component 
score is the weighted average of the two measure scores. Each measure 
is assigned the following cutoff values and weights to derive a score 
for an institution's ability to withstand funding-related stress:

   Cutoff Values and Weights for Ability To Withstand Funding-Related
                             Stress Measures
------------------------------------------------------------------------
                                         Cutoff values
        Scorecard measures        --------------------------    Weight
                                     Minimum      Maximum     (percent)
------------------------------------------------------------------------
Core Deposits/Total Liabilities..            3           79           60
Balance Sheet Liquidity Ratio....            7          188           40
------------------------------------------------------------------------

     (E) Calculation of Performance Score. The weighted average CAMELS 
score, the ability to withstand asset-related stress score, and the 
ability to withstand funding-related stress score are multiplied by 
their weights and the results are summed to arrive at the performance 
score. The performance score cannot exceed 100.
    (ii) Loss severity score. The loss severity score is based on two 
measures: the loss severity measure and noncore funding to total 
liabilities ratio. Appendices A and D to this subpart describe these 
measures in detail and Appendix B to this subpart describes how each of 
these measures is converted to a score between 0 and 100. The loss 
severity score is the weighted average of these two scores. Each 
measure is assigned the following cutoff values and weights to derive a 
score for an institution's loss severity score:

       Cutoff Values and Weights for Loss Severity Score Measures
------------------------------------------------------------------------
                                         Cutoff values
        Scorecard measures        --------------------------    Weight
                                     Minimum      Maximum     (percent)
------------------------------------------------------------------------
Potential Losses/Total Domestic              0           29           75
 Deposits (loss severity measure)
Noncore Funding/Total Liabilities           21           97           25
------------------------------------------------------------------------

    (iii) Total Score. The performance and loss severity scores are 
combined to produce a total score. The loss severity score is converted 
into a loss severity factor that ranges from 0.8 (score of 5 or lower) 
to 1.2 (score of 85 or higher). Scores that fall at or below the 
minimum cutoff of 5 receive a loss severity measure of 0.8 and scores 
that fall at or above the maximum cutoff of 85 receive a loss severity 
score of 1.2. The following linear interpolation converts loss severity 
scores between the cutoffs into a loss severity factor: (Loss Severity 
Factor = 0.8+[0.005*(Loss Severity Score- 5)]. The performance score is 
multiplied by the loss severity factor to produce a total score (total 
score = performance score * loss severity factor). The total score 
cannot be less than 30 or more than 90. The total score is subject to 
adjustment, up or down, by a maximum of 15 points, as set forth in 
section (d)(5). The resulting total score cannot be less than 30 or 
more than 90.
    (iv) Initial base assessment rate. A large institution with a total 
score of 30 pays the minimum initial base assessment rate and an 
institution with a total score of 90 pays the maximum initial base 
assessment rate. For total scores between 30 and 90, initial base 
assessment rates rise at an increasing rate as the total score 
increases, calculated according to the following formula:

[[Page 72640]]

[GRAPHIC] [TIFF OMITTED] TP24NO10.358


where Rate is the initial base assessment rate (expressed in basis 
points), Maximum Rate is the maximum initial base assessment rate then 
in effect (expressed in basis points), and Minimum Rate is the minimum 
initial base assessment rate then in effect (expressed in basis 
points). Initial base assessment rates are subject to adjustment 
pursuant to paragraphs (d)(5), (d)(6), (d)(7), and (d)(8) of this 
section, resulting in the institution's total base assessment rate, 
which in no case can be lower than 50 percent of the institution's 
initial base assessment rate.
    (4) Assessment scorecard for highly complex institutions--(i) All 
highly complex institutions shall have their quarterly assessments 
determined using the scorecard for highly complex institutions.

                                    Scorecard for Highly Complex Institutions
----------------------------------------------------------------------------------------------------------------
                                                                                          Weights
                                                                                           within     Component
                                                          Scorecard measures             component     weights
                                                                                         (percent)    (percent)
----------------------------------------------------------------------------------------------------------------
P.............................................                          Performance Score
----------------------------------------------------------------------------------------------------------------
P.1...........................................  Weighted Average CAMELS Rating........          100           30
P.2...........................................  Ability to Withstand Asset-Related      ...........           50
                                                 Stress:.
                                                  Tier 1 Leverage Ratio...............           10  ...........
                                                  Concentration Measure...............           35  ...........
                                                  Core Earnings/Average Quarter-End              20  ...........
                                                   Total Assets.
                                                  Credit Quality Measure and Market              35  ...........
                                                   Risk Measure.
----------------------------------------------------------------------------------------------------------------
P.3...........................................  Ability to Withstand Funding-Related    ...........           20
                                                 Stress:.
                                                  Core Deposits/Total Liabilities.....           50  ...........
                                                  Balance Sheet Liquidity Ratio.......           30  ...........
                                                  Average Short-term Funding/Average             20  ...........
                                                   Total Assets.
                                                  Average Short-Term Funding/Average             20  ...........
                                                   Total Assets.
----------------------------------------------------------------------------------------------------------------
L.............................................                         Loss Severity Score
----------------------------------------------------------------------------------------------------------------
L.1...........................................  Loss Severity.........................  ...........          100
                                                  Potential Losses/Total Domestic                75  ...........
                                                   Deposits (loss severity measure).
                                                  Noncore Funding/Total Liabilities...           25  ...........
----------------------------------------------------------------------------------------------------------------

     (ii) The scorecard for highly complex institutions contains the 
performance components and the loss severity components of the large 
bank scorecard and employs the same methodology. The assessment process 
set forth in paragraph (d)(3) of this section for the large bank 
scorecard applies to highly complex institutions, modified as follows.
    (A) The scorecard for highly-complex institutions contains two 
additional measures:
    (1) A concentration measure based on three risk measures--higher-
risk assets, top 20 counterparty exposure, and the largest counterparty 
exposure, all divided by Tier 1 capital and reserves, and
    (2) A credit quality measure and market risk measure in the ability 
to withstand asset-related stress; and an additional component--average 
short-term funding to average total assets ratio--in the ability to 
withstand funding-related stress.
    (B) Performance score for highly complex institutions. A 
performance score for highly complex institutions is the weighted 
average of three inputs: Weighted average CAMELS rating (30%); ability 
to withstand asset-related stress score (50%); and ability to withstand 
funding-related stress score (20%). To calculate the performance score 
for highly complex institutions, the weighted average CAMELS score, the 
ability to withstand asset-related stress score, and the ability to 
withstand funding-related stress score are multiplied by their weights 
and the results are summed to arrive at the performance score. The 
resulting score cannot exceed 100.
    (C) Ability to withstand asset-related stress. (1) The scorecard 
for highly complex institutions substitutes the growth-adjusted 
concentration measure with the top 20 counterparty exposure and the 
largest counterparty exposure, adds one additional factor to the 
ability to withstand asset-related stress component--the market risk 
measure--and one additional factor to the ability to withstand funding-
related stress component--the average short-term funding to average 
total assets ratio. The cutoff values and weights for ability to 
withstand asset-related stress measures are set forth below.

[[Page 72641]]



                Cutoff Values and Weights for Ability To Withstand Asset-Related Stress Measures
----------------------------------------------------------------------------------------------------------------
                                                  Cutoff values           Sub-
                                           --------------------------  component
            Scorecard measures                                           weight                Weight
                                              Minimum      Maximum     (percent)
----------------------------------------------------------------------------------------------------------------
Tier 1 Leverage Ratio.....................            6           13  ...........  10%
Concentration Measure:....................  ...........  ...........  ...........  35%
    Higher Risk Assets/Tier 1 Capital and             0          135
     Reserves; Top 20 Counterparty.
    Exposure/Tier 1 Capital and Reserves;             0          125
     or.
    Largest Counterparty Exposure/Tier 1              0           20
     Capital and Reserves.
Core Earnings/Average Quarter-End Total               0            2  ...........  20%
 Assets.
Credit Quality Measure\*\:................  ...........  ...........  ...........  35% * (1-Trading Asset
                                                                                    Ratio).
    Criticized and Classified Items to                8          100
     Tier 1 Capital and Reserves; or.
    Underperforming Assets/Tier 1 Capital             2           37
     and Reserves.
Market Risk Measure\*\:...................  ...........  ...........  ...........  35% * Trading Asset Ratio.
    Trading Revenue Volatility/Tier 1                 0            2           60
     Capital.
    Market Risk Capital/Tier 1 Capital....            0           10           20
    Level 3 Trading Assets/Tier 1 Capital.            0           35           20
----------------------------------------------------------------------------------------------------------------
* Combined, the credit quality measure and the market risk measure will be assigned a 35 percent weight. The
  relative weight between the two measures will depend on the ratio of average trading assets to sum of average
  securities, loans and trading assets (trading asset ratio).

    (2) Appendix A to subpart A of this part describes these measures 
in detail and gives the source of the data used to calculate the 
measures.
    (D) Ability to withstand funding related stress. (1) The scorecard 
for highly complex institutions adds one additional factor to the 
ability to withstand funding-related stress component--the average 
short-term funding to average total assets ratio. The cutoff values and 
weights for ability to withstand funding-related stress measures for 
highly complex institutions are set forth below.

   Cutoff Values and Weights for Ability To Withstand Funding-Related
                             Stress Measures
------------------------------------------------------------------------
                                         Cutoff values
        Scorecard measures        --------------------------    Weight
                                     Minimum      Maximum     (percent)
------------------------------------------------------------------------
Core Deposits/Total Liabilities..            3           79           50
Balance Sheet Liquidity Ratio....            7          188           30
Average Short-term Funding/                  0           20           20
 Average Total Assets............
------------------------------------------------------------------------

     (2) Appendix A to subpart A of this part describes these measures 
in detail and gives the source of the data used to calculate the 
measures.
    (iv) Loss severity score for highly complex institutions. The loss 
severity score for highly complex institutions is calculated as 
provided for the loss severity score for large institutions in 
paragraph (d)(3)(ii) of this section.
    (v) The performance score and the loss severity score are combined 
in the same manner to calculate the total score as for large 
institutions as set forth in paragraph (d)(3) of this section.
    (vi) The initial base assessment rate for highly complex 
institutions is calculated from the total score in the same manner as 
for large institutions as set forth in paragraph (d)(3) of this 
section. Initial base assessment rates are subject to adjustment 
pursuant to paragraphs (d)(5), (d)(6), (d)(7), and (d)(8) of this 
section, resulting in the institution's total base assessment rate, 
which in no case can be lower than 50 percent of the institution's 
initial base assessment rate.
    (5) Adjustment to total score for large institutions and highly 
complex institutions. The total score for large institutions and highly 
complex institutions is subject to adjustment, up or down, by a maximum 
of 15 points, based upon significant risk factors that are not 
adequately captured in the appropriate scorecard. In making such 
adjustments, the FDIC may consider such information as financial 
performance and condition information and other market or supervisory 
information.
    (i) Prior notice of adjustments--(A) Prior notice of upward 
adjustment. Prior to making any upward adjustment to an institution's 
total score because of considerations of additional risk information, 
the FDIC will formally notify the institution and its primary federal 
regulator and provide an opportunity to respond. This notification will 
include the reasons for the adjustment(s) and when the adjustment(s) 
will take effect.
    (B) Prior notice of downward adjustment. Prior to making any 
downward adjustment to an institution's total score because of 
considerations of additional risk information, the FDIC will formally 
notify the institution's primary federal regulator and provide an 
opportunity to respond.
    (ii) Determination whether to adjust upward; effective period of 
adjustment. After considering an institution's and the primary federal 
regulator's responses to the notice, the FDIC will determine whether 
the adjustment to an institution's total score is warranted, taking 
into account any revisions to scorecard measures, as well as any 
actions taken by the institution to address the FDIC's concerns 
described in the notice. The FDIC will evaluate the need for the 
adjustment each subsequent assessment period. Except as provided in 
paragraph (d)(5)(iv) of this section, the amount of adjustment cannot 
exceed the proposed adjustment amount contained in the initial notice 
unless additional notice is provided so that the primary federal 
regulator and the institution may respond.

[[Page 72642]]

    (iii) Determination whether to adjust downward; effective period of 
adjustment. After considering the primary federal regulator's responses 
to the notice, the FDIC will determine whether the adjustment to total 
score is warranted, taking into account any revisions to scorecard 
measures, as well as any actions taken by the institution to address 
the FDIC's concerns described in the notice. Any downward adjustment in 
an institution's total score will remain in effect for subsequent 
assessment periods until the FDIC determines that an adjustment is no 
longer warranted. Downward adjustments will be made without 
notification to the institution. However, the FDIC will provide advance 
notice to an institution and its primary federal regulator and give 
them an opportunity to respond before removing a downward adjustment.
    (iv) Adjustment without notice. Notwithstanding the notice 
provisions set forth above, the FDIC may change an institution's total 
score without advance notice under this paragraph, if the institution's 
supervisory ratings or the scorecard measures deteriorate.
    (6) Unsecured debt adjustment to initial base assessment rate for 
all institutions. All institutions, except new institutions as provided 
under paragraph (d)(10)(i)(C) of this section and insured branches of 
foreign banks as provided under paragraph (d)(2)(iii) of this section, 
are subject to an adjustment of assessment rates for unsecured debt. 
Any unsecured debt adjustment shall be made after any adjustment under 
paragraph (d)(5) of this section.
    (i) Application of unsecured debt adjustment. The unsecured debt 
adjustment shall be determined as the sum of the initial base 
assessment rate plus 40 basis points; that sum shall be multiplied by 
the ratio of an insured depository institution's long-term unsecured 
debt to its assessment base. The amount of the reduction in the 
assessment rate due to the adjustment is equal to the dollar amount of 
the adjustment divided by the amount of the assessment base.
    (ii) Limitation--No unsecured debt adjustment that provides a 
benefit for any institution shall exceed the lesser of 5 basis points 
or 50 percent of the institution's initial base assessment rate.
    (iii) Applicable quarterly reports of condition--Unsecured debt 
adjustment ratios for any given quarter shall be calculated from 
quarterly reports of condition (Call Reports and Thrift Financial 
Reports, or any successor reports, as appropriate) filed by each 
institution as of the last day of the quarter.
    (7) Depository institution debt adjustment to initial base 
assessment rate for all institutions. All institutions shall be subject 
to an adjustment of assessment rates for unsecured debt held that is 
issued by another depository institution. Any such depository 
institution debt adjustment shall be made after any adjustment under 
paragraphs (d)(5) and (d)(6) of this section.
    (i) Application of depository institution debt adjustment. The 
depository institution debt adjustment shall equal 50 basis points 
multiplied by the ratio of the long-term unsecured debt an institution 
holds that was issued by another insured depository institution to its 
assessment base.
    (ii) Applicable quarterly reports of condition. Depository 
institution debt adjustment ratios for any given quarter shall be 
calculated from quarterly reports of condition (Call Reports and Thrift 
Financial Reports, or any successor reports, as appropriate) filed by 
each institution as of the last day of the quarter.
    (8) Brokered Deposit Adjustment. All small institutions in Risk 
Categories II, III, and IV, all large institutions, and all highly 
complex institutions shall be subject to an assessment rate adjustment 
for brokered deposits. Any such brokered deposit adjustment shall be 
made after any adjustment under paragraphs (d)(5), (d)(6), and (d)(7) 
of this section. The brokered deposit adjustment includes all brokered 
deposits as defined in Section 29 of the Federal Deposit Insurance Act 
(12 U.S.C. 1831f), and 12 CFR 337.6, including reciprocal deposits as 
defined in Sec.  327.8(p), and brokered deposits that consist of 
balances swept into an insured institution by another institution. The 
adjustment under this paragraph is limited to those institutions whose 
ratio of brokered deposits to domestic deposits is greater than 10 
percent; asset growth rates do not affect the adjustment. Insured 
branches of foreign banks are not subject to the brokered deposit 
adjustment as provided in paragraph (d)(2)(iii) of this section.
    (i) Application of brokered deposit adjustment. The brokered 
deposit adjustment shall be determined by multiplying 25 basis points 
by the ratio of the difference between an insured depository 
institution's brokered deposits and 10 percent of its domestic deposits 
to its assessment base.
    (ii) Limitation. The maximum brokered deposit adjustment will be 10 
basis points; the minimum brokered deposit adjustment will be 0.
    (iii) Applicable quarterly reports of condition. Brokered deposit 
ratios for any given quarter shall be calculated from the quarterly 
reports of condition (Call Reports and Thrift Financial Reports, or any 
successor reports, as appropriate) filed by each institution as of the 
last day of the quarter.
    (9) Request to be treated as a large institution--(i) Procedure. 
Any institution with assets of between $5 billion and $10 billion may 
request that the FDIC determine its assessment rate as a large 
institution. The FDIC will consider such a request provided that it has 
sufficient information to do so. Any such request must be made to the 
FDIC's Division of Insurance and Research. Any approved change will 
become effective within one year from the date of the request. If an 
institution whose request has been granted subsequently reports assets 
of less than $5 billion in its report of condition for four consecutive 
quarters, the FDIC will consider such institution to be a small 
institution subject to the financial ratios method.
    (ii) Time limit on subsequent request for alternate method. An 
institution whose request to be assessed as a large institution is 
granted by the FDIC shall not be eligible to request that it be 
assessed as a small institution for a period of three years from the 
first quarter in which its approved request to be assessed as a large 
institution became effective. Any request to be assessed as a small 
institution must be made to the FDIC's Division of Insurance and 
Research.
    (iii) An institution that disagrees with the FDIC's determination 
that it is a large, highly complex, or small institution may request 
review of that determination pursuant to Sec.  327.4(c).
    (10) New and established institutions and exceptions--(i) New small 
institutions. A new small Risk Category I institution shall be assessed 
the Risk Category I maximum initial base assessment rate for the 
relevant assessment period. No new small institution in any risk 
category shall be subject to the unsecured debt adjustment as 
determined under paragraph (d)(6) of this section. All new small 
institutions in any Risk Category shall be subject to the depository 
institution debt adjustment as determined under paragraph (d)(7) of 
this section. All new small institutions in Risk Categories II, III, 
and IV shall be subject to the brokered deposit adjustment as 
determined under paragraph (d)(8) of this section.

[[Page 72643]]

    (ii) New large institutions and new highly complex institutions. 
All new large institutions and all new highly complex institutions 
shall be assessed under the appropriate method provided at paragraph 
(d)(3) or (d)(4) and subject to the adjustments provided at paragraphs 
(d)(5), (d)(7), and (d)(8). No new highly complex or large institutions 
are entitled to adjustment under paragraph (d)(6). If a large or highly 
complex institution has not yet received CAMELS ratings, it will be 
given a weighted CAMELS rating of 2 for assessment purposes until 
actual CAMELS ratings are assigned.
    (iii) CAMELS ratings for the surviving institution in a merger or 
consolidation. When an established institution merges with or 
consolidates into a new institution, if the FDIC determines the 
resulting institution to be an established institution under Sec.  
327.8(k)(1), its CAMELS ratings for assessment purposes will be based 
upon the established institution's ratings prior to the merger or 
consolidation until new ratings become available.
    (iv) Rate applicable to institutions subject to subsidiary or 
credit union exception. A small Risk Category I institution that is 
established under Sec.  327.8(k)(4) and (5), but does not have CAMELS 
component ratings, shall be assessed at 2 basis points above the 
minimum initial base assessment rate applicable to Risk Category I 
institutions until it receives CAMELS component ratings. Thereafter, 
the assessment rate will be determined by annualizing, where 
appropriate, financial ratios obtained from all quarterly reports of 
condition that have been filed, until the institution files four 
quarterly reports of condition. If a large or highly complex 
institution is considered established under Sec.  327.8(k)(4) and (5), 
but does not have CAMELS component ratings, it will be given a weighted 
CAMELS rating of 2 for assessment purposes until actual CAMELS ratings 
are assigned.
    (v) Request for review. An institution that disagrees with the 
FDIC's determination that it is a new institution may request review of 
that determination pursuant to Sec.  327.4(c).
    (11) Assessment rates for bridge depository institutions and 
conservatorships. Institutions that are bridge depository institutions 
under 12 U.S.C. 1821(n) and institutions for which the Corporation has 
been appointed or serves as conservator shall, in all cases, be 
assessed at the Risk Category I minimum initial base assessment rate, 
which shall not be subject to adjustment under paragraphs (d)(5), (6), 
(7) or (8) of this section.
    7. Revise Sec.  327.10 to read as follows:


Sec.  327.10  Assessment rate schedules.

    (a) Assessment rate schedules if, after September 30, 2010, the 
reserve ratio of the DIF has not reached 1.15 percent. (1) 
Applicability. The assessment rate schedules in paragraph (a) of this 
section will cease to be applicable when the reserve ratio of the DIF 
first reaches 1.15 percent after September 30, 2010.
    (2) Initial Base Assessment Rate Schedule. After September 30, 
2010, if the reserve ratio of the DIF has not reached 1.15 percent, the 
initial base assessment rate for an insured depository institution 
shall be the rate prescribed in the following schedule:

Initial Base Assessment Rate Schedule if, After September 30, 2010, the Reserve Ratio of the DIF has not Reached
                                                  1.15 Percent
----------------------------------------------------------------------------------------------------------------
                                                                                                      Large and
                                                    Risk         Risk         Risk         Risk        highly
                                                 category I  category II    category   category IV     complex
                                                                              III                   institutions
----------------------------------------------------------------------------------------------------------------
Initial base assessment rate..................          5-9           14           23           35          5-35
----------------------------------------------------------------------------------------------------------------
 * All amounts for all risk categories are in basis points annually. Initial base rates that are not the minimum
  or maximum rate will vary between these rates.

    (i) Risk Category I Initial Base Assessment Rate Schedule. The 
annual initial base assessment rates for all institutions in Risk 
Category I shall range from 5 to 9 basis points.
    (ii) Risk Category II, III, and IV Initial Base Assessment Rate 
Schedule. The annual initial base assessment rates for Risk Categories 
II, III, and IV shall be 14, 23, and 35 basis points, respectively.
    (iii) All institutions in any one risk category, other than Risk 
Category I, will be charged the same initial base assessment rate, 
subject to adjustment as appropriate.
    (iv) Large and Highly Complex Institutions Initial Base Assessment 
Rate Schedule. The annual initial base assessment rates for all large 
and highly complex institutions shall range from 5 to 35 basis points.
    (3) Total Base Assessment Rate Schedule after Adjustments. After 
September 30, 2010, if the reserve ratio of the DIF has not reached 
1.15 percent, the total base assessment rates after adjustments for an 
insured depository institution shall be the rate prescribed in the 
following schedule.

 Total Base Assessment Rate Schedule (after adjustments)* if, After September 30, 2010, the Reserve Ratio of the
                                       DIF has not Reached 1.15 Percent**
----------------------------------------------------------------------------------------------------------------
                                                                                                      Large and
                                                    Risk         Risk         Risk         Risk        highly
                                                 category I  category II    category   category IV     complex
                                                                              III                   institutions
----------------------------------------------------------------------------------------------------------------
Initial base assessment rate..................          5-9           14           23           35          5-35
Unsecured debt adjustment.....................      (4.5)-0        (5)-0        (5)-0        (5)-0         (5)-0
Brokered deposit adjustment...................  ...........         0-10         0-10         0-10          0-10
    Total base assessment rate................        2.5-9         9-24        18-33        30-45        2.5-45
----------------------------------------------------------------------------------------------------------------
 * All amounts for all risk categories are in basis points annually. Total base rates that are not the minimum
  or maximum rate will vary between these rates.
 ** Total base assessment rates do not include the depository institution debt adjustment.


[[Page 72644]]

    (i) Risk Category I Total Base Assessment Rate Schedule. The annual 
total base assessment rates for all institutions in Risk Category I 
shall range from 2.5 to 9 basis points.
    (ii) Risk Category II Total Base Assessment Rate Schedule. The 
annual total base assessment rates for Risk Category II shall range 
from 9 to 24 basis points.
    (iii) Risk Category III Total Base Assessment Rate Schedule. The 
annual total base assessment rates for Risk Category III shall range 
from 18 to 33 basis points.
    (iv) Risk Category IV Total Base Assessment Rate Schedule. The 
annual total base assessment rates for Risk Category IV shall range 
from 30 to 45 basis points.
    (v) Large and Highly Complex Institutions Total Base Assessment 
Rate Schedule. The annual total base assessment rates for all large and 
highly complex institutions shall range from 2.5 to 45 basis points.
    (b) Assessment rate schedules once the reserve ratio of the DIF 
first reaches 1.15 percent after September 30, 2010, and the reserve 
ratio for the immediately prior assessment period is less than 2 
percent.
    (1) Initial Base Assessment Rate Schedule. After September 30, 
2010, once the reserve ratio of the DIF first reaches 1.15 percent, and 
the reserve ratio for the immediately prior assessment period is less 
than 2 percent, the initial base assessment rate for an insured 
depository institution shall be the rate prescribed in the following 
schedule:

Initial Base Assessment Rate Schedule Once the Reserve Ratio of the DIF Reaches 1.15 Percent After September 30,
         2010, and the Reserve Ratio for the Immediately Prior Assessment Period is Less than 2 Percent
----------------------------------------------------------------------------------------------------------------
                                                                                                      Large and
                                                    Risk         Risk         Risk         Risk        highly
                                                 category I  category II    category   category IV     complex
                                                                              III                   institutions
----------------------------------------------------------------------------------------------------------------
Initial base assessment rate..................          3-7           12           19           30          3-30
----------------------------------------------------------------------------------------------------------------
 * All amounts for all risk categories are in basis points annually. Initial base rates that are not the minimum
  or maximum rate will vary between these rates.

    (i) Risk Category I Initial Base Assessment Rate Schedule. The 
annual initial base assessment rates for all institutions in Risk 
Category I shall range from 3 to 7 basis points.
    (ii) Risk Category II, III, and IV Initial Base Assessment Rate 
Schedule. The annual initial base assessment rates for Risk Categories 
II, III, and IV shall be 12, 19, and 30 basis points, respectively.
    (iii) All institutions in any one risk category, other than Risk 
Category I, will be charged the same initial base assessment rate, 
subject to adjustment as appropriate.
    (iv) Large and Highly Complex Institutions Initial Base Assessment 
Rate Schedule. The annual initial base assessment rates for all large 
and highly complex institutions shall range from 3 to 30 basis points.
    (2) Total Base Assessment Rate Schedule after Adjustments. After 
September 30, 2010, once the reserve ratio of the DIF first reaches 
1.15 percent, and the reserve ratio for the immediately prior 
assessment period is less than 2 percent, the total base assessment 
rates after adjustments for an insured depository institution shall be 
the rate prescribed in the following schedule.

 Total Base Assessment Rate Schedule (after Adjustments)* Once the Reserve Ratio of the DIF Reaches 1.15 Percent
   After September 30, 2010, and the Reserve Ratio for the Immediately Prior Assessment Period is Less than 2
                                                    Percent**
----------------------------------------------------------------------------------------------------------------
                                                                                                      Large and
                                                    Risk         Risk         Risk         Risk        highly
                                                 category I  category II    category   category IV     complex
                                                                              III                   institutions
----------------------------------------------------------------------------------------------------------------
Initial base assessment rate..................          3-7           12           19           30          3-30
Unsecured debt adjustment.....................      (3.5)-0        (5)-0        (5)-0        (5)-0         (5)-0
Brokered deposit adjustment...................  ...........         0-10         0-10         0-10          0-10
    Total base assessment rate................        1.5-7         7-22        14-29        29-40        1.5-40
----------------------------------------------------------------------------------------------------------------
 * All amounts for all risk categories are in basis points annually. Total base rates that are not the minimum
  or maximum rate will vary between these rates.
** Total base assessment rates do not include the depository institution debt adjustment.

    (i) Risk Category I Total Base Assessment Rate Schedule. The annual 
total base assessment rates for institutions in Risk Category I shall 
range from 1.5 to 7 basis points.
    (ii) Risk Category II Total Base Assessment Rate Schedule. The 
annual total base assessment rates for Risk Category II shall range 
from 7 to 22 basis points.
    (iii) Risk Category III Total Base Assessment Rate Schedule. The 
annual total base assessment rates for Risk Category III shall range 
from 14 to 29 basis points.
    (iv) Risk Category IV Total Base Assessment Rate Schedule. The 
annual total base assessment rates for Risk Category IV shall range 
from 29 to 40 basis points.
    (v) Large and Highly Complex Institutions Total Base Assessment 
Rate Schedule. The annual total base assessment rates for all large and 
highly complex institutions shall range from 1.5 to 40 basis points.
    (c) Assessment rate schedules if the reserve ratio of the DIF for 
the prior assessment period is equal to or greater than 2 percent and 
less than 2.5 percent. (1) Initial Base Assessment Rate

[[Page 72645]]

Schedule. If the reserve ratio of the DIF for the prior assessment 
period is equal to or greater than 2 percent and less than 2.5 percent, 
the initial base assessment rate for an insured depository institution, 
except as provided in paragraph (e) of this section, shall be the rate 
prescribed in the following schedule:

Initial Base Assessment Rate Schedule if Reserve Ratio for Prior Assessment Period Is Equal to or Greater Than 2
                                        Percent But Less Than 2.5 Percent
----------------------------------------------------------------------------------------------------------------
                                                                                                      Large and
                                                    Risk         Risk         Risk         Risk        highly
                                                 category I  category II    category   category IV     complex
                                                                              III                   institutions
----------------------------------------------------------------------------------------------------------------
Initial base assessment rate..................          2-6           10           17           28          2-28
----------------------------------------------------------------------------------------------------------------
* All amounts for all risk categories are in basis points annually. Initial base rates that are not the minimum
  or maximum rate will vary between these rates.

    (i) Risk Category I Initial Base Assessment Rate Schedule. The 
annual initial base assessment rates for all institutions in Risk 
Category I shall range from 2 to 6 basis points.
    (ii) Risk Category II, III, and IV Initial Base Assessment Rate 
Schedule. The annual initial base assessment rates for Risk Categories 
II, III, and IV shall be 10, 17, and 28 basis points, respectively.
    (iii) All institutions in any one risk category, other than Risk 
Category I, will be charged the same initial base assessment rate, 
subject to adjustment as appropriate.
    (iv) Large and Highly Complex Institutions Initial Base Assessment 
Rate Schedule. The annual initial base assessment rates for all large 
and highly complex institutions shall range from 2 to 28 basis points.
    (2) Total Base Assessment Rate Schedule after Adjustments. If the 
reserve ratio of the DIF for the prior assessment period is equal to or 
greater than 2 percent and less than 2.5 percent, the total base 
assessment rates after adjustments for an insured depository 
institution, except as provided in paragraph (e) of this section, shall 
be the rate prescribed in the following schedule.

 Total Base Assessment Rate Schedule (after Adjustments)* if Reserve Ratio for Prior Assessment Period Is Equal
                            to or Greater Than 2 Percent But Less Than 2.5 Percent**
----------------------------------------------------------------------------------------------------------------
                                                                                                      Large and
                                                    Risk         Risk         Risk         Risk        highly
                                                 category I  category II    category   category IV     complex
                                                                              III                   institutions
----------------------------------------------------------------------------------------------------------------
Initial base assessment rate..................          2-6           10           17           28          2-38
Unsecured debt adjustment.....................        (3)-0        (5)-0        (5)-0        (5)-0         (5)-0
Brokered deposit adjustment...................                      0-10         0-10         0-10          0-10
                                               -----------------------------------------------------------------
    Total base assessment rate................          1-6         5-20        12-27        23-38          1-38
----------------------------------------------------------------------------------------------------------------
* All amounts for all risk categories are in basis points annually. Total base rates that are not the minimum or
  maximum rate will vary between these rates.
** Total base assessment rates do not include the depository institution debt adjustment.

    (i) Risk Category I Total Base Assessment Rate Schedule. The annual 
total base assessment rates for institutions in Risk Category I shall 
range from 1 to 6 basis points.
    (ii) Risk Category II Total Base Assessment Rate Schedule. The 
annual total base assessment rates for Risk Category II shall range 
from 5 to 20 basis points.
    (iii) Risk Category III Total Base Assessment Rate Schedule. The 
annual total base assessment rates for Risk Category III shall range 
from 12 to 27 basis points.
    (iv) Risk Category IV Total Base Assessment Rate Schedule. The 
annual total base assessment rates for Risk Category IV shall range 
from 23 to 38 basis points.
    (v) Large and Highly Complex Institutions Total Base Assessment 
Rate Schedule. The annual total base assessment rates for all large and 
highly complex institutions shall range from 1 to 38 basis points.
    (d) Assessment rate schedules if the reserve ratio of the DIF for 
the prior assessment period is greater than 2.5 percent.
    (1) Initial Base Assessment Rate Schedule. If the reserve ratio of 
the DIF for the prior assessment period is greater than 2.5 percent, 
the initial base assessment rate for an insured depository institution, 
except as provided in paragraph (e) of this section, shall be the rate 
prescribed in the following schedule:

[[Page 72646]]



 Initial Base Assessment Rate Schedule if Reserve Ratio for Prior Assessment Period Is Greater Than or Equal to
                                                   2.5 Percent
----------------------------------------------------------------------------------------------------------------
                                                                                                      Large and
                                                    Risk         Risk         Risk         Risk        highly
                                                 category I  category II    category   category IV     complex
                                                                              III                   institutions
----------------------------------------------------------------------------------------------------------------
Initial base assessment rate..................          1-5            9           15           25          1-25
----------------------------------------------------------------------------------------------------------------
* All amounts for all risk categories are in basis points annually. Initial base rates that are not the minimum
  or maximum rate will vary between these rates.

    (i) Risk Category I Initial Base Assessment Rate Schedule. The 
annual initial base assessment rates for all institutions in Risk 
Category I shall range from 1 to 5 basis points.
    (ii) Risk Category II, III, and IV Initial Base Assessment Rate 
Schedule. The annual initial base assessment rates for Risk Categories 
II, III, and IV shall be 9, 15, and 25 basis points, respectively.
    (iii) All institutions in any one risk category, other than Risk 
Category I, will be charged the same initial base assessment rate, 
subject to adjustment as appropriate.
    (iv) Large and Highly Complex Institutions Initial Base Assessment 
Rate Schedule. The annual initial base assessment rates for all large 
and highly complex institutions shall range from 1 to 25 basis points.
    (2) Total Base Assessment Rate Schedule after Adjustments. If the 
reserve ratio of the DIF for the prior assessment period is greater 
than 2.5 percent, the total base assessment rates after adjustments for 
an insured depository institution, except as provided in paragraph (e) 
of this section, shall be the rate prescribed in the following 
schedule.

Total Base Assessment Rate Schedule (after Adjustments)* if Reserve Ratio for Prior Assessment Period Is Greater
                                         Than or Equal to 2.5 Percent**
----------------------------------------------------------------------------------------------------------------
                                                                                                      Large and
                                                    Risk         Risk         Risk         Risk        highly
                                                 category I  category II    category   category IV     complex
                                                                              III                   institutions
----------------------------------------------------------------------------------------------------------------
Initial base assessment rate..................          1-5            9           15           25          1-25
Unsecured debt adjustment.....................      (2.5)-0      (4.5)-0        (5)-0        (5)-0         (5)-0
Brokered deposit adjustment...................                      0-10         0-10         0-10          0-10
    Total base assessment rate................        0.5-5       4.5-19        10-25        20-35        0.5-35
----------------------------------------------------------------------------------------------------------------
* All amounts for all risk categories are in basis points annually. Total base rates that are not the minimum or
  maximum rate will vary between these rates.
** Total base assessment rates do not include the depository institution debt adjustment.

    (i) Risk Category I Total Base Assessment Rate Schedule. The annual 
total base assessment rates for institutions in Risk Category I shall 
range from 0.5 to 5 basis points.
    (ii) Risk Category II Total Base Assessment Rate Schedule. The 
annual total base assessment rates for Risk Category II shall range 
from 4.5 to 19 basis points.
    (iii) Risk Category III Total Base Assessment Rate Schedule. The 
annual total base assessment rates for Risk Category III shall range 
from 10 to 25 basis points.
    (iv) Risk Category IV Total Base Assessment Rate Schedule. The 
annual total base assessment rates for Risk Category IV shall range 
from 20 to 35 basis points.
    (v) Large and Highly Complex Institutions Total Base Assessment 
Rate Schedule. The annual total base assessment rates for all large and 
highly complex institutions shall range from 0.5 to 35 basis points.
    (e) Assessment Rate Schedules for New Institutions. New depository 
institutions, as defined in 327.8(j), shall be subject to the 
assessment rate schedules as follows:
    (1) Prior to the reserve ratio of the DIF first reaching 1.15 
percent after September 30, 2010. After September 30, 2010, if the 
reserve ratio of the DIF has not reached 1.15 percent, new institutions 
shall be subject to the initial and total base assessment rate 
schedules provided for in paragraph (a) of this section.
    (2) Assessment rate schedules once the DIF reserve ratio first 
reaches 1.15 percent after September 30, 2010. After September 30, 
2010, once the reserve ratio of the DIF first reaches 1.15 percent, new 
institutions shall be subject to the initial and total base assessment 
rate schedules provided for in paragraph (b) of this section, even if 
the reserve ratio equals or exceeds 2 percent or 2.5 percent.
    (f) Total Base Assessment Rate Schedule adjustments and 
procedures--(1) Board Rate Adjustments. The Board may increase or 
decrease the total base assessment rate schedule in paragraphs (a) 
through (d) of this section up to a maximum increase of 3 basis points 
or a fraction thereof or a maximum decrease of 3 basis points or a 
fraction thereof (after aggregating increases and decreases), as the 
Board deems necessary. Any such adjustment shall apply uniformly to 
each rate in the total base assessment rate schedule. In no case may 
such Board rate adjustments result in a total base assessment rate that 
is mathematically less than zero or in a total base assessment rate 
schedule that, at any time, is more than 3 basis points above or below 
the total base assessment schedule for the Deposit Insurance Fund in 
effect pursuant to paragraph (b) of this section, nor may any one such 
Board adjustment constitute an increase or decrease of more than 3 
basis points.
    (2) Amount of revenue. In setting assessment rates, the Board shall 
take into consideration the following:
    (i) Estimated operating expenses of the Deposit Insurance Fund;
    (ii) Case resolution expenditures and income of the Deposit 
Insurance Fund;
    (iii) The projected effects of assessments on the capital and 
earnings of the institutions paying assessments to the Deposit 
Insurance Fund;

[[Page 72647]]

    (iv) The risk factors and other factors taken into account pursuant 
to 12 USC 1817(b)(1); and
    (v) Any other factors the Board may deem appropriate.
    (3) Adjustment procedure. Any adjustment adopted by the Board 
pursuant to this paragraph will be adopted by rulemaking, except that 
the Corporation may set assessment rates as necessary to manage the 
reserve ratio, within set parameters not exceeding cumulatively 3 basis 
points, pursuant to paragraph (c)(1) of this section, without further 
rulemaking.
    (4) Announcement. The Board shall announce the assessment schedules 
and the amount and basis for any adjustment thereto not later than 30 
days before the quarterly certified statement invoice date specified in 
Sec.  327.3(b) of this part for the first assessment period for which 
the adjustment shall be effective. Once set, rates will remain in 
effect until changed by the Board.
    8. Appendix A to Subpart A is revised to read as follows:

Appendix A to Subpart A of Part 327--Description of Scorecard Measures

------------------------------------------------------------------------
        Scorecard measures                       Description
------------------------------------------------------------------------
Tier 1 Leverage Ratio.............  Tier 1 capital for Prompt Corrective
                                     Action (PCA) divided by adjusted
                                     average assets based on the
                                     definition for prompt corrective
                                     action.
Concentration Measure for Large     Concentration score for large
 IDIs (excluding Highly Complex      institutions takes the higher score
 Institutions).                      of the following two:
(1) Higher-Risk Assets/Tier 1       Sum of construction and land
 Capital and Reserves.               development (C&D) loans (funded and
                                     unfunded), leveraged loans (funded
                                     and unfunded), nontraditional
                                     mortgages, and subprime consumer
                                     loans divided by Tier 1 capital and
                                     reserves. See Appendix C to this
                                     subpart for the detailed
                                     description of the ratio.
(2) Growth-Adjusted Portfolio       The measure is calculated in
 Concentrations.                     following steps:
                                    (1) Concentration levels (as a ratio
                                     to Tier 1 capital and reserves) are
                                     calculated for each broad portfolio
                                     category (C&D, other commercial
                                     real estate loans, first lien
                                     residential mortgages (including
                                     non-agency mortgage-backed
                                     securities), and junior lien
                                     residential mortgages, commercial
                                     and industrial loans, credit card,
                                     and other consumer loans).
                                    (2) Three-year merger-adjusted
                                     portfolio growth rates are then
                                     scaled to a growth factor of 1 to
                                     1.2 where a 3-year cumulated growth
                                     rate of 20 percent or less equals a
                                     factor of 1 and a growth rate of 80
                                     percent or greater equals a factor
                                     of 1.2. If three years of data are
                                     not available, a growth factor of 1
                                     will be assigned.
                                    (3) Risk weights are assigned to
                                     each category based on historical
                                     loss rates.
                                    (4) Concentration levels are
                                     multiplied by risk weights and
                                     squared to produce a risk-adjusted
                                     concentration ratio for each
                                     portfolio.
                                    (5) The risk-adjusted concentration
                                     ratio for each portfolio is
                                     multiplied by the growth factor and
                                     resulting values are summed.
                                    See Appendix C to this subpart for
                                     the detail description of the
                                     measure.
Concentration Measure for Highly    Concentration score for highly
 Complex Institutions.               complex institutions takes the
                                     highest score of the following
                                     three:
(1) Higher-Risk Assets/Tier 1       Sum of C&D loans (funded and
 Capital and Reserves.               unfunded), leveraged loans (funded
                                     and unfunded), nontraditional
                                     mortgages, and subprime consumer
                                     loans divided by Tier 1 capital and
                                     reserves. See Appendix C to this
                                     subpart for the detailed
                                     description of the ratio.
(2) Top 20 Counterparty Exposure/   Sum of the total exposure amount to
 Tier 1 Capital and Reserves.        the largest 20 counterparties by
                                     exposure amount divided by Tier 1
                                     capital and reserves. Counterparty
                                     exposure is equal to the sum of
                                     Exposure at Default (EAD)
                                     associated with derivatives trading
                                     and Securities Financing
                                     Transactions (SFTs) and the gross
                                     lending exposure (including all
                                     unfunded commitments) for each
                                     counterparty or borrower at the
                                     consolidated entity level.\39\ EAD
                                     for derivatives trading and SFTs is
                                     to be calculated as defined in
                                     Basel II or as updated in future
                                     Basel Accords. EAD and lending
                                     exposure is to be reported at the
                                     consolidated level across all legal
                                     entities for that counterparty.
(3) Largest Counterparty Exposure/  Sum of the exposure amount to the
 Tier 1 Capital and Reserves.        largest counterparty by exposure
                                     amount divided by Tier 1 capital
                                     and reserves. Counterparty exposure
                                     is equal to the sum of Exposure at
                                     Default (EAD) associated with
                                     derivatives trading and Securities
                                     Financing Transactions (SFTs) and
                                     the gross lending exposure
                                     (including all unfunded
                                     commitments) for each counterparty
                                     or borrower at the consolidated
                                     entity level. EAD for derivatives
                                     trading and SFTs is to be
                                     calculated as defined in Basel II
                                     or as updated in future Basel
                                     Accords. EAD and lending exposure
                                     is to be reported at the
                                     consolidated level across all legal
                                     entities for that counterparty.
Core Earnings/Average Quarter-End   Core earnings are defined as
 Total Assets.                       quarterly net income less
                                     extraordinary items and realized
                                     gains and losses on available-for-
                                     sale (AFS) and held-to-maturity
                                     (HTM) securities, adjusted for
                                     mergers. The ratio takes a four-
                                     quarter sum of merger-adjusted core
                                     earnings and divides it by an
                                     average of five quarter-end total
                                     assets (most recent and four prior
                                     quarters). If four quarters of data
                                     on core earnings are not available,
                                     data for quarters that are
                                     available will be added and
                                     annualized. If five quarters of
                                     data on total assets are not
                                     available, data for quarters that
                                     are available will be averaged.
Credit Quality Measure:...........  Asset quality score takes a higher
                                     score of the following two:
(1) Criticized and Classified       Sum of criticized and classified
 Items/Tier 1 Capital and Reserves.  items divided by the sum of Tier 1
                                     capital and reserves. Criticized
                                     and classified items include items
                                     with an internal grade of ``Special
                                     Mention'' or worse and include
                                     retail items under Uniform Retail
                                     Classification Guidelines,
                                     securities that are internally
                                     rated the regulatory equivalent of
                                     ``Special Mention'' or worse, and
                                     marked-to-market counterparty
                                     positions that are internally rated
                                     the regulatory equivalent of
                                     ``Special Mention'' or worse, less
                                     credit valuation adjustments.
                                     Criticized and classified items
                                     exclude loans and securities in
                                     trading books, and the maximum
                                     amount recoverable from the U.S.
                                     government, its agencies, or
                                     government-sponsored agencies,
                                     under guarantee or insurance
                                     provisions.
(2) Underperforming Assets/Tier 1   Sum of loans that are 30-89 day past
 Capital and Reserves.               due, loans that are 90 days or more
                                     past due, nonaccrual loans,
                                     restructured loans (including
                                     restructured 1-4 family loans), and
                                     ORE, excluding the maximum amount
                                     recoverable from the U.S.
                                     government, its agencies, or
                                     government-sponsored agencies,
                                     under guarantee or insurance
                                     provisions, divided by a sum of
                                     Tier 1 capital and reserves.

[[Page 72648]]

 
Core Deposits/Total Liabilities...  Sum of demand deposits, NOW
                                     accounts, MMDA, other savings
                                     deposits, CDs under $250,000 less
                                     insured brokered deposits under
                                     $250,000 divided by total
                                     liabilities.
Balance Sheet Liquidity Ratio.....  Sum of cash and balances due from
                                     depository institutions, federal
                                     funds sold and securities purchased
                                     under agreements to resell, and
                                     agency securities (excludes agency
                                     mortgage-backed securities but
                                     includes securities issued by the
                                     U.S. Treasury, U.S. government
                                     agencies, and U.S. government-
                                     sponsored enterprises) divided by
                                     the sum of federal funds purchased
                                     and repurchase agreements, other
                                     borrowings (including FHLB) with a
                                     remaining maturity of one year or
                                     less, 7.5 percent of insured
                                     domestic deposits, and 15 percent
                                     of uninsured domestic and foreign
                                     deposits.
Potential Losses/Total Domestic     Potential losses to the DIF in the
 Deposits (Loss Severity Measure).   event of failure divided by total
                                     domestic deposits. Appendix D to
                                     this subpart describes the
                                     calculation of the loss severity
                                     measure in detail.
Noncore Funding/Total Liabilities.  Noncore liabilities divided by total
                                     liabilities. Noncore liabilities
                                     generally consist of total time
                                     deposits of $250,000 or more, other
                                     borrowed money (all maturities),
                                     foreign office deposits, securities
                                     sold under agreements to
                                     repurchase, federal funds
                                     purchased, and insured brokered
                                     deposits issued in denominations of
                                     less than $250,000.
Market Risk Measure for Highly      This measure is a weighted average
 Complex Institutions.               of three risk measures:
(1) Trading Revenue Volatility/     Trailing 4-quarter standard
 Tier 1 Capital.                     deviation of quarterly trading
                                     revenue (merger-adjusted) divided
                                     by Tier 1 capital.
(2) Market Risk Capital/Tier 1      Market risk capital divided by Tier
 Capital.                            1 capital. Market risk capital
                                     equals market-risk equivalent
                                     assets divided by 12.5.
(3) Level 3 Trading Assets/Tier 1   Level 3 trading assets divided by
 Capital.                            Tier 1 capital.
Average Short-Term Funding/Average  Quarterly average of federal funds
 Total Assets.                       purchased and repurchase agreements
                                     divided by the quarterly average of
                                     total assets as reported on
                                     Schedule RC-K of call reports.
------------------------------------------------------------------------

     
---------------------------------------------------------------------------

    \39\ EAD and SFTs are defined and described in the compilation 
issued by the Basel Committee on Banking Supervision in its June 
2006 document, ``International Convergence of Capital Measurement 
and Capital Standards.'' The definitions are described in detail in 
Annex 4 of the document. Any updates to the Basel II capital 
treatment of counterparty credit risk would be implemented as they 
are adopted.
---------------------------------------------------------------------------

    9. Appendix B to Subpart A is revised to read as follows:

Appendix B to Subpart A of Part 327--Conversion of Scorecard Measures 
into Score

1. Weighted Average CAMELS Rating

    Weighted average CAMELS ratings between 1 and 3.5 are assigned a 
score between 25 and 100 according to the following equation:
S = 25 + [(20/3)*(C \2\ -)],
Where:

S = the weighted average CAMELS score; and
C = the weighted average CAMELS rating.

2. Other Scorecard Measures

    For certain scorecard measures, a lower ratio implies lower risk 
and a higher ratio implies higher risk. These measures include:
     Concentration measure;
     Credit quality measure;
     Market risk measure;
     Average short-term funding to average total assets 
ratio;
     Potential losses to total domestic deposits ratio (loss 
severity measure); and,
     Noncore funding to total liabilities ratio.
    For those measures, a value between the minimum and maximum 
cutoff values is converted linearly to a score between 0 and 100, 
according to the following formula:

S = (V - Min)*100/(Max - Min),

where S is score (rounded to three decimal points), V is the value 
of the measure, Min is the minimum cutoff value and Max is the 
maximum cutoff value.

    For other scorecard measures, a lower value represents higher 
risk and a higher value represents lower risk. These measures 
include:
     Tier 1 leverage ratio;
     Core earnings to average quarter-end total assets 
ratio;
     Core deposits to total liabilities ratio; and,
     Balance sheet liquidity ratio.
    For those measures, a value between the minimum and maximum 
cutoff values is converted linearly to a score between 0 and 100, 
according to the following formula:

S = (Max - V)*100/(Max - Min),

where S is score (rounded to three decimal points), V is the value 
of the measure, Max is the maximum cutoff value and Min is the 
minimum cutoff value.

    10. Appendix C to Subpart A is revised to read as follows:

Appendix C to Subpart A to Part 327--Concentration Measures

    The concentration measure score for large institutions is the 
higher of the two concentration scores: A higher-risk assets to Tier 
1 capital and reserves ratio and a growth-adjusted portfolio 
concentration measure. The concentration measure score for highly 
complex institutions takes a higher of the three concentration 
scores: a higher-risk assets to Tier 1 capital and reserve ratio, a 
Top 20 counterparty exposure to Tier 1 capital and reserves ratio, a 
largest counterparty to Tier 1 capital and reserves ratio. The 
higher-risk assets to Tier 1 capital and reserve ratio and the 
growth-adjusted portfolio concentration measure are described below.

1. Higher-risk assets/Tier 1 Capital and Reserves

    The higher-risk assets to Tier 1 capital and reserves ratio is 
the sum of the concentrations in each of four risk areas described 
below and is calculated as:
[GRAPHIC] [TIFF OMITTED] TP24NO10.359

Where

H is institution i's higher-risk concentration measure and
k is a risk area.\1\ The four risk areas (k) are defined as:
---------------------------------------------------------------------------

    \1\ The high-risk concentration measure is rounded to two 
decimal points.

     Construction and land development loans (funded and 
unfunded);
     Leveraged loans (funded and unfunded);

[[Page 72649]]

     Nontraditional mortgage loans; and
     Subprime consumer loans. 2,3
---------------------------------------------------------------------------

    \2\ All loan concentrations should include purchased credit 
impaired loans.
    \3\ Each loan concentration category should exclude the maximum 
amount of loans recoverable from the U.S. government, its agencies, 
or government-sponsored agencies, under guarantee or insurance 
provisions.
---------------------------------------------------------------------------

    The risk areas are defined according to the interagency guidance 
for a given product with specific modifications made to minimize 
reporting discrepancies. The definitions for each risk area are as 
follows:
    1. Construction and Land Development Loans: Construction and 
development loans include construction and land development loans 
outstanding and unfunded commitments.
    2. Leveraged Loans: Leveraged loans include all commercial 
loans--funded and unfunded and securities (e.g., high yield bonds 
meeting any of the criteria below), excluding those securities 
classified as trading book, that meet any one of the following 
conditions:
     Loans or securities where proceeds are used for buyout, 
acquisition, and recapitalization;
     Loans or securities with a balance sheet leverage ratio 
(total liabilities/total assets) higher than 50 percent or where a 
transaction resulted in an increase in the leverage ratio of more 
than 75 percent. Loans or securities where borrower's operating 
leverage ratio ((total debt/trailing twelve month EBITDA (earnings 
before interest, taxes, depreciation, and amortization) or senior 
debt/trailing twelve month EBITDA)) are above 4.0X EBITDA or 3.0X 
EBITDA, respectively. For purposes of this calculation, the only 
permitted EBITDA adjustments are those adjustments specifically 
permitted for that borrower in its credit agreement; or
     Loans or securities that are designated as highly 
leveraged transactions (HLT) by syndication agent.\4\

    \4\ http://www.fdic.gov/news/news/press/2001/pr2801.html.
---------------------------------------------------------------------------

For purposes of the concentration measure, leveraged loans include 
all loans and/or securitizations that may not have been considered 
leveraged at the time of origination, but subsequent to origination, 
meet the characteristics of a leveraged loan. Leveraged loans 
include all securitizations where greater than 50 percent of the 
assets backing the securitization meet one or more of the preceding 
criteria of leveraged loans (e.g., CLOs), with the exception of 
those securities classified as trading book.
    3. Nontraditional Mortgage Loans: Nontraditional mortgage loans 
includes all residential loan products that allow the borrower to 
defer repayment of principal or interest and includes all interest-
only products, teaser rate mortgages, and negative amortizing 
mortgages, with the exception of home equity lines of credit 
(HELOCs) or reverse mortgages.\5\
---------------------------------------------------------------------------

    \5\ http://www.fdic.gov/regulations/laws/federal/2006/06noticeFINAL.html.
---------------------------------------------------------------------------

    For purposes of the concentration measure, nontraditional 
mortgage loans include securitizations where greater than 50 percent 
of the assets backing the securitization meet one or more of the 
preceding criteria for nontraditional mortgage loans, with the 
exception of those securities classified as trading book.
    4. Subprime Consumer Loans: Subprime loans include loans made to 
borrowers that display one or more of the following credit risk 
characteristics (excluding subprime loans that are previously 
included as nontraditional mortgage loans):
     Two or more 30-day delinquencies in the last 12 months, 
or one or more 60-day delinquencies in the last 24 months;
     Judgment, foreclosure, repossession, or charge-off in 
the prior 24 months;
     Bankruptcy in the last 5 years;
     Credit bureau risk score (FICO) of 660 or below 
(depending on the product/collateral), or other bureau or 
proprietary scores with an equivalent default probability 
likelihood; and/or
     Debt service-to-income ratio of 50 percent or greater, 
or otherwise limited ability to cover family living expenses after 
deducting total monthly debt-service requirements from monthly 
income.\6\

    \6\ http://www.fdic.gov/news/news/press/2001/pr0901a.html.
---------------------------------------------------------------------------

For purposes of the concentration measure, subprime loans include 
loans that were not considered subprime at origination, but meet the 
characteristics of subprime subsequent to origination. Subprime 
loans also include securitizations where more than 50 percent of 
assets backing the securitization meet one or more of the preceding 
criteria for subprime loans, excluding those securities classified 
as trading book.

2. Growth-adjusted portfolio concentration measure

    The growth-adjusted concentration measure is the sum of the 
values of concentrations in each of the seven portfolios, each of 
the values being first adjusted for risk weights and growth. To 
obtain the value for each of the seven portfolios, the product of 
the risk weight and the concentration ratio is first squared and 
then multiplied by the growth factor. The measure is calculated as:
[GRAPHIC] [TIFF OMITTED] TP24NO10.360

Where

N is institution i's growth-adjusted portfolio concentration 
measure;\7\
---------------------------------------------------------------------------

    \7\ The growth-adjusted portfolio concentration measure is 
rounded to two decimal points.
---------------------------------------------------------------------------

k is a portfolio;
g is a growth factor for institution i's portfolio k; and,
w is a risk weight for portfolio k.

    The seven portfolios (k) are defined based on the Call Report/
TFR data and they are:
     First-lien residential mortgages and non-agency 
residential mortgage-backed securities;
     Closed-end junior liens and home equity lines of credit 
(HELOCs);
     Construction and land development loans;
     Other commercial real estate loans;
     Commercial and industrial loans;
     Credit card loans; and
     Other consumer loans. 8, 9
---------------------------------------------------------------------------

    \8\ All loan concentrations should include the fair value of 
purchased credit impaired loans.
    \9\ Each loan concentration category should exclude the maximum 
amount of loans recoverable from the U.S. government, its agencies, 
or government-sponsored agencies, under guarantee or insurance 
provisions.
---------------------------------------------------------------------------

    The growth factor, g, is based on a three-year merger-adjusted 
growth rate for a given portfolio; g ranges from 1 to 1.2 where a 20 
percent growth rate equals a factor of 1 and an 80 percent growth 
rate equals a factor of 1.2.10, 11 For growth rates less 
than 20 percent, g is 1; for growth rates greater than 80 percent, g 
is 1.2. For growth rates between 20 percent and 80 percent, the 
growth factor is calculated as:
---------------------------------------------------------------------------

    \10\ The cut-off values of 0.2 and 0.8 correspond to about 45th 
percentile and 80th percentile among the large institutions, 
respectively, based on the data from 2000 to 2009.
    \11\ The growth factor is rounded to two decimal points.
    [GRAPHIC] [TIFF OMITTED] TP24NO10.361
    
    [GRAPHIC] [TIFF OMITTED] TP24NO10.362
    

[[Page 72650]]


    Report/TFR and t is the quarter for which the assessment is 
being determined.
    The risk weight for each portfolio reflects relative peak loss 
rates for banks at the 90th percentile during the 1990-2009 
period.\12\ These loss rates were converted into equivalent risk 
weights as shown in Table C.1.
---------------------------------------------------------------------------

    \12\ The risk weights are based on loss rates for each portfolio 
relative to the loss rate for C&I loans, which is given a risk 
weight of 1. The peak loss rates were derived as follows. The loss 
rate for each loan category for each bank with over $5 billion in 
total assets was calculated for each of the last twenty calendar 
years (1990-2009). The highest value of the 90th percentile of each 
loan category over the twenty year period was selected as the peak 
loss rate.

  Table C.1--90th Percentile Annual Loss Rates for 1990-2009 Period and
                       Corresponding Risk Weights
------------------------------------------------------------------------
                                                 Loss Rates      Risk
                   Portfolio                       (90th       weights
                                                percentile)   (percent)
------------------------------------------------------------------------
First-Lien Mortgages..........................          2.3          0.5
Second/Junior Lien Mortgages..................          4.6          0.9
Commercial and Industrial (C&I) Loans.........          5.0          1.0
Construction and Development (C&D) Loans......         15.0          3.0
Commercial Real Estate Loans, excluding C&D...          4.3          0.9
Credit Card Loans.............................         11.8          2.4
Other Consumer Loans..........................          5.9          1.2
------------------------------------------------------------------------

    11. Appendix D to Subpart A is added to read as follows:

Appendix D to Subpart A of Part 327--Description of the Loss Severity 
Measure

    The loss severity measure applies a standardized set of 
assumptions to an institution's balance sheet for a given quarter to 
measure possible losses to the FDIC in the event of an institution's 
failure. To determine an institution's loss severity rate, the FDIC 
first uses assumptions about uninsured deposit and other unsecured 
liability runoff and growth in insured deposits to adjust the size 
and composition of the institution's liabilities. Assets are then 
reduced to match any reduction in liabilities.\1\ The institution's 
asset values are then further reduced so that the Tier 1 leverage 
ratio reaches 2 percent.\2\ Asset adjustments are made pro rata to 
asset categories to preserve the institution's asset composition. 
Assumptions regarding loss rates at failure for a given asset 
category and the extent of secured liabilities are then applied to 
estimated assets and liabilities at failure to determine whether the 
institution has enough unencumbered assets to cover domestic 
deposits. Any projected shortfall is divided by current domestic 
deposits to obtain an end-of-period loss severity ratio. The loss 
severity measure is an average loss severity ratio for the three 
most recent quarters.
---------------------------------------------------------------------------

    \1\ In most cases, the model would yield reductions in 
liabilities and assets prior to failure. Exceptions may occur for 
institutions primarily funded through insured deposits, which the 
model assumes to grow prior to failure.
    \2\ Of course, in reality, runoff and capital declines occur 
more or less simultaneously as an institution approaches failure. 
The loss severity measure assumptions simplify this process for ease 
of modeling.
---------------------------------------------------------------------------

Runoff and Capital Adjustment Assumptions

    Table D.1 contains run-off assumptions.

                   Table D.1--Runoff Rate Assumptions
------------------------------------------------------------------------
                                                           Runoff rate*
                     Liability type                          (percent)
------------------------------------------------------------------------
Insured Deposits........................................           -32.0
Uninsured Deposits......................................            28.6
Foreign Deposits........................................            80.0
Federal Funds Purchased.................................            40.0
Repurchase Agreements...................................            25.0
Trading Liabilities.....................................            50.0
Unsecured Borrowings <= 1 Year..........................            75.0
Unsecured Borrowings > 1 Year...........................             0.0
Secured Borrowings <= 1 Year............................            25.0
Secured Borrowings > 1 Year.............................             0.0
Subordinated Debt and Limited Liability Preferred Stock.            15.0
Other Liabilities.......................................             0.0
------------------------------------------------------------------------
 * A negative rate implies growth.

    Given the resulting total liabilities after runoff, assets are 
then reduced pro rata to preserve the relative amount of assets in 
each of the following asset categories and to achieve a Tier 1 
leverage ratio of 2 percent:
     Cash and Interest Bearing Balances;
     Trading Account Assets;
     Federal Funds Sold and Repurchase Agreements;
     Treasury and Agency Securities;
     Municipal Securities;
     Other Securities;
     Construction and Development Loans;
     Nonresidential Real Estate Loans;
     Multifamily Real Estate Loans;
     1-4 Family Closed-End First Liens;
     1-4 Family Closed-End Junior Liens;
     Revolving Home Equity Loans; and
     Agricultural Real Estate Loans.

Recovery Value of Assets at Failure

    Table D.2 shows loss rates applied to each of the asset 
categories as adjusted above.

                 Table D.2--Asset Loss Rate Assumptions
------------------------------------------------------------------------
                                                             Loss rate
                     Asset category                          (percent)
------------------------------------------------------------------------
Cash and Interest Bearing Balances......................             0.0
Trading Account Assets..................................             0.0
Federal Funds Sold and Repurchase Agreements............             0.0
Treasury and Agency Securities..........................             0.0
Municipal Securities....................................            10.0
Other Securities........................................            15.0
Construction and Development Loans......................            38.2
Nonresidential Real Estate Loans........................            17.6
Multifamily Real Estate Loans...........................            10.8
1-4 Family Closed-End First Liens.......................            19.4
1-4 Family Closed-End Junior Liens......................            41.0
Revolving Home Equity Loans.............................            41.0
Agricultural Real Estate Loans..........................            19.7
Agricultural Loans......................................            11.8
Commercial and Industrial Loans.........................            21.5
Credit Card Loans.......................................            18.3
Other Consumer Loans....................................            18.3
All Other Loans.........................................            51.0
Other Assets............................................            75.0
------------------------------------------------------------------------

Secured Liabilities at Failure

    Federal home loan bank advances, secured federal funds 
purchased, foreign deposits and repurchase agreements are assumed to 
be fully secured.

Loss Severity Ratio Calculation

    The FDIC's loss given failure (LGD) is calculated as:
    [GRAPHIC] [TIFF OMITTED] TP24NO10.363
    
An end-of-quarter loss severity ratio is LGD divided by total 
domestic deposits at quarter-end and the loss severity measure for 
the scorecard is an average of end-of-period loss severity ratio for 
three most recent quarters.


[[Page 72651]]


    By order of the Board of Directors.

    Dated at Washington, DC, this 9th day of November 2010.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2010-29138 Filed 11-19-10; 4:15 pm]
BILLING CODE 6741-01-P