[Federal Register Volume 81, Number 58 (Friday, March 25, 2016)]
[Rules and Regulations]
[Pages 16059-16074]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-06770]



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  Federal Register / Vol. 81, No. 58 / Friday, March 25, 2016 / Rules 
and Regulations  

[[Page 16059]]



FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 327

RIN 3064-AE40


Assessments

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule.

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SUMMARY: Pursuant to the requirements of the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (Dodd-Frank Act) and the FDIC's 
authority under section 7 of the Federal Deposit Insurance Act (FDI 
Act), the FDIC is imposing a surcharge on the quarterly assessments of 
insured depository institutions with total consolidated assets of $10 
billion or more. The surcharge will equal an annual rate of 4.5 basis 
points applied to the institution's assessment base (with certain 
adjustments). If the Deposit Insurance Fund (DIF or fund) reserve ratio 
reaches 1.15 percent before July 1, 2016, surcharges will begin July 1, 
2016. If the reserve ratio has not reached 1.15 percent by that date, 
surcharges will begin the first day of the calendar quarter after the 
reserve ratio reaches 1.15 percent. (Lower regular quarterly deposit 
insurance assessment (regular assessment) rates will take effect the 
quarter after the reserve ratio reaches 1.15 percent.) Surcharges will 
continue through the quarter that the reserve ratio first reaches or 
exceeds 1.35 percent, but not later than December 31, 2018. The FDIC 
expects that surcharges will commence in the second half of 2016 and 
that they should be sufficient to raise the DIF reserve ratio to 1.35 
percent in approximately eight quarters, i.e., before the end of 2018. 
If the reserve ratio does not reach 1.35 percent by December 31, 2018 
(provided it is at least 1.15 percent), the FDIC will impose a 
shortfall assessment on March 31, 2019, on insured depository 
institutions with total consolidated assets of $10 billion or more. The 
FDIC will provide assessment credits (credits) to insured depository 
institutions with total consolidated assets of less than $10 billion 
for the portion of their regular assessments that contribute to growth 
in the reserve ratio between 1.15 percent and 1.35 percent. The FDIC 
will apply the credits each quarter that the reserve ratio is at least 
1.38 percent to offset the regular deposit insurance assessments of 
institutions with credits.

DATES: This rule will become effective on July 1, 2016.

FOR FURTHER INFORMATION CONTACT: Munsell W. St. Clair, Chief, Banking 
and Regulatory Policy Section, Division of Insurance and Research, 
(202) 898-8967; Nefretete Smith, Senior Attorney, Legal Division, (202) 
898-6851; and James Watts, Senior Attorney, Legal Division (202) 898-
6678.

SUPPLEMENTARY INFORMATION: 

I. Notice of Proposed Rulemaking and Comments

    On October 22, 2015, the FDIC's Board of Directors (Board) 
authorized publication of a notice of proposed rulemaking (NPR) to 
impose a surcharge on the quarterly assessments of insured depository 
institutions with total consolidated assets of $10 billion or more.
    The NPR was published in the Federal Register on November 6, 
2015.\1\ The FDIC sought comment on every aspect of the proposed rule 
and on alternatives. The FDIC received a total of eight letters. Of 
these letters, four were from trade groups and four were from banks. 
Comments are discussed in the relevant sections below.
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    \1\ See 80 FR 68780 (Nov. 6, 2015).
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II. Policy Objectives

    The FDIC maintains a fund in order to assure the agency's capacity 
to meet its obligations as insurer of deposits and receiver of failed 
banks.\2\ The FDIC considers the adequacy of the DIF in terms of the 
reserve ratio, which is equal to the DIF balance divided by estimated 
insured deposits. A higher minimum reserve ratio reduces the risk that 
losses from bank failures during a downturn will exhaust the DIF and 
reduces the risk of large, procyclical increases in deposit insurance 
assessments to maintain a positive DIF balance.
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    \2\ As used in this final rule, the term ``bank'' has the same 
meaning as ``insured depository institution'' as defined in section 
3 of the FDI Act, 12 U.S.C. 1813(c)(2).
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    The Dodd-Frank Act, enacted on July 21, 2010, contained several 
provisions to strengthen the DIF.\3\ Among other things, it: (1) Raised 
the minimum reserve ratio for the DIF to 1.35 percent (from the former 
minimum of 1.15 percent); \4\ (2) required that the reserve ratio reach 
1.35 percent by September 30, 2020; \5\ and (3) required that, in 
setting assessments, the FDIC ``offset the effect of [the increase in 
the minimum reserve ratio] on insured depository institutions with 
total consolidated assets of less than $10,000,000,000.'' \6\
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    \3\ Public Law 111-203, 334, 124 Stat. 1376, 1539 (12 U.S.C. 
1817(note)).
    \4\ 12 U.S.C. 1817(b)(3)(B). The Dodd-Frank Act also removed the 
upper limit on the designated reserve ratio (which was formerly 
capped at 1.5 percent).
    \5\ 12 U.S.C. 1817(note).
    \6\ 12 U.S.C. 1817(note). The Dodd-Frank Act also: (1) 
eliminated the requirement that the FDIC provide dividends from the 
fund when the reserve ratio is between 1.35 percent and 1.5 percent; 
(2) eliminated the requirement that the amount in the DIF in excess 
of the amount required to maintain the reserve ratio at 1.5 percent 
of estimated insured deposits be paid as dividends; and (3) granted 
the FDIC's authority to declare dividends when the reserve ratio at 
the end of a calendar year is at least 1.5 percent, but granted the 
FDIC sole discretion in determining whether to suspend or limit the 
declaration of payment or dividends, 12 U.S.C. 1817(e)(2)(A)-(B).
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    Both the Dodd-Frank Act and the FDI Act grant the FDIC broad 
authority to implement the requirement to achieve the 1.35 percent 
minimum reserve ratio. In particular, under the Dodd-Frank Act, the 
FDIC is authorized to take such steps as may be necessary for the 
reserve ratio to reach 1.35 percent by September 30, 2020.\7\ 
Furthermore, under the FDIC's special assessment authority in section 
7(b)(5) of the FDI Act, the FDIC may impose special assessments in an 
amount determined to be necessary for any purpose that the FDIC may 
deem necessary.\8\
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    \7\ 12 U.S.C. 1817(note).
    \8\ 12 U.S.C. 1817(b)(5).
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    In the FDIC's view, the Dodd-Frank Act requirement to raise the 
reserve ratio to the minimum of 1.35 percent by September 30, 2020 
reflects the importance of building the DIF in a timely manner to 
withstand future economic shocks. Increasing the reserve ratio faster 
reduces the likelihood of procyclical assessments, a key policy

[[Page 16060]]

goal of the FDIC that is supported in the academic literature and 
acknowledged by banks.\9\
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    \9\ In 2011, the FDIC Board of Directors adopted a 
comprehensive, long-range management plan for the DIF that is 
designed to reduce procyclicality in the deposit insurance 
assessment system. Input from bank executives and industry trade 
group representatives favored steady, predictable assessments and 
found high assessment rates during crises objectionable. In 
addition, economic literature points to the role of regulatory 
policy in minimizing procyclical effects. See, for example: 75 FR 
66272 and George G. Pennacchi, 2004. ``Risk-Based Capital Standards, 
Deposit Insurance and Procyclicality,'' FDIC Center for Financial 
Research Working Paper No. 2004-05.
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    The purpose of the final rule is to meet the Dodd-Frank Act 
requirements in a manner that appropriately balances several 
considerations, including the goal of reaching the minimum reserve 
ratio reasonably promptly in order to strengthen the fund and reduce 
the risk of pro-cyclical assessments, the goal of maintaining stable 
and predictable assessments for banks over time, and the projected 
effects on bank capital and earnings. The primary mechanism described 
below for meeting the statutory requirements--surcharges on regular 
assessments--will ensure that the reserve ratio reaches 1.35 percent 
without inordinate delay (likely in 2018) and will ensure that 
assessments are allocated equitably among banks responsible for the 
cost of reaching the minimum reserve ratio.

III. Background

    The Dodd-Frank Act gave the FDIC greater discretion to manage the 
DIF than it had previously, including greater discretion in setting the 
target reserve ratio, or designated reserve ratio (DRR), which the FDIC 
must set annually.\10\ The Board has set a 2 percent DRR for each year 
starting with 2011.\11\ The Board views the 2 percent DRR as a long-
term goal.
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    \10\ 12 U.S.C. 1817(b)(3)(A)(i).
    \11\ A DRR of 2 percent was based on a historical analysis as 
well as on the statutory factors that the FDIC must consider when 
setting the DRR. In its historical analysis, the FDIC analyzed 
historical fund losses and used simulated income data from 1950 to 
2010 to determine how high the reserve ratio would have to have been 
before the onset of the two banking crises that occurred during this 
period to maintain a positive fund balance and stable assessment 
rates.
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    By statute, the FDIC also operates under a Restoration Plan while 
the reserve ratio remains below 1.35 percent.\12\ The Restoration Plan, 
originally adopted in 2008 and subsequently revised, is designed to 
ensure that the reserve ratio will reach 1.35 percent by September 30, 
2020.\13\
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    \12\ 12 U.S.C. 1817(b)(3)(E).
    \13\ 75 FR 66293 (Oct. 27, 2010).
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    In February 2011, the FDIC adopted a final rule that, among other 
things, contained a schedule of deposit insurance assessment rates that 
apply to regular assessments that banks pay. The FDIC noted when it 
adopted these rates that, because of the requirement making banks with 
$10 billion or more in assets responsible for increasing the reserve 
ratio from 1.15 percent to 1.35 percent, ``assessment rates applicable 
to all insured depository institutions need only be set high enough to 
reach 1.15 percent'' before the statutory deadline of September 30, 
2020.\14\ The February 2011 final rule left to a later date the method 
for assessing banks with $10 billion or more in assets for the amount 
needed to reach 1.35 percent.\15\
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    \14\ See 76 FR 10673, 10683 (Feb. 25, 2011).
    \15\ 76 FR at 10683. The Restoration Plan originally stated that 
the FDIC would pursue rulemaking on the offset in 2011, 75 FR 66293 
(Oct. 27, 2010), but in 2011 the Board decided to postpone 
rulemaking until a later date.
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    In the February 2011 final rule, the FDIC also adopted a schedule 
of lower regular assessment rates that will go into effect once the 
reserve ratio of the DIF reaches 1.15 percent.\16\ These lower regular 
assessment rates will apply to all banks' regular assessments. Regular 
assessments paid under the schedule of lower rates are intended to 
raise the reserve ratio gradually to the long-term goal of 2 percent.
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    \16\ 76 FR at 10717; see also 12 CFR 327.10(b). The FDIC adopted 
this schedule of lower assessment rates following its historical 
analysis of the long-term assessment rates that would be needed to 
ensure that the DIF would remain positive without raising assessment 
rates even during a banking crisis of the magnitude of the two 
banking crises of the past 30 years. On June 16, 2015, the Board 
adopted a notice of proposed rulemaking that would revise the risk-
based pricing methodology for established small institutions. See 80 
FR 40838 (July 13, 2015). On January 21, 2016, the Board adopted a 
second notice of proposed rulemaking that would revise parts of the 
proposal adopted by the Board in 2015. The revised proposal would 
leave the overall range of initial assessment rates and the 
assessment revenue expected to be generated unchanged from the 
current assessment system for established small institutions. See 81 
FR 6108 (Feb. 4, 2016).
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    The FDIC expects that, under the current assessment rate schedule, 
the DIF reserve ratio will reach 1.15 percent in the first half of 
2016.

IV. Description of the Final Rule

A. Surcharges

Surcharge Rate and Duration
    As proposed in the NPR, to implement the requirements of the Dodd-
Frank Act, and pursuant to the FDIC's authority in section 7 of the FDI 
Act,\17\ the FDIC is adding a surcharge to the regular assessments of 
banks with $10 billion or more in assets. Also as proposed in the NPR, 
the surcharge will begin the quarter after the DIF reserve ratio first 
reaches or exceeds 1.15 percent and will continue until the reserve 
ratio first reaches or exceeds 1.35 percent, but no later than the 
fourth quarter of 2018.\18\ For each quarter, the FDIC will notify 
banks that will be subject to the surcharge and inform those banks of 
the amount of the surcharge within the timeframe that applies to 
notification of regular assessment amounts.\19\
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    \17\ 12 U.S.C. 1817.
    \18\ As discussed below, this rule will become effective on July 
1, 2016. If the reserve ratio reaches 1.15 percent before that date, 
surcharges will begin July 1, 2016. If the reserve ratio has not 
reached 1.15 percent by that date, surcharges will begin the first 
day of the calendar quarter after the reserve ratio reaches 1.15 
percent.
    \19\ As with regular assessments, surcharges will be paid one 
quarter in arrears, based on the bank's previous quarter data and 
will be due on the 30th day of the last month of the quarter. (If 
the payment date is not a business day, the collection date will be 
the previous business day.) Thus, for example, if the surcharge is 
in effect for the first quarter of 2017, the FDIC will notify banks 
that are subject to the surcharge of the amount of each bank's 
surcharge obligation no later than June 15, 2017, 15 days before the 
first quarter 2017 surcharge payment due date of June 30, 2017 
(which is also the payment due date for first quarter 2017 regular 
assessments). The notice may be included in the banks' invoices for 
their regular assessment.
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    As proposed in the NPR, the annual surcharge rate will be 4.5 basis 
points, which the FDIC expects will be sufficient to raise the reserve 
ratio from 1.15 percent to 1.35 percent in 8 quarters, before the end 
of 2018.
Comments Received
    The FDIC received several comments on the surcharge rate and 
estimated surcharge period. In a joint comment letter, three trade 
groups stated that a ``strong'' majority of large banks that they 
surveyed favored an alternative discussed in the NPR of charging lower 
surcharges over a longer period and imposing a shortfall assessment 
only if the reserve ratio has not reached 1.35 percent by a date nearer 
the statutory deadline. Specifically, the trade groups proposed an 
annual surcharge of no more than 2.25 basis points to reach 1.35 
percent in 14 quarters, and a shortfall, if needed, to be assessed in 
the first quarter of 2020.\20\ A few other commenters supported the 
three trade groups' proposal.
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    \20\ The trade groups noted that leaving the current assessment 
rate schedule in place when the reserve ratio reaches 1.15 percent 
would be roughly equivalent to an annual surcharge of no more than 
2.25 basis points to reach 1.35 percent in 14 quarters.
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    One commenter supported an alternative discussed in the NPR of 
foregoing surcharges entirely and, if the reserve ratio does not reach 
1.35 percent by a deadline sometime near the statutory deadline, 
imposing a delayed

[[Page 16061]]

shortfall assessment at the end of the following quarter.
    On the other hand, the joint comment letter submitted by the three 
trade groups did note that a few large banks surveyed supported the 
proposed surcharge rate and timeline in the NPR, while a few others 
favored a one-time assessment once the reserve ratio first reaches 1.15 
percent (an alternative also discussed in the NPR). One bank in its 
comment letter also preferred a one-time assessment just after the 
reserve ratio first reaches or exceeds 1.15 percent in order to raise 
the reserve ratio closer to 1.35 percent (but not all the way to 1.35 
percent) sooner than would occur under the proposal. Another trade 
group preferred charging surcharges over a shorter timeframe--four 
quarters--but found that the proposal in the NPR and a one-time 
assessment just after the reserve ratio first reaches or exceeds 1.15 
percent were also reasonable options.
    In the FDIC's view, the final rule strikes an appropriate balance 
among these options after considering: (1) The statutory deadline for 
reaching the minimum reserve ratio; (2) the importance of strengthening 
the fund's ability to withstand a spike in losses; (3) the goal of 
reducing the risk of larger assessments for the entire industry in a 
future period of stress; and (4) the effects on the capital and 
earnings of surcharged banks.
    The FDIC expects that surcharges will result in the reserve ratio 
reaching 1.35 percent in 2018. Reaching the statutory target reasonably 
promptly and in advance of the statutory deadline has benefits. First, 
it strengthens the fund so that it can better withstand an 
unanticipated spike in losses from bank failures or the failure of one 
or more large banks.
    Second, it reduces the risk of the banking industry facing 
unexpected, large assessment rate increases in a future period of 
stress. Once the reserve ratio reaches 1.35 percent, the September 30, 
2020 deadline in the Dodd-Frank Act will have been met and will no 
longer apply. If the reserve ratio later falls below 1.35 percent, even 
if that occurs before September 30, 2020, the FDIC will have a minimum 
of eight years to return the reserve ratio to 1.35 percent, reducing 
the likelihood of a large increase in assessment rates.\21\ In 
contrast, if a spike in losses occurs before the reserve ratio reaches 
1.35 percent, the Dodd-Frank Act deadline will remain in place, which 
could require that the entire banking industry--including banks with 
less than $10 billion in assets, if the reserve ratio falls below 1.15 
percent--pay for the increase in the reserve ratio within a relatively 
short time. The final rule, therefore, reduces the risk of higher 
assessments being imposed at a time when the industry might not be as 
healthy and prosperous and could less afford to pay.
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    \21\ See generally 12 U.S.C. 1817(b)(3)(E)(ii).
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    In addition, large banks will account for future surcharges in the 
quarterly report of condition and income (Call Report) and other 
banking regulatory reports based on generally accepted accounting 
principles (GAAP) as quarterly expenses, as they do for regular 
assessments, effectively spreading the cost of the requirement over 
approximately eight quarters in a simple, predictable manner.
    In contrast, a longer surcharge period or a delayed one-time 
assessment without surcharges would reduce the fund's ability to 
withstand a spike in losses and increase the risk of larger assessments 
for the entire industry in a future period of stress.
    Five comment letters also stated that, rather than imposing a 
separate surcharge at a uniform rate, the FDIC should implement 
surcharges in a risk-based manner.\22\ One commenter argued that a 
risk-based surcharge would provide incentives to manage risk. Some 
commenters suggested foregoing a surcharge and instead leaving in place 
the current risk-based assessment rate schedule when the reserve ratio 
reaches 1.15 percent, rather than the lower one that is scheduled to go 
into effect. One commenter also recommended that surcharges be 
integrated into risk-based assessments in a way that maintains banks' 
incentives to hold long-term unsecured debt.\23\
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    \22\ Suggested methods for implementing a risk-based surcharge 
included a surcharge based on a multiple of a bank's initial base 
assessment rate, a variable-rate surcharge, or imposing the 
surcharge only on the weakest or riskiest banks.
    \23\ A bank's total base assessment rate can vary from its 
initial base assessment rate as the result of three possible 
adjustments. One of these adjustments, the unsecured debt 
adjustment, lowers a bank's assessment rate based on the bank's 
ratio of long-term unsecured debt to the bank's assessment base. 12 
CFR 327.9(d).
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    The final rule uses a flat-rate surcharge. As one commenter 
acknowledged, while the FDI Act requires that regular assessments be 
risk-based, no such requirement exists for special assessments.\24\ In 
fact, the most recent special assessment, imposed in 2009, was also a 
flat rate assessment, and, in 1996, Congress imposed a flat-rate 
special assessment on banks that held deposits insured by the Savings 
Association Insurance Fund.\25\ In addition, nothing in the Dodd-Frank 
Act requires a risk-based assessment to raise the minimum reserve ratio 
from 1.15 percent to 1.35 percent.
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    \24\ Compare 12 U.S.C. 1817(b)(1), requiring a risk-based 
deposit insurance assessment system, with 12 U.S.C. 1817(b)(5), 
which allows the FDIC to impose special assessments and contains no 
requirement that they be risk-based.
    \25\ See 74 FR 25639 (May 29, 2009); 61 FR 53834 (Oct. 16, 
1996).
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    Banks subject to the surcharge will continue to pay risk-based 
regular deposit insurance assessments. As a result, they will still 
have the incentives they now have to prudently manage risk and to issue 
long-term unsecured debt.
    Moreover, because banks' risk profiles change over time, aggregate 
assessments using a risk-based surcharge would be more prone to vary 
than will a flat-rate surcharge. This variance would reduce the 
predictability of surcharge revenue and create additional uncertainty 
regarding the needed rates and the time required for the reserve ratio 
to reach 1.35 percent. Banks themselves would have less predictable 
surcharge assessments.
Banks Subject to the Surcharge
    As proposed in the NPR, the banks subject to the surcharge (large 
banks) will be determined each quarter based on whether the bank was a 
``large institution'' or ``highly complex institution'' for purposes of 
that quarter's regular assessments.\26\ Generally, this includes 
institutions with total assets of $10 billion or more; however, an 
insured branch of a foreign bank whose assets as reported in its

[[Page 16062]]

most recent quarterly Report of Assets and Liabilities of U.S. Branches 
and Agencies of Foreign Banks equaled or exceeded $10 billion will also 
be considered a large bank and will be subject to the 
surcharge.27 28
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    \26\ In general, a ``large institution'' is 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) or a small institution that reports 
assets of $10 billion or more in its quarterly reports of condition 
for four consecutive quarters. 12 CFR 327.8(f). If an institution 
classified as large 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. 12 CFR 327.8(e). In general, a ``highly complex 
institution'' is: (1) An insured depository institution (excluding a 
credit card bank) that has had $50 billion or more in total assets 
for at least four consecutive quarters that is controlled by a U.S. 
parent holding company that has had $500 billion or more in total 
assets for four consecutive quarters, or controlled by one or more 
intermediate U.S. parent holding companies that are controlled by a 
U.S. holding company that has had $500 billion or more in assets for 
four consecutive quarters; or (2) a processing bank or trust 
company. If an institution classified as highly complex fails to 
meet the definition of a highly complex institution for four 
consecutive quarters (or reports assets of less than $10 billion in 
its quarterly reports of condition for four consecutive quarters), 
the FDIC will reclassify the institution beginning the following 
quarter. 12 CFR 327.8(g). In general, a ``small institution'' is an 
insured depository institution with assets of less than $10 billion 
as of December 31, 2006, or an insured branch of a foreign 
institution. 12 CFR 327.8(e).
    \27\ Assets for foreign banks are reported in FFIEC 002 report 
(Report of Assets and Liabilities of U.S. Branches and Agencies of 
Foreign Banks), Schedule RAL, line 3, column A.
    \28\ For purposes of the final rule, a large bank also includes 
a small institution if, while surcharges were in effect, the small 
institution was the surviving institution or resulting institution 
in a merger or consolidation with a large bank or if the small 
institution acquired all or substantially all of the assets or 
assumed all or substantially all of the deposits of a large bank.
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Comments Received
    The FDIC received two comments from trade groups on which banks 
should be subject to the surcharge. One commenter suggested that the 
surcharge should not apply to mid-size banks and should only apply to 
highly complex banks, while another commenter proposed that the 
surcharge be restricted to only the largest banks, those considered 
``too big to fail,'' or those controlling a large share of industry 
assets. As an alternative to their suggestions, both commenters 
proposed that the FDIC increase the $10 billion deduction from large 
banks' assessment bases for the surcharge (discussed below), for 
example, to $25 billion or $50 billion, which would effectively exempt 
banks with total assets under these threshold amounts from surcharges.
    The FDIC has identified no compelling basis to distinguish between 
large banks based on any particular asset size or other profile. 
Further, the final rule is consistent with the statutory language. The 
Dodd-Frank Act requires the FDIC to ``offset the effect of [the 
increase in the minimum reserve ratio] on insured depository 
institutions with total consolidated assets of less than 
$10,000,000,000,'' and unlike other parts of the Act, there is no 
indication that section 334(e) should apply only to banks of a certain 
size or that engage in certain activities. The apparent purpose of the 
Act's requirement was to insulate banks with less than $10 billion in 
total assets from the cost of the increase in the minimum reserve 
ratio. The final rule appropriately meets this requirement.
    The FDIC is cognizant of the concerns of large banks near the $10 
billion threshold. As a practical matter, the $10 billion deduction 
from large banks' assessment bases for the surcharge has the effect of 
shifting the burden of the surcharges towards larger banks. While, as 
discussed later, the purpose of the $10 billion deduction is to avoid a 
``cliff effect'' for banks near the $10 billion asset threshold, it has 
the concomitant effect of benefitting large banks closer in size to the 
$10 billion asset threshold relatively more than larger banks, since 
the relative effect of the $10 billion deduction decreases as asset 
size increases. As reflected in Table 1, based on data as of December 
31, 2015, the simple average effective surcharge rate (the surcharge 
rate if applied to a bank's regular quarterly deposit insurance 
assessment base) for banks with assets between $10 billion and $50 
billion will be approximately half the simple average effective rate 
for banks with assets greater than $100 billion. In fact, with lower 
regular assessment rates scheduled to take effect when the reserve 
ratio reaches 1.15 percent, more than half (36 out of 67) of large 
banks with total assets between $10 billion and $50 billion and roughly 
one-third of all large banks are expected to pay an effective 
assessment rate, even with the surcharge, that is lower than their 
current assessment rate.

        Table 1--Effective Annual Assessment Rates by Size Group
                 [Based on data as of December 31, 2015]
------------------------------------------------------------------------
                                                               Average
                                                 Number of    effective
            Assets (in $ billions)                 banks      surcharge
                                                                rate *
------------------------------------------------------------------------
$10 to $50....................................           67         2.11
$50 to $100...................................           15         3.73
Over $100.....................................           26         4.23
All Large.....................................          108         2.85
------------------------------------------------------------------------
* The average is a simple average.

Banks' Assessment Bases for the Surcharge
    Pursuant to the broad authorities under the Dodd-Frank Act and the 
FDI Act, including the authority to determine the assessment amount, 
which includes defining an appropriate assessment base for the 
surcharge (the surcharge base), each large bank's surcharge base for 
any given quarter will equal its regular quarterly deposit insurance 
assessment base (regular assessment base) for that quarter with certain 
adjustments.\29\
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    \29\ Public Law 111-203, 334(e), 124 Stat. 1376, 1539 (12 U.S.C. 
1817(note)); 12 U.S.C. 1817(b)(5). For purposes of regular 
assessments, the Dodd-Frank Act defines the assessment base with 
respect to an insured depository institution as an amount equal to 
the average consolidated total assets of the insured depository 
institution during the assessment period; minus the sum of the 
average tangible equity of the insured depository institution during 
the assessment period, and in the case of an insured depository 
institution that is a custodial bank (as defined by the FDIC, based 
on factors including the percentage of total revenues generated by 
custodial businesses and the level of assets under custody) or a 
banker's bank (as that term is used in . . . (12 U.S.C. 24)), an 
amount that the FDIC determines is necessary to establish 
assessments consistent with the definition under section 7(b)(1) of 
the [Federal Deposit Insurance] Act (12 U.S.C. 1817(b)(1)) for a 
custodial bank or a banker's bank. 12 U.S.C. 1817(note).
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    The first adjustment under the final rule differs from the NPR, but 
is similar to an alternative method of determining the surcharge base 
on which the NPR requested comment. The NPR would have added the entire 
regular assessment bases of affiliated small banks to the surcharge 
bases of large bank affiliates, but sought comment on an alternative 
that would add only the amount of any increase in the regular 
assessment bases of affiliated small banks. In response to a joint 
comment letter from three trade groups and after balancing all the 
considerations expressed in the NPR, the FDIC has decided to add to a 
large bank's surcharge base each quarter only the cumulative net 
increase in the aggregate regular assessment bases of affiliated small 
banks above the aggregate regular assessment bases as of December 31, 
2015 of affiliated small banks as of that date that is in excess of an 
effective annual rate of 10 percent.30 31
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    \30\ As used in this final rule, the term ``affiliate'' has the 
same meaning as defined in section 3 of the FDI Act, 12 U.S.C. 
3(w)(6), which references the Bank Holding Company Act (``any 
company that controls, is controlled by, or is under common control 
with another company''). 12 U.S.C. 1841(k).
    The term ``small bank'' is synonymous with the term ``small 
institution'' as it is defined in 12 CFR 327.8(e) and used in 
existing portions of 12 CFR part 327 for purposes of regular 
assessments, except that it excludes: (1) An insured branch of a 
foreign bank whose assets as reported in its most recent most recent 
quarterly Call Report equal or exceed $10 billion; and (2) a small 
institution that, while surcharges are in effect, is the surviving 
or resulting institution in a merger or consolidation with a large 
bank or that acquired of all or substantially all of the assets or 
assumed all or substantially all of the deposits of a large bank.
    \31\ The final rule measures the net increase in affiliated 
small banks' assessment bases from December 31, 2015, which is the 
latest possible date that ensures that banks do not engage in 
avoidance behavior between issuance of the final rule and its 
effective date.
    The cumulative net increase in excess of an effective annual 
rate of 10 percent in the aggregate regular assessment bases of 
affiliated small banks will be calculated by compounding a quarterly 
rate of approximately 2.41 percent from December 31, 2015. Thus, for 
example, at the end of September 2016 (3 quarters after December 31, 
2015), assuming that surcharges are in effect, the final rule will 
add to a large bank's surcharge base for that quarter any cumulative 
net increase in the aggregate regular assessment bases of affiliated 
small banks in excess of approximately 7.41 percent (approximately 
2.41 percent per quarter compounded for 3 quarters). Similarly, at 
the end of March 2017 (5 quarters after December 31, 2015), assuming 
that surcharges are in effect, the final rule will add to a large 
bank's surcharge base for that quarter any cumulative net increase 
in the aggregate regular assessment bases of affiliated small banks 
in excess of approximately 12.65 percent (approximately 2.41 percent 
per quarter compounded for 5 quarters).
    A net increase in affiliated small banks' assessment bases 
includes any increase resulting from a merger or consolidation with 
an unaffiliated insured depository institution. A net decrease in 
the aggregate regular assessment bases of affiliated small banks 
below their aggregate regular assessment bases as of December 31, 
2015 will not reduce the surcharge bases of affiliated large banks.
    To prevent assessment avoidance, if a banking organization with 
at least one large bank but no small banks acquires or establishes a 
small bank after December 31, 2015, the entire assessment base of 
the small bank will be apportioned among the surcharge bases of 
large banks in the holding company in the manner discussed below. 
Also, if a large bank in a banking organization with multiple large 
bank affiliates becomes a small bank during the surcharge period, 
its entire assessment base will be apportioned among the surcharge 
bases of its large bank affiliates in the manner discussed below.
    As of December 31, 2015, 19 banking organizations had both large 
and small banks.

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[[Page 16063]]

    Adding cumulative growth in excess of an effective annual rate of 
10 percent in the regular assessment bases of affiliated small banks to 
the assessment bases of their large bank affiliates limits the ability 
of large banks to reduce their surcharges (and potentially shift costs 
to other large banks) either by transferring assets and liabilities to 
existing or new affiliated small banks or by growing the businesses of 
affiliated small banks instead of the large bank without unduly 
constraining the normal growth of the affiliated small banks.\32\
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    \32\ As noted in the NPR, however, some large banks may be able 
to shift the burden of the surcharge by transferring assets and 
liabilities to a nonbank affiliate, or by shrinking or limiting 
growth.
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    Including only the amount of any cumulative net increase that is in 
excess of an effective annual rate of 10 percent in the aggregate 
regular assessment bases of affiliated small banks, rather than their 
entire assessment bases as proposed in the NPR, will have only a very 
small effect on total surcharge revenue and is unlikely to increase the 
number of quarters that surcharges are in effect.
    The second adjustment is as proposed in the NPR. It deducts $10 
billion from a large bank's regular assessment base (as increased by 
the first adjustment) to produce the surcharge base. Deducting $10 
billion from each large bank's assessment base for the surcharge avoids 
a ``cliff effect'' for banks near the $10 billion asset threshold, 
thereby ensuring equitable treatment. Otherwise, a bank with just over 
$10 billion in assets would pay significant surcharges, while a bank 
with $9.9 billion in assets would pay none. The $10 billion reduction 
reduces incentives for banks to limit their growth to stay below $10 
billion in assets, or to reduce their size to below $10 billion in 
assets, solely to avoid surcharges.
    In a banking organization that includes more than one large bank, 
both (1) the $10 billion deduction, and (2) the cumulative net increase 
in affiliated small banks' regular assessment bases exceeding a 10 
percent effective annual rate will be apportioned among all large banks 
in the banking organization in proportion to each large bank's regular 
assessment base for that quarter.\33\ Appendix 1 gives examples of the 
calculation of the surcharge base for a banking organization that has 
more than one large bank and for a banking organization that has both 
large and small banks.
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    \33\ As of December 31, 2015, 9 banking organizations had 
multiple affiliated large banks.
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Comments Received
    The FDIC received one joint comment letter from three trade groups 
related to the first adjustment. As proposed in the NPR, the first 
adjustment would have added the entire regular assessment bases of 
affiliated small banks to the surcharge bases of large bank affiliates. 
The joint comment letter opposed adding any portion of the assessment 
bases of small bank affiliates to large banks, but argued that, if any 
addition were to occur, it should be limited to no more than any 
increase in the assessment bases of small bank affiliates above 
``normal growth'' after surcharges begin.\34\ As described above, the 
final rule uses the net increase in excess of a 10 percent effective 
annual rate in the aggregate regular assessment bases of affiliated 
small banks above their aggregate regular assessment bases as of 
December 31, 2015.
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    \34\ The joint comment letter argued that the proposed addition 
of the entire regular assessment bases of affiliated small banks to 
the surcharge bases of large bank affiliates ``would abrogate the 
intent of [Sec.] 334 [of the Dodd-Frank Act] by imposing de facto 
assessment surcharges on small banks affiliated with large banks, 
albeit indirectly by assessing their larger affiliates,'' and, 
therefore, these small banks would not receive a full offset for 
their contribution towards raising the reserve ratio from 1.15 
percent to 1.35 percent. In fact, however, small bank affiliates of 
large banks will not pay any surcharge assessment and will be 
entitled to credits on the same basis as all other small banks.
    The joint comment letter also argued that Sec. 334 of the Dodd-
Frank Act does not authorize the FDIC to augment large banks' 
assessment bases with those of their small bank affiliates. In fact, 
however, the Dodd-Frank Act and the FDI Act give the FDIC broad 
authority to determine the amount of any special assessments, 
including the surcharges, and thus an appropriate assessment base 
for the surcharge. See Public Law 111-203, 334(e), 124 Stat. 1376, 
1539 (12 U.S.C. 1817(note)); 12 U.S.C. 1817(b)(5). The FDI Act 
contains no provisions mandating any particular assessment base for 
a special assessment.
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    The FDIC received three comments related to the second adjustment, 
the deduction of $10 billion from a large bank's assessment base and 
apportioning the deduction among all large banks in the banking 
organization. Two commenters proposed a larger deduction (discussed 
above). A joint comment letter submitted by three trade groups proposed 
that bank holding companies with multiple large banks be allowed to 
deduct $10 billion for each large bank, arguing that limiting large 
banks in a bank holding company to a single $10 billion deduction 
``discriminates against banking organizations with multiple affiliated 
large banks.''
    The provisions in the final rule regarding the second deduction are 
unchanged from those proposed in the NPR. Allocation of the $10 billion 
deduction among affiliated large banks ensures that banking 
organizations of a similar size (in terms of large bank assessment 
bases) pay a similar surcharge. Thus, a banking organization with 
multiple large banks will not have an advantage over other similarly 
sized banking organizations that have only one large bank because, 
instead of deducting $10 billion from each large bank in the 
organization, the deduction will be apportioned among the multiple 
affiliated large banks.
    Moreover, allowing each large bank in a banking organization to 
take a $10 billion deduction could, in effect, penalize the large 
majority of banking organizations that do not have more than one large 
bank by increasing the risk that surcharges would last longer than 
envisioned under the proposal.

B. Shortfall Assessment

    The FDIC expects that surcharges combined with regular assessments 
will raise the reserve ratio to 1.35 percent before December 31, 2018. 
It is possible, however, that unforeseen events could result in higher 
DIF losses or faster insured deposit growth than expected, or that 
banks may take steps to reduce or avoid quarterly surcharges. While not 
expected, these events or actions could prevent the reserve ratio from 
reaching 1.35 percent by the end of 2018. In this case, provided the 
reserve ratio is at least 1.15 percent, the FDIC will impose a 
shortfall assessment on large banks.\35\
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    \35\ In the unlikely event that the reserve ratio is below 1.15 
percent on December 31, 2018, the FDIC will impose a shortfall 
assessment at the end of the calendar quarter immediately following 
the first calendar quarter after December, 31, 2018, in which the 
reserve ratio first reaches or exceeds 1.15 percent. The aggregate 
amount of such a shortfall assessment will equal 0.2 percent of 
estimated insured deposits at the end of the calendar quarter in 
which the reserve ratio first reaches or exceeds 1.15 percent. If 
surcharges have been in effect (that is, if the reserve ratio 
reaches but then falls below 1.15 percent before December 31, 2018), 
the shortfall assessment will be imposed on the banks described in 
the text using average surcharge bases as described in the text. If 
surcharges have never been in effect: (1) The banks subject to the 
shortfall assessment will be the banks that were large banks as of 
the calendar quarter in which the reserve ratio first reached or 
exceeded 1.15 percent; and (2) an individual large bank's share of 
the shortfall assessment will be proportional to the average of what 
its surcharge bases would have been over the four calendar quarters 
ending with the calendar quarter in which the reserve ratio first 
reaches or exceeds 1.15 percent. The shortfall assessment will be 
collected on the 30th day of the last month of the quarter after the 
assessment was imposed. If that date is not a business day, the 
collection date will be the previous business day.
    If the reserve ratio remains or is projected to remain below 
1.15 percent for a prolonged period after 2018 (and never reaches 
1.35 percent), the FDIC Board may have to consider increases to 
regular assessment rates on all banks (in addition to the shortfall 
assessment on banks with $10 billion or more in assets) in order to 
achieve the minimum reserve ratio of 1.35 percent by the September 
30, 2020 statutory deadline.

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[[Page 16064]]

    The provisions in the final rule regarding the shortfall assessment 
are as proposed in the NPR. If the reserve ratio has not reached 1.35 
percent by the end of 2018, the FDIC will impose a shortfall assessment 
on large banks on March 31, 2019 and collect it on June 30, 2019.\36\ 
The aggregate amount of the shortfall assessment will equal 1.35 
percent of estimated insured deposits on December 31, 2018 minus the 
actual fund balance on that date.
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    \36\ The FDIC will notify each bank subject to a shortfall 
assessment of its share of the shortfall assessment no later than 15 
days before payment is due.
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    If a shortfall assessment is needed, it will be imposed on any bank 
that was a large bank in any quarter during the period that surcharges 
are in effect (the surcharge period). Each large bank's share of any 
shortfall assessment will be proportional to the average of its 
surcharge bases (the average surcharge base) during the surcharge 
period. If a bank was not a large bank during a quarter of the 
surcharge period, its surcharge base will be deemed to equal zero for 
that quarter.\37\
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    \37\ Thus, for example, if a large bank were subject to a 
shortfall assessment because it had been subject to a surcharge for 
only one quarter of the surcharge period, the bank's surcharge base 
for seven quarters would be deemed to be zero and its average 
surcharge base would be its single positive surcharge base divided 
by eight (assuming that the surcharge period had lasted eight 
quarters).
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    If a bank of any size acquires--through merger or consolidation--a 
large bank that had paid surcharges for one or more quarters, the 
acquiring bank will be subject to a shortfall assessment and its 
average surcharge base will be increased by the average surcharge base 
of the acquired bank.\38\
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    \38\ With respect to surcharges and shares of any shortfall 
assessment, a surviving or resulting bank in a merger or 
consolidation includes any bank that acquires all or substantially 
all of another bank's assets or assumes all or substantially all of 
another bank's deposits.
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    A large bank's share of the total shortfall assessment will equal 
its average surcharge base divided by the sum of the average surcharge 
bases of all large banks subject to the shortfall assessment. Using an 
average of surcharge bases ensures that anomalous growth or shrinkage 
in a large bank's assessment base will not subject it to a 
disproportionately large or small share of any shortfall assessment.
Comments Received
    In addition to the comments discussed above regarding the duration 
of the surcharge and timing of any required corresponding shortfall 
assessment, the FDIC received two other comments on the shortfall 
assessment. One commenter suggested that the shortfall assessment, in 
addition to the surcharges, should only be applied to ``highly 
complex'' banks. Another commenter stated that the shortfall assessment 
and surcharges should be risk-based.
    For the reasons discussed previously in connection with the 
surcharge assessment, the shortfall assessment in the final rule is as 
proposed in the NPR. If a shortfall assessment is necessary, the 
expected revenue based on the calculation method adopted will be much 
more predictable than the expected revenue from a risk-based method. In 
previous special assessments, the FDIC used a uniform rate, rather than 
a risk-based rate, and large banks will continue to pay risk-based 
regular assessments. Moreover, as also noted above, neither the statute 
nor its legislative history suggest that only highly complex banks 
should be responsible for raising the reserve ratio from 1.15 percent 
to 1.35 percent. The statute requires that the FDIC offset the effect 
of the increase in the minimum reserve ratio on banks with less than 
$10 billion in consolidated assets.

C. Payment Mechanism for the Surcharge and Any Shortfall Assessment

    Each large bank is required to take any actions necessary to allow 
the FDIC to debit its share of the surcharge from the bank's designated 
deposit account used for payment of its regular assessment. Similarly, 
each large bank subject to any shortfall assessment is required to take 
any actions necessary to allow the FDIC to debit its share of the 
shortfall assessment from the bank's designated deposit account used 
for payment of its regular assessment. Before the dates that payments 
are due, each bank must ensure that sufficient funds to pay its 
obligations are available in the designated account for direct debit by 
the FDIC. Failure to take any such action or to fund the account will 
constitute nonpayment of the assessment. Penalties for nonpayment will 
be as provided for nonpayment of a bank's regular assessment.\39\
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    \39\ See 12 CFR 308.132(c)(3)(v).
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Comments Received
    The FDIC received no comments on this part of the proposal. The 
final rule adopts this part of the proposal without change.

D. Additional Provisions Regarding Mergers, Consolidations and 
Terminations of Deposit Insurance

    Under existing regulations, a bank that is not the resulting or 
surviving bank in a merger or consolidation must file a Call Report for 
every assessment period prior to the assessment period in which the 
merger or consolidation occurs. The surviving or resulting bank is 
responsible for ensuring that these Call Reports are filed. The 
surviving or resulting bank is also responsible and liable for any 
unpaid assessments on behalf of the bank that is not the resulting or 
surviving bank.\40\ Unpaid assessments also include any unpaid 
surcharges and shares of a shortfall assessment under the final rule.
---------------------------------------------------------------------------

    \40\ 12 CFR 327.6(a).
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    Thus, for example, a large bank's first quarter 2017 surcharge 
(assuming that the surcharge is in effect then), which will be 
collected on June 30, 2017, will include the large bank's own first 
quarter 2017 surcharge plus any unpaid first quarter 2017 or earlier 
surcharges owed by any large bank it acquired between April 1, 2017 and 
June 30, 2017 by merger or through the acquisition of all or 
substantially all of the acquired bank's assets. The acquired bank will 
be required to file Call Reports through the first quarter of 2017 and 
the acquiring bank will be responsible for ensuring that these Call 
Reports were filed.
    Existing regulations also provide that, for an assessment period in 
which a merger or consolidation occurs, total consolidated assets for 
the surviving or resulting bank include the total consolidated assets 
of all banks that are parties to the merger or consolidation as if the 
merger or consolidation occurred on the first day of the assessment 
period. Tier 1 capital (which is deducted from total consolidated 
assets to determine a bank's regular assessment base) is to be reported 
in the

[[Page 16065]]

same manner.\41\ These provisions will also apply to surcharges and 
shares of any shortfall assessment under the final rule.
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    \41\ 12 CFR 327.6(b).
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    Existing regulations also provide that, when the insured status of 
a bank is terminated and the deposit liabilities of the bank are not 
assumed by another bank, the bank whose insured status is terminating 
must, among other things, continue to pay assessments for the 
assessment periods that its deposits are insured, but not 
thereafter.\42\ These provisions will also apply to surcharges and 
shares of any shortfall assessment under the final rule.
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    \42\ 12 CFR 327.6(c).
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    Finally, in the case of one or more transactions in which one bank 
voluntarily terminates its deposit insurance under the FDI Act and 
sells certain assets and liabilities to one or more other banks, each 
bank must report the increase or decrease in assets and liabilities on 
the Call Report that is due after the transaction date and the banks 
will be assessed accordingly under existing FDIC assessment 
regulations. The bank whose insured status is terminating must, among 
other things, continue to pay assessments for the assessment periods 
that its deposits are insured. The same process will also apply to 
surcharges and shares of any shortfall assessment under the final rule.
Comments Received
    The FDIC received no comments on this part of the proposal. The 
final rule adopts this part of the proposal without change.

E. Credits for Small Banks \43\
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    \43\ Large banks will not receive a refund or credit if 
surcharges bring the reserve ratio above 1.35 percent. Thus, for 
example, if the reserve ratio is 1.34 percent at the end of 
September 2018 and is 1.37 percent at the end of December 2018, 
large banks will not receive a refund or credit for the two basis 
points in the reserve ratio above 1.35 percent. Similarly, large 
banks will not receive a refund or credit if a shortfall assessment 
brings the reserve ratio above 1.35 percent.
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    While the reserve ratio remains between 1.15 percent and 1.35 
percent, some portion of the deposit insurance assessments paid by 
small banks will contribute to increasing the reserve ratio. To meet 
the Dodd-Frank Act requirement to offset the effect on small banks of 
raising the reserve ratio from 1.15 percent to 1.35 percent, the FDIC 
will provide assessment credits to these banks for the portion of their 
assessments that contribute to the increase from 1.15 percent to 1.35 
percent.\44\ The provisions in the final rule governing how credits are 
calculated and awarded are as proposed in the NPR. The FDIC will apply 
credits to reduce future regular deposit insurance assessments.
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    \44\ Small banks will not be entitled to any credits for the 
quarter in which a shortfall is assessed because large banks will be 
responsible for the entire remaining amount needed to raise the 
reserve ratio to 1.35 percent.
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Aggregate Amount of Credits
    As proposed in the NPR, to determine the aggregate amount of 
credits awarded small banks, the FDIC will first calculate 0.2 percent 
of estimated insured deposits (the difference between 1.35 percent and 
1.15 percent) on the date that the reserve ratio first reaches or 
exceeds 1.35 percent.\45\ The amount that small banks contributed to 
this increase in the DIF through regular assessments--and the resulting 
aggregate amount of credits to be awarded small banks--will equal the 
small banks' portion of all large and small bank regular assessments 
during the ``credit calculation period'' times an amount equal to the 
increase in the DIF calculated above less surcharges. (The ``credit 
calculation period'' covers the period beginning the quarter after the 
reserve ratio first reaches or exceeds 1.15 percent through the quarter 
that the reserve ratio first reaches or exceeds 1.35 percent (or 
December 31, 2018, if the reserve ratio has not reached 1.35 percent by 
then).) Surcharges will be subtracted from the increase in the DIF 
calculated above before determining the amount by which small banks 
contributed to that increase because surcharges are intended to 
increase the reserve ratio above 1.15 percent, not to maintain it at 
1.15 percent.\46\
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    \45\ If the reserve ratio does not reach 1.35 percent by 
December 31, 2018, the amount calculated will be the increase in the 
DIF needed to raise the DIF reserve ratio from 1.15 percent to the 
actual reserve ratio on December 31, 2018; that amount equals the 
DIF balance on December 31, 2018 minus 1.15 percent of estimated 
insured deposits on that date.
    \46\ If total assessments, including surcharges, during the 
credit calculation period are less than or equal to the increase in 
the DIF calculated above, the aggregate amount of credits to be 
awarded small banks will equal the aggregate amount of regular 
assessments paid by small banks during the credit calculation 
period.
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    This method of determining the aggregate small bank credit 
implicitly assumes that all non-assessment revenue (for example, 
investment income) during the credit calculation period will be used to 
maintain the fund at a 1.15 percent reserve ratio and that regular 
assessment revenue will be used to maintain the fund at that reserve 
ratio only to the extent that other revenue is insufficient. 
Essentially, the method attributes reserve ratio growth to assessment 
revenue as much as possible and, with one exception, maximizes the 
amount of the aggregate small bank assessment credit. The exception is 
the assumption that all surcharge payments contribute to growth of the 
reserve ratio (to the extent of that growth), which is consistent with 
the purpose of the surcharge payments.
    The FDIC projects that the aggregate amount of credits will total 
approximately $1 billion, but the actual amount of credits may differ.
Comments Received
    The FDIC received only one comment on the proposed method of 
determining the aggregate amount of small bank credits. That comment, 
from a trade group, supported the proposal.
Individual Small Banks' Credits
    As proposed in the NPR, credits will be awarded to any bank, 
including a small bank affiliate of a large bank, that was a small bank 
at some time during the credit calculation period. An individual small 
bank's share of the aggregate credit (a small bank's credit share) will 
be proportional to its credit base, defined as the average of its 
regular assessment bases during the credit calculation 
period.47 48 If, before the DIF reserve ratio reaches 1.35 
percent, a small bank acquires another small bank through merger or 
consolidation, the acquiring small bank's regular assessment bases for 
purposes of determining its credit base will include the acquired 
bank's regular assessment bases for those quarters during the credit 
calculation period that were before the merger or consolidation. No 
small bank can receive more in credits than it (and any small bank 
acquired through merger or consolidation) paid during the credit 
calculation period in regular assessments while it is a small bank not 
subject to the surcharge.
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    \47\ When determining the credit base, a small bank's assessment 
base is deemed to equal zero for any quarter in which it is a large 
bank.
    \48\ Call Report amendments after the payment date for the final 
quarter of the surcharge period do not affect a bank's credit share.
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    By making a small bank's credit share proportional to its credit 
base rather than, for example, its actual assessments paid, the final 
rule reduces the chances that a riskier bank assessed at higher than 
average rates will receive credits for these higher rates. The final 
rule thus reduces the incentive for banks to take on higher risk.

[[Page 16066]]

Comments Received
    The FDIC received no comments on this part of the proposal.
Successors
    If any bank acquires a bank with credits through merger or 
consolidation after the DIF reserve ratio reaches 1.35 percent, the 
acquiring bank will acquire the credits of the acquired small bank. 
Other than through merger or consolidation, credits are not 
transferable.\49\ Also, credits held by a bank that fails or ceases 
being an insured depository institution will expire. These provisions 
are as proposed in the NPR.
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    \49\ A joint comment letter from three trade groups recommended 
that the FDIC allow a small bank to sell or transfer its credits. 
The final rule does not adopt this recommendation because of the 
small amount of expected credits, the short period they are expected 
to last, and the low number of banks that used transfer provisions 
in the past. The credits to be awarded pursuant to this final rule 
are expected to be relatively small (approximately $1 billion in 
credits compared to approximately $4.7 billion in credits awarded 
pursuant to the Federal Deposit Insurance Reform Act of 2005 (Reform 
Act). See 71 FR 61374 (Oct. 18, 2006) implementing one-time 
assessment credits awarded pursuant to the Reform Act. Credits 
awarded under the Reform Act also lasted considerably longer than 
the credits to be awarded under the final rule are expected to last. 
Over 50 percent of banks still had credits remaining under the 
Reform Act after five quarters and over 20 percent had credits 
remaining after eight quarters, while virtually all banks are 
expected to use up credits awarded under the final rule in five 
quarters or less. In addition, although the credits awarded under 
the Reform Act were transferrable, 71 FR at 61377, only one-half 
percent of banks (36 banks) actually transferred them (other than 
through merger). Similarly, although the FDIC allowed banks to 
transfer unused portions of approximately $45.7 billion in 
assessments that were prepaid at the end of 2009, 74 FR, 59056, 
59060 (Nov. 17, 2009), only 20 banks actually transferred any of 
their prepaid assessment amounts (again, other than through merger). 
While credits are not transferrable under the final rule, the final 
rule provides that all banks may use credits to fully offset their 
assessments, and the final rule provides that credits may be used 
earlier than proposed in the NPR--when the reserve ratio reaches 
1.38 percent, rather than 1.40 percent.
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Use of Credits
    After the reserve ratio reaches 1.38 percent (and provided that it 
remains at or above 1.38 percent), the FDIC will automatically apply a 
small bank's credits to reduce its regular deposit insurance assessment 
up to the full amount of the bank's credits or assessment, whichever is 
less.50 51 52 In response to comments, this portion of the 
final rule differs from the proposal in two ways. First, the final rule 
allows credit use as long as the reserve ratio is at or above 1.38 
percent, rather than when it is at or above 1.40 percent as proposed in 
the NPR. Under the FDI Act, the Board is required to adopt a 
restoration plan if the reserve ratio falls below 1.35 percent. 
Allowing credit use only when the reserve ratio is at or above 1.38 
percent should provide sufficient cushion for the DIF to remain above 
1.35 percent in the event of rapid growth in insured deposits and 
ensure that credit use alone will not result in the reserve ratio 
falling below 1.35 percent. Allowing credit use before the reserve 
ratio reaches this level, however, would create a greater risk of the 
reserve ratio falling below 1.35 percent, triggering the need for a 
restoration plan.\53\
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    \50\ The amount of credits applied each quarter will not be 
recalculated as the result of subsequent amendments to the quarterly 
Call Reports or the quarterly Reports of Assets and Liabilities of 
U.S. Branches and Agencies of Foreign Banks. Credit amounts may not 
be used to pay Financing Corporation (FICO) assessments. See section 
21(f) of the Federal Home Loan Bank Act, 12 U.S.C. 1441(f).
    \51\ A joint comment from three trade groups expressed concern 
that credits could be viewed as assets on a bank's balance sheet 
and, therefore, included in the bank's assessment base. The 
commenters recommended that the FDIC revise ``the assessments 
pricing formula'' for small institutions so that credits are not 
assessed. Assessment credits awarded pursuant to the Reform Act were 
not recognized as assets for accounting purposes. See 71 FR 61374 
(Oct. 18, 2006). Even if the credits to be awarded pursuant to this 
final rule are recognized as assets under GAAP, the FDIC would not 
adopt the commenters' recommendation. Revising assessments in this 
manner so that credits are not assessed is equivalent to excluding 
credits from small institutions' assessment bases. Except as 
specifically authorized by statute, the FDIC does not exclude 
assets, even securities issued or guaranteed by the U.S. government 
or its agencies, from banks' assessment bases. Moreover, as 
discussed in a previous footnote, the credits to be awarded under 
the final rule are expected to be relatively small, are expected to 
last only two to five quarters for most small banks, and would have 
only a minimal effect on small institutions' assessments even if 
treated as assets.
    \52\ Any credits in excess of a bank's assessment will be used 
to fully offset a bank's entire deposit insurance assessments in 
future quarters until credits are exhausted, as long as the reserve 
ratio exceeds 1.38 percent.
    \53\ Also, allowing credit use before the reserve ratio reaches 
1.35 percent, as one trade group suggested, would delay the reserve 
ratio's reaching 1.35 percent and would add complexity because 
credits would have to be estimated and later adjusted, since the 
actual amount of credits will not be known until the reserve ratio 
reaches 1.35 percent.
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    Second, the final rule provides that credits available to an 
institution may be used to offset the institution's entire quarterly 
insurance assessment, rather than limiting credit use to an annual rate 
of 2 basis points as proposed in the NPR.
Notices of Credits
    As soon as practicable after the DIF reserve ratio reaches 1.35 
percent, the FDIC will notify each small bank of the FDIC's preliminary 
estimate of the small bank's credit and the manner in which the credit 
was calculated (the notice). The estimate will be based on information 
derived from the FDIC's official system of records. The FDIC will 
provide the notice through FDICconnect or other means in accordance 
with existing practices for assessment invoices.\54\
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    \54\ See generally 12 CFR 327.2(b).
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    After the initial notice, periodic updated notices will be provided 
to reflect adjustments that may be made as the result of credit use, 
requests for review of credit amounts, or any subsequent merger or 
consolidation.
Requests for Review and Appeals
    The final rule includes provisions that allow a small bank that 
disagrees with the FDIC's computation of, or basis for, its credits to 
request review or appeal. These provisions are unchanged from those 
proposed in the NPR.
    The FDIC received no comments on this part of the proposal.

V. Economic Effects

    The FDIC estimates that it will collect approximately $10 billion 
in surcharges and award approximately $1 billion in credits to small 
banks, although actual amounts may vary from these estimates. The FDIC 
projects that a shortfall assessment will be unnecessary.
    As discussed above, the benefits of the final rule will be to 
quickly strengthen the fund's ability to withstand an unanticipated 
spike in losses and reduce the risk of larger assessments for the 
entire industry. Under the final rule, the cost of raising the minimum 
reserve ratio will be spread over approximately eight quarters and 
calculated in a simple, predictable manner.

A. Accounting Treatment

    Based on FDIC analysis, banks subject to the surcharge will not 
account for future surcharges or a possible shortfall assessment as a 
present liability or a recognized loss contingency in the Call Report 
and other banking regulatory reports based on GAAP because the 
surcharges do not relate to a current condition or event giving rise to 
a liability under Financial Accounting Standards Board Accounting 
Standards Codification Topic 450, Contingencies. Surcharges will become 
recognized loss contingencies in a then current quarter if (i) the bank 
is in existence during that quarter; and (ii) the bank is a large bank 
as of that quarter and, therefore, subject to the surcharge. Surcharges 
are based on the bank's regular assessment bases in future periods, and 
recognized in regulatory reports for those periods, just as regular 
assessments are now (where each assessment is accounted for as a

[[Page 16067]]

liability and expensed for the quarter it is assessed). A shortfall 
assessment will be a recognized loss contingency if (i) the reserve 
ratio has not reached 1.35 percent by the end of 2018; and (ii) the 
bank has been subject to a surcharge.

B. Capital and Earnings Analysis

    Consistent with section 7(b)(2)(B) of the FDI Act, the analysis 
that follows estimates the effects of a 4.5 basis point surcharge on 
the equity capital and earnings of large banks.\55\ Because small banks 
will not pay surcharges, surcharges will affect neither their capital 
nor their earnings; however, the analysis also estimates the effect of 
credits on small bank earnings.
---------------------------------------------------------------------------

    \55\ Equity capital is defined as tier 1 capital for this 
purpose.
---------------------------------------------------------------------------

    The FDIC has estimated the effect of a 4.5 basis-point surcharge on 
large banks' earnings in two ways. First, as a percentage of adjusted 
earnings, to take into account the savings projected to result from 
lower assessment rates implemented in the future when the reserve ratio 
reaches 1.15 percent. Second, as a percentage of current earnings. 
Current earnings are assumed to equal pre-tax income before 
extraordinary and other items from January 1, 2015 through December 31, 
2015. Adjusted earnings are current earnings plus the savings to be 
gained by large banks from lower future assessments that will result 
from the lower assessment rate schedule that will apply to regular 
assessments once the reserve ratio reaches 1.15 percent.
Assumptions and Data
    The analysis is based on large banks as of December 31, 2015. As of 
that date, there were 108 large banks. Banks are merger-adjusted, 
except for failed bank acquisitions, for purposes of determining 
income.
    Although the surcharge is expected to continue for 8 quarters, the 
analysis examines the effect of the surcharge over one year. Each large 
bank's surcharge base is calculated as of December 31, 2015. Data from 
January 1, 2015 through December 31, 2015 are used to calculate each 
large bank's current earnings and adjusted earnings. Capital for each 
large bank is the amount reported as of December 31, 2015. The analysis 
assumes that current earnings equal pre-tax income before extraordinary 
and other items from January 1, 2015 through December 31, 2015. Using 
this measure eliminates the potentially transitory effects of 
extraordinary items and taxes on profitability. In calculating the 
effect on capital and banks' ability to maintain a leverage ratio of at 
least 4 percent (the minimum capital requirement \56\), however, the 
analysis considers the effective after-tax cost of assessments.\57\ The 
analysis assumes that the large banks do not transfer the surcharge to 
customers in the form of changes in borrowing rates, deposit rates, or 
service fees.
---------------------------------------------------------------------------

    \56\ See 12 CFR 324.10(a).
    \57\ Since deposit insurance assessments are a tax-deductible 
operating expense, increases in assessment expenses can lower 
taxable income and decreases in the assessment rate can raise 
taxable income.
---------------------------------------------------------------------------

Projected Effects
    For all or almost all large banks, the effective surcharge annual 
rate measured against large banks' regular assessment base will be less 
than the nominal surcharge rate of 4.5 basis points because of the $10 
billion deduction. The FDIC projects that the net effect of lower 
assessment rates that go into effect when the reserve ratio reaches 
1.15 percent and the imposition of the surcharge will result in lower 
assessments for approximately one-third of all large banks. 
Specifically, the analysis estimates that 37 of the 108 large banks 
will pay lower assessments in the future than they pay currently.
    The analysis reveals no significant capital effects from the 
surcharge. All large institutions continue to maintain a 4 percent 
leverage ratio, at a minimum, both before and after the imposition of 
the surcharge.\58\
---------------------------------------------------------------------------

    \58\ Of the 108 large banks, 107 continue to maintain a leverage 
ratio of at least 4 percent. The other large bank is an insured 
branch of a foreign bank and does not report income in its quarterly 
financial filings, so its regulatory capital ratios cannot be 
calculated.
---------------------------------------------------------------------------

    The annual surcharge also represents only a small percentage of 
bank earnings for most large banks. In the aggregate, the annual 
surcharge absorbs 2.33 percent of total large bank adjusted earnings 
and 2.36 percent of total large bank current earnings.
    Table 2.A shows that as of December 31, 2015, for 83 percent of all 
large banks (86 large banks) the surcharge represents 3 percent or less 
of adjusted annual earnings. For 92 percent (96 large banks), the 
surcharge represents 5 percent or less of adjusted annual earnings. 
Only 8 large banks' adjusted annual earnings are affected by more than 
5 percent, with the maximum effect on any single bank being 9.6 
percent.

             Table 2.A--The Effect of the Final Rule on Adjusted Earnings of Individual Large Banks
----------------------------------------------------------------------------------------------------------------
                                                   Large banks
-----------------------------------------------------------------------------------------------------------------
                                                            Population                        Assets
                                                 ---------------------------------------------------------------
     Surcharge relative to adjusted earnings                       Percentage of                   Percentage of
                                                      Number        total large    Total  ($ in     total large
                                                                       banks         billions)         banks
----------------------------------------------------------------------------------------------------------------
Equal to 0%.....................................               2               2              21               0
Between 0% and 1%...............................              23              22             604               5
Between 1% and 2%...............................              32              31           1,925              15
Between 2% and 3%...............................              29              28           6,608              51
Between 3% and 4%...............................               6               6           2,473              19
Between 4% and 5%...............................               4               4             444               3
Over 5%.........................................               8               8             828               6
                                                 ---------------------------------------------------------------
    All Large Banks.............................             104             100          12,904             100
----------------------------------------------------------------------------------------------------------------
Notes:
(1) Effect of Surcharge on Current Earnings: Mean = 2.17%; Median = 1.88%; Max = 9.61%; Min = 0.00%.
(2) Four large banks were excluded from the original population of 108. One large bank is an insured branch of a
  foreign bank and does not report income in its quarterly financial filings and the other three large banks
  reported negative income. Figures may not add to totals due to rounding.


[[Page 16068]]

    When evaluating the effect of the surcharge on current earnings 
(that is, excluding the gains projected from lower future regular 
assessments), the effect of surcharges is slightly greater, as 
expected, but the results are not materially different. Table 2.B shows 
that, for 82 percent of large banks as of December 31, 2015, (85 large 
banks), the surcharge represents 3 percent or less of current earnings. 
For 91 percent (95 large banks), the surcharge represents 5 percent or 
less of current earnings. Only 9 large banks' current earnings are 
affected by more than 5 percent, with the maximum effect on any single 
bank being 10.11 percent.

              Table 2.B--The Effect of the Final Rule on Current Earnings of Individual Large Banks
----------------------------------------------------------------------------------------------------------------
                                                   Large banks
-----------------------------------------------------------------------------------------------------------------
                                                            Population                        Assets
                                                 ---------------------------------------------------------------
     Surcharge relative to  current earnings                       Percentage of                   Percentage of
                                                      Number        total large    Total  ($ in     total large
                                                                       banks         billions)         banks
----------------------------------------------------------------------------------------------------------------
Equal to 0......................................               2               2              21               0
Between 0% and 1%...............................              23              22             604               5
Between 1% and 2%...............................              31              30           1,906              15
Between 2% and 3%...............................              29              28           6,568              51
Between 3% and 4%...............................               7               7           2,532              20
Between 4% and 5%...............................               3               3             171               1
Over 5%.........................................               9               9           1,101               9
                                                 ---------------------------------------------------------------
    All Large Banks.............................             104             100          12,904             100
----------------------------------------------------------------------------------------------------------------
Notes:
(1) Effect of Surcharge on Current Earnings: Mean = 2.23%; Median = 1.90%; Max = 10.11%; Min = 0.00%.
(2) Four large banks were excluded from the original population of 108. One large bank is an insured branch of a
  foreign bank and does not report income in its quarterly financial filings and the other three large banks
  reported negative income. Figures may not add to totals due to rounding.

    Finally, credits will result in a small increase in the income of 
small banks. Small bank annual earnings are estimated to increase 
between 2.5 and 2.7 percent due to these credits.
    The FDIC received five comments noting the effects of the surcharge 
on banks' capital and earnings, including the effects of banks' ability 
to pay dividends or to grow. As discussed above, however, FDIC analysis 
reveals no significant capital effects on large banks from the 
surcharge. On average, the annual surcharge would absorb about 2.4 
percent of large bank annual income.

VI. Alternatives Considered

    In the NPR, the FDIC solicited comments on several alternatives.
    Under the first alternative presented, the FDIC would forego 
surcharges and instead impose a one-time assessment, similar to a 
shortfall assessment, at the end of the quarter after the DIF reserve 
ratio first reaches or exceeds 1.15 percent. As previously discussed, 
the FDIC received two comments supporting this alternative. These 
comments are discussed earlier.
    The second alternative would also forego surcharges and, if the 
reserve ratio does not reach 1.35 percent by a date sometime near the 
statutory deadline, impose a shortfall assessment at the end of the 
following quarter, to be collected at the end of the next quarter. The 
FDIC received one comment supporting this alternative, and a few banks 
surveyed by three trade groups submitting a joint comment letter also 
supported this alternative. These comments are also previously 
discussed.
    The FDIC solicited comment on additional alternatives that are 
essentially variations of certain aspects of the surcharge proposal, 
including the method of determining the surcharge base, the method of 
allocating credits, and the length of the surcharge period. Comments in 
response to these alternatives are discussed in the relevant sections.

VII. Effective Date

    This rule will become effective on July 1, 2016. If the reserve 
ratio reaches 1.15 percent before that date, surcharges will begin July 
1, 2016. If the reserve ratio has not reached 1.15 percent by that 
date, surcharges will begin the first day of the calendar quarter after 
the reserve ratio reaches 1.15 percent.

VIII. Regulatory Analysis and Procedure

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires that an agency, in 
connection with a notice of final rulemaking, prepare a final 
regulatory flexibility analysis describing the impact of the rule on 
small entities or certify that the final rule will not have a 
significant economic impact on a substantial number of small 
entities.\59\ Certain types of rules, such as rules of particular 
applicability relating to rates or corporate or financial structures, 
or practices relating to such rates or structures, are expressly 
excluded from the definition of the term ``rule'' for purposes of the 
RFA.\60\ This final rule relates directly to the rates imposed on 
insured depository institutions for deposit insurance. For this reason, 
the requirements of the RFA do not apply. Nonetheless, the FDIC is 
voluntarily undertaking a regulatory flexibility analysis.
---------------------------------------------------------------------------

    \59\ See 5 U.S.C. 604, 605(b).
    \60\ 5 U.S.C. 601.
---------------------------------------------------------------------------

    As of December 31, 2015, of 6,191 FDIC-insured institutions,\61\ 
there were 4,921 small insured depository institutions as that term is 
defined for purposes of the RFA (i.e., those with $550 million or less 
in assets).\62\ As described in the SUPPLEMENTARY INFORMATION section 
of the preamble, the purpose of this final rule is to meet the Dodd-
Frank Act requirements to increase the DIF reserve ratio from 1.15 to 
1.35 by September 30, 2020, and offset the effect of that increase on 
banks

[[Page 16069]]

with less than $10 billion in total consolidated assets. The final rule 
meets those requirements in a manner that appropriately balances 
several considerations, including the goal of reaching the statutory 
minimum reserve ratio reasonably promptly in order to strengthen the 
fund and reduce the risk of pro-cyclical assessments, the goal of 
maintaining stable and predictable assessments for banks over time, and 
the projected effects on bank capital and earnings. Both the Dodd-Frank 
Act and the FDI Act grant the FDIC broad authority to implement the 
requirement to offset the effect of the increase in the minimum reserve 
ratio on banks with less than $10 billion in total assets.
---------------------------------------------------------------------------

    \61\ The total at December 31, 2015, includes 6,182 insured 
commercial banks and savings institutions and 9 insured U.S. 
branches of foreign banks.
    \62\ Throughout this RFA analysis, a ``small institution'' or 
``small insured depository institution'' refers to an institution 
with assets of $550 million or less. As of December 31, 2015, one 
insured branch of a foreign bank had less than $550 million in 
assets and is included in the small insured depository institution 
total.
---------------------------------------------------------------------------

    The final rule affects small entities to the extent that they are 
eligible for credits in exchange for their contributions toward raising 
the DIF reserve ratio from 1.15 percent to 1.35 percent. The FDIC will 
apply these credits to future regular assessments, resulting in 
estimated average savings of 2.4 to 2.6 percent of annual earnings for 
small insured depository institutions.
    The final rule does not directly impose any ``reporting'' or 
``recordkeeping'' requirements, and the compliance requirements for the 
final rule would not exceed (and, in fact, would be the same as) 
existing compliance requirements for the current risk-based deposit 
insurance assessment system for small banks.\63\ The FDIC is unaware of 
any duplicative, overlapping or conflicting federal rules.\64\ The 
final rule will not have a significant economic impact on a substantial 
number of small entities within the meaning of those terms as used in 
the RFA and the FDIC so certifies.\65\
---------------------------------------------------------------------------

    \63\ 5 U.S.C. 604.
    \64\ 5 U.S.C. 605.
    \65\ 5 U.S.C. 605.
---------------------------------------------------------------------------

B. Small Business Regulatory Enforcement Fairness Act

    The final rule has been determined to be a ``major rule'' within 
the meaning of the Small Business Regulatory Enforcement Fairness Act 
of 1996 (SBREFA) (Title II, Pub. L. 104-121) by the Office of 
Management and Budget.

C. Riegle Community Development and Regulatory Improvement Act

    The Riegle Community Development and Regulatory Improvement Act 
requires that the FDIC, in determining the effective date and 
administrative compliance requirements of new regulations that impose 
additional reporting, disclosure, or other requirements on insured 
depository institutions, consider, consistent with principles of safety 
and soundness and the public interest, any administrative burdens that 
such regulations would place on depository institutions, including 
small depository institutions, and customers of depository 
institutions, as well as the benefits of such regulations.\66\ Subject 
to certain exceptions, new regulations and amendments to regulations 
prescribed by a Federal banking agency which impose additional 
reporting, disclosures, or other new requirements on insured depository 
institutions shall take effect on the first day of a calendar quarter 
which begins on or after the date on which the regulations are 
published in final form.\67\ In accordance with these provisions and as 
discussed above, the FDIC considered any administrative burdens, as 
well as benefits, that the final rule would place on depository 
institutions and their customers in determining the effective date and 
administrative compliance requirements of the final rule. Thus, the 
final rule will be effective no earlier than the first day of a 
calendar quarter that begins after publication of the rule.
---------------------------------------------------------------------------

    \66\ 12 U.S.C. 4802(a).
    \67\ 12 U.S.C. 4802(b).
---------------------------------------------------------------------------

D. Paperwork Reduction Act

    In accordance with the requirements of the Paperwork Reduction Act 
(``PRA'') of 1995, 44 U.S.C. 3501-3521, the FDIC may not conduct or 
sponsor, and the respondent is not required to respond to, an 
information collection unless it displays a currently valid Office of 
Management and Budget (``OMB'') control number.
    This final rule does not revise FDIC's Assessments Information 
Collection 3064-0057, Quarterly Certified Statement Invoice for Deposit 
Insurance Assessment. The FDIC will continue to obtain the information 
necessary to calculate the surcharge assessment and assessment credits 
from the Call Report. Therefore, no submission to OMB need be made.

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

    The FDIC has determined that the final 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).

F. 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 rulemakings published 
in the Federal Register after January 1, 2000. The FDIC invited 
comments on how to make this proposal easier to understand. No comments 
addressing this issue were received.

List of Subjects in 12 CFR Part 327

    Bank deposit insurance, Banks, Banking, Savings associations.

    For the reasons set forth above, the FDIC amends part 327 as 
follows:

PART 327--ASSESSMENTS

0
1. The authority citation for 12 CFR part 327 continues to read as 
follows:

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


0
2. Revise Sec.  327.11 to read as follows:


Sec.  327.11  Surcharges and assessments required to raise the reserve 
ratio of the DIF to 1.35 percent.

    (a) Surcharge--(1) Institutions subject to surcharge. The following 
insured depository institutions are subject to the surcharge described 
in this paragraph:
    (i) Large institutions, as defined in Sec.  327.8(f);
    (ii) Highly complex institutions, as defined in Sec.  327.8(g); and
    (iii) Insured branches of foreign banks whose assets are equal to 
or exceed $10 billion, as reported in Schedule RAL of the branch's most 
recent quarterly Report of Assets and Liabilities of U.S. Branches and 
Agencies of Foreign Banks.
    (2) Surcharge period. The surcharge period shall begin the later of 
the first day of the assessment period following the assessment period 
in which the reserve ratio of the DIF first reaches or exceeds 1.15 
percent, or the assessment period beginning on July 1, 2016. The 
surcharge period shall continue through the earlier of the assessment 
period ending December 31, 2018, or the end of the assessment period in 
which the reserve ratio of the DIF first reaches or exceeds 1.35 
percent.
    (3) Notification of surcharge. The FDIC shall notify each insured 
depository institution subject to the surcharge of the amount of such 
surcharge no later than 15 days before such surcharge is due, as 
described in paragraph (a)(4) of this section.
    (4) Payment of any surcharge. Each insured depository institution 
subject to

[[Page 16070]]

the surcharge shall pay to the Corporation any surcharge imposed under 
paragraph (a) of this section in compliance with and subject to the 
provisions of Sec. Sec.  327.3, 327.6 and 327.7. The payment date for 
any surcharge shall be the date provided in Sec.  327.3(b)(2) for the 
institution's quarterly certified statement invoice for the assessment 
period in which the surcharge was imposed.
    (5) Calculation of surcharge. An insured depository institution's 
surcharge for each assessment period during the surcharge period shall 
be determined by multiplying 1.125 basis points times the institution's 
surcharge base for the assessment period.
    (i) Surcharge base--Insured depository institution that has no 
affiliated insured depository institution subject to the surcharge. The 
surcharge base for an assessment period for an insured depository 
institution subject to the surcharge that has no affiliated insured 
depository institution subject to the surcharge shall equal:
    (A) The institution's deposit insurance assessment base for the 
assessment period, determined according to Sec.  327.5; plus
    (B) The greater of the increase amount determined according to 
paragraph (a)(5)(iii) of this section or zero; minus
    (C) $10 billion; provided, however, that an institution's surcharge 
base for an assessment period cannot be negative.
    (ii) Surcharge base--insured depository institution that has one or 
more affiliated insured depository institutions subject to the 
surcharge. The surcharge base for an assessment period for an insured 
depository institution subject to the surcharge that has one or more 
affiliated insured depository institutions subject to the surcharge 
shall equal:
    (A) The institution's deposit insurance assessment base for the 
assessment period, determined according to Sec.  327.5; plus
    (B) The greater of the institution's portion, determined according 
to paragraph (a)(5)(v) of this section, of the increase amount 
determined according to paragraph (a)(5)(iii) of this section or zero; 
minus
    (C) The institution's portion, determined according to paragraph 
(a)(5)(v) of this section, of $10 billion; provided, however, that an 
institution's surcharge base for an assessment period cannot be 
negative.
    (iii) Surcharge base--determination of increase amount. The 
increase amount for an assessment period shall equal:
    (A) The amount of the aggregate deposit insurance assessment bases 
for the assessment period, determined according to Sec.  327.5, of all 
of the institution's affiliated insured depository institutions that 
are not subject to the surcharge, minus
    (B) The product of the increase multiplier set out in paragraph 
(a)(5)(iv) of this section and the aggregate deposit insurance 
assessment bases, determined according to Sec.  327.5, as of December 
31, 2015, of all of the small institutions, as defined in Sec.  
327.8(e), that were the institution's affiliated insured depository 
institutions for the assessment period ending December 31, 2015.
    (iv) Increase multiplier for the assessment periods during the 
surcharge period. During the surcharge period, the increase multiplier 
shall be the amount prescribed in the following schedule:

  Increase Multipliers for the Assessment Periods During the Surcharge
                                 Period
------------------------------------------------------------------------
            For the assessment period ending--
------------------------------------------------------------------------
September 30, 2016......................................       1.0740995
December 31, 2016.......................................       1.1000000
March 31, 2017..........................................       1.1265251
June 30, 2017...........................................       1.1536897
September 30, 2017......................................       1.1815094
December 31, 2017.......................................       1.2100000
 March 31, 2018.........................................       1.2391776
June 30, 2018...........................................       1.2690587
September 30, 2018......................................       1.2996604
December 31, 2018.......................................       1.3310000
------------------------------------------------------------------------

    (A) For the assessment period ending September 30, 2016, the 
increase multiplier shall be 1.0740995.
    (B) For the assessment period ending December 31, 2016, the 
increase multiplier shall be 1.1000000.
    (C) For the assessment period ending March 31, 2017, the increase 
multiplier shall be 1.1265251.
    (D) For the assessment period ending June 30, 2017, the increase 
multiplier shall be 1.1536897.
    (E) For the assessment period ending September 30, 2017, the 
increase multiplier shall be 1.1815094.
    (F) For the assessment period ending December 31, 2017, the 
increase multiplier shall be 1.2100000.
    (G) For the assessment period ending March 31, 2018, the increase 
multiplier shall be 1.2391776.
    (H) For the assessment period ending June 30, 2018, the increase 
multiplier shall be 1.2690587.
    (I) For the assessment period ending September 30, 2018, the 
increase multiplier shall be 1.2996604.
    (J) For the assessment period ending December 31, 2018, the 
increase multiplier shall be 1.33100000.
    (v) Surcharge base--institution's portion. For purposes of 
paragraphs (a)(5)(ii)(B) and (C) of this section, an institution's 
portion shall equal the ratio of the institution's deposit insurance 
assessment base for the assessment period, determined according to 
Sec.  327.5, to the sum of the institution's deposit insurance 
assessment base for the assessment period, determined according to 
Sec.  327.5, and the deposit insurance assessment bases for the 
assessment period, determined according to Sec.  327.5, of all of the 
institution's affiliated insured depository institutions subject to the 
surcharge.
    (vi) For the purposes of this section, an affiliated insured 
depository institution is an insured depository institution that meets 
the definition of ``affiliate'' in section 3 of the FDI Act, 12 U.S.C. 
1813(w)(6).
    (6) Effect of mergers and consolidations on surcharge base. (i) If 
an insured depository institution acquires another insured depository 
institution through merger or consolidation during the surcharge 
period, the acquirer's surcharge base will be calculated consistent 
with Sec.  327.6 and Sec.  327.11(a)(5). For the purposes of the 
surcharge, a merger or consolidation means any transaction in which an 
insured depository institution merges or consolidates with any other 
insured depository institution, and includes transactions in which an 
insured depository institution either directly or indirectly acquires 
all or substantially all of the assets, or assumes all or substantially 
all of the deposit liabilities of any other insured depository 
institution where there is not a legal merger or consolidation of the 
two insured depository institutions.
    (ii) If an insured depository institution not subject to the 
surcharge is the surviving or resulting institution in a merger or 
consolidation with an insured depository institution that is subject to 
the surcharge or acquires all or substantially all of the assets, or 
assumes all or substantially all of the deposit liabilities, of an 
insured depository institution subject to the surcharge, then the 
surviving or resulting insured deposit institution or the insured 
depository institution that acquires such assets or assumes such 
deposit liabilities is subject to the surcharge.
    (b) Shortfall assessment.--(1) Institutions subject to shortfall 
assessment. Any insured depository institution that was subject to a 
surcharge under paragraph (a)(1) of this section, in any assessment 
period during the surcharge period described

[[Page 16071]]

in paragraph (a)(2) of this section, shall be subject to the shortfall 
assessment described in this paragraph (b). If surcharges under 
paragraph (a) of this section have not been in effect, the insured 
depository institutions subject to the shortfall assessment described 
in this paragraph (b) will be the insured depository institutions 
described in paragraph (a)(1) of this section as of the assessment 
period in which the reserve ratio of the DIF reaches or exceeds 1.15 
percent.
    (2) Notification of shortfall. The FDIC shall notify each insured 
depository institution subject to the shortfall assessment of the 
amount of such institution's share of the shortfall assessment 
described in paragraph (b)(5) of this section no later than 15 days 
before such shortfall assessment is due, as described in paragraph 
(b)(3) of this section.
    (3) Payment of any shortfall assessment. Each insured depository 
institution subject to the shortfall assessment shall pay to the 
Corporation such institution's share of any shortfall assessment as 
described in paragraph (b)(5) of this section in compliance with and 
subject to the provisions of Sec. Sec.  327.3, 327.6 and 327.7. The 
payment date for any shortfall assessment shall be the date provided in 
Sec.  327.3(b)(2) for the institution's quarterly certified statement 
invoice for the assessment period in which the shortfall assessment is 
imposed.
    (4) Amount of aggregate shortfall assessment. (i) If the reserve 
ratio of the DIF is at least 1.15 percent but has not reached or 
exceeded 1.35 percent as of December 31, 2018, the shortfall assessment 
shall be imposed on March 31, 2019, and shall equal 1.35 percent of 
estimated insured deposits as of December 31, 2018, minus the actual 
DIF balance as of that date.
    (ii) If the reserve ratio of the DIF is less than 1.15 percent and 
has not reached or exceeded 1.35 percent by December 31, 2018, the 
shortfall assessment shall be imposed at the end of the assessment 
period immediately following the assessment period that occurs after 
December 31, 2018, during which the reserve ratio first reaches or 
exceeds 1.15 percent and shall equal 0.2 percent of estimated insured 
deposits as of the end of the calendar quarter in which the reserve 
ratio first reaches or exceeds 1.15 percent.
    (5) Institutions' shares of aggregate shortfall assessment. Each 
insured depository institution's share of the aggregate shortfall 
assessment shall be determined by apportioning the aggregate amount of 
the shortfall assessment among all institutions subject to the 
shortfall assessment in proportion to each institution's shortfall 
assessment base as described in this paragraph.
    (i) Shortfall assessment base if surcharges have been in effect. If 
surcharges have been in effect, an institution's shortfall assessment 
base shall equal the average of the institution's surcharge bases 
during the surcharge period. For purposes of determining the average 
surcharge base, if an institution was not subject to the surcharge 
during any assessment period of the surcharge period, its surcharge 
base shall equal zero for that assessment period.
    (ii) Shortfall assessment base if surcharges have not been in 
effect. If surcharges have not been in effect, an institution's 
shortfall assessment base shall equal the average of what its surcharge 
bases would have been over the four assessment periods ending with the 
assessment period in which the reserve ratio first reaches or exceeds 
1.15 percent. If an institution would not have been subject to a 
surcharge during one of those assessment periods, its surcharge base 
shall equal zero for that assessment period.
    (6) Effect of mergers and consolidations on shortfall assessment. 
(i) If an insured depository institution, through merger or 
consolidation, acquires another insured depository institution that 
paid surcharges for one or more assessment periods, the acquirer will 
be subject to a shortfall assessment and its average surcharge base 
will be increased by the average surcharge base of the acquired 
institution, consistent with paragraph (b)(5) of this section.
    (ii) For the purposes of the shortfall assessment, a merger or 
consolidation means any transaction in which an insured depository 
institution merges or consolidates with any other insured depository 
institution, and includes transactions in which an insured depository 
institution either directly or indirectly acquires all or substantially 
all of the assets, or assumes all or substantially all of the deposit 
liabilities of any other insured depository institution where there is 
not a legal merger or consolidation of the two insured depository 
institutions.
    (c) Assessment credits. (1)(i) Eligible Institutions. For the 
purposes of this paragraph (c) an insured depository institution will 
be considered an eligible institution, if, for at least one assessment 
period during the credit calculation period, the institution was a 
credit accruing institution.
    (ii) Credit accruing institutions. A credit accruing institution is 
an institution that, for a particular assessment period, is not:
    (A) A large institution, as defined in Sec.  327.8(f);
    (B) A highly complex institution, as defined in Sec.  327.8(g); or
    (C) An insured branch of a foreign bank whose assets are equal to 
or exceed $10 billion, as reported in Schedule RAL of the branch's most 
recent quarterly Report of Assets and Liabilities of U.S. Branches and 
Agencies of Foreign Banks.
    (2) Credit calculation period. The credit calculation period shall 
begin the first day of the assessment period after the reserve ratio of 
the DIF reaches or exceeds 1.15 percent, and shall continue through the 
earlier of the assessment period that the reserve ratio of the DIF 
reaches or exceeds 1.35 percent or the assessment period that ends 
December 31, 2018.
    (3) Determination of aggregate assessment credit awards to all 
eligible institutions. The FDIC shall award an aggregate amount of 
assessment credits equal to the product of the fraction of quarterly 
regular deposit insurance assessments paid by credit accruing 
institutions during the credit calculation period and the amount by 
which the DIF increase, as determined under paragraph (c)(3)(ii) or 
(iii) of this section, exceeds total surcharges imposed under paragraph 
(b) of this section; provided, however, that the aggregate amount of 
assessment credits cannot exceed the aggregate amount of quarterly 
deposit insurance assessments paid by credit accruing institutions 
during the credit calculation period.
    (i) Fraction of quarterly regular deposit insurance assessments 
paid by credit accruing institutions. The fraction of assessments paid 
by credit accruing institutions shall equal quarterly deposit insurance 
assessments, as determined under Sec.  327.9, paid by such institutions 
for each assessment period during the credit calculation period, 
divided by the total amount of quarterly deposit insurance assessments 
paid by all insured depository institutions during the credit 
calculation period, excluding the aggregate amount of surcharges 
imposed under paragraph (b) of this section.
    (ii) DIF increase if the DIF reserve ratio has reached 1.35 percent 
by December 31, 2018. If the DIF reserve ratio has reached 1.35 percent 
by December 31, 2018, the DIF increase shall equal 0.2 percent of 
estimated insured deposits as of the date that the DIF reserve ratio 
first reaches or exceeds 1.35 percent.
    (iii) DIF Increase if the DIF reserve ratio has not reached 1.35 
percent by

[[Page 16072]]

December 31, 2018. If the DIF reserve ratio has not reached 1.35 
percent by December 31, 2018, the DIF increase shall equal the DIF 
balance on December 31, 2018, minus 1.15 percent of estimated insured 
deposits on that date.
    (4) Determination of individual eligible institutions' shares of 
aggregate assessment Credit.--
    (i) Assessment credit share. To determine an eligible institution's 
assessment credit share, the aggregate assessment credits awarded by 
the FDIC shall be apportioned among all eligible institutions in 
proportion to their respective assessment credit bases, as described in 
paragraph (c)(4)(ii) of this section.
    (ii) Assessment credit base. An eligible institution's assessment 
credit base shall equal the average of its quarterly deposit insurance 
assessment bases, as determined under Sec.  327.5, during the credit 
calculation period, as defined in paragraph (c)(2) of this section. An 
eligible institution's credit base shall be deemed to equal zero for 
any assessment period during which the institution was not a credit 
accruing institution.
    (iii) Limitation. The assessment credits awarded to an eligible 
institution shall not exceed the total amount of quarterly deposit 
insurance assessments paid by that institution for assessment periods 
during the credit calculation period in which it was a credit accruing 
institution.
    (5) Effect of merger or consolidation on assessment credit base. If 
an eligible institution acquires another eligible institution through 
merger or consolidation before the reserve ratio of the DIF reaches 
1.35 percent, the acquirer's quarterly deposit insurance assessment 
base (for purposes of calculating the acquirer's assessment credit 
base) shall be deemed to include the acquired institution's deposit 
insurance assessment base for the assessment periods during the credit 
calculation period that were prior to the merger or consolidation and 
in which the acquired institution was a credit accruing institution.
    (6) Effect of call report amendments. Amendments to the quarterly 
Reports of Condition and Income or the quarterly Reports of Assets and 
Liabilities of U.S. Branches and Agencies of Foreign Banks that occur 
subsequent to the payment date for the final assessment period of the 
credit calculation period shall not affect an eligible institution's 
credit share.
    (7) Award and notice of assessment credits--(i) Award of assessment 
credits. As soon as practicable after the earlier of either December 
31, 2018, or the date on which the reserve ratio of the DIF reaches 
1.35 percent, the FDIC shall notify an eligible institution of the 
FDIC's preliminary estimate of such institution's assessment credits 
and the manner in which the FDIC calculated such credits.
    (ii) Notice of assessment credits. The FDIC shall provide eligible 
institutions with periodic updated notices reflecting adjustments to 
the institution's assessment credits resulting from requests for review 
or appeals, mergers or consolidations, or the FDIC's application of 
credits to an institution's quarterly deposit insurance assessments.
    (8) Requests for review and appeal of assessment credits. Any 
institution that disagrees with the FDIC's computation of or basis for 
its assessment credits, as determined under this paragraph (c), may 
request review of the FDIC's determination or appeal that 
determination. Such requests for review or appeal shall be filed 
pursuant to the procedures set forth in paragraph (d) of this section.
    (9) Successors. If an insured depository institution acquires an 
eligible institution through merger or consolidation after the reserve 
ratio of the DIF reaches 1.35 percent, the acquirer is successor to any 
assessment credits of the acquired institution.
    (10) Mergers and consolidation include only legal mergers and 
consolidation. For the purposes of this paragraph (c), a merger or 
consolidation does not include transactions in which an insured 
depository institution either directly or indirectly acquires the 
assets of, or assumes liability to pay any deposits made in, any other 
insured depository institution, but there is not a legal merger or 
consolidation of the two insured depository institutions.
    (11) Use of credits. (i) The FDIC shall apply assessment credits 
awarded under paragraph (c) of this section to an institution's deposit 
insurance assessments, as calculated under Sec.  327.9, only for 
assessment periods in which the reserve ratio of the DIF exceeds 1.38 
percent.
    (ii) The FDIC shall apply assessment credits to reduce an 
institution's quarterly deposit insurance assessments by each 
institution's remaining credits. The assessment credit applied to each 
institution's deposit insurance assessment for any assessment period 
shall not exceed the institution's total deposit insurance assessment 
for that assessment period.
    (iii) The amount of credits applied each quarter will not be 
recalculated as a result of amendments to the quarterly Reports of 
Condition and Income or the quarterly Reports of Assets and Liabilities 
of U.S. Branches and Agencies of Foreign Banks pertaining to any 
quarter in which credits have been applied.
    (12) Transfer or sale of credits. Other than through merger or 
consolidation, credits may not be sold or transferred.
    (d) Request for review and appeals of assessment credits. (1) An 
institution that disagrees with the basis for its assessment credits, 
or the Corporation's computation of its assessments credits under 
paragraph (c) of this section and seeks to change it must submit a 
written request for review and any supporting documentation to the 
FDIC's Director of the Division of Finance.
    (2) Timing. (i) Any request for review under this paragraph must be 
submitted within 30 days from
    (A) The initial notice provided by the FDIC to the insured 
depository institution under paragraph (c)(7) of this section stating 
the FDIC's preliminary estimate of an eligible institution's assessment 
credit and the manner in which the assessment credit was calculated; or
    (B) Any updated notice provided by the FDIC to the insured 
depository institution under paragraph (c)(7) of this section.
    (ii) Any requests submitted after the deadline in paragraph 
(d)(2)(i) of this section will be considered untimely filed and the 
institution will be subsequently barred from submitting a request for 
review of its assessment credit.
    (3) Process of review. (i) Upon receipt of a request for review, 
the FDIC shall temporarily freeze the amount of the assessment credit 
being reviewed until a final determination is made by the Corporation.
    (ii) The FDIC may request, as part of its review, additional 
information from the insured depository institution involved in the 
request and any such information must be submitted to the FDIC within 
21 days of the FDIC's request;
    (iii) The FDIC's Director of the Division of Finance, or his or her 
designee, will notify the requesting institution of his or her 
determination of whether a change is warranted within 60 days of 
receipt by the FDIC of the request for review, or if additional 
information had been requested from the FDIC, within 60 days of receipt 
of any such additional information.
    (4) Appeal. If the requesting institution disagrees with the final 
determination from the Director of the Division of Finance, that 
institution may appeal its assessment credit

[[Page 16073]]

determination to the FDIC's Assessment Appeals Committee within 30 days 
from the date of the Director's written determination. Notice of the 
procedures applicable to an appeal before the Assessment Appeals 
Committee will be included in the Director's written determination.
    (5) Adjustments to assessment credits. Once the Director of the 
Division of Finance, or the Assessment Appeals Committee, as 
appropriate, has notified the requesting bank of its final 
determination, the FDIC will make appropriate adjustments to assessment 
credit amounts consistent with that determination. Adjustments to an 
insured depository institution's assessment credit amounts will not be 
applied retroactively to reduce or increase the quarterly deposit 
insurance assessment for a prior assessment period.


0
3. In Sec.  327.35, revise paragraph (a) to read as follows:


Sec.  327.35  Application of credits.

    (a) Subject to the limitations in paragraph (b) of this section, 
the amount of an eligible insured depository institution's one-time 
credit shall be applied to the maximum extent allowable by law against 
that institution's quarterly assessment payment under subpart A of this 
part, after applying assessment credits awarded under Sec.  327.11(c), 
until the institution's credit is exhausted.
* * * * *

    Note: The following appendix will not appear in the Code of 
Federal Regulations.

Appendix 1

Example Calculations of Surcharge Bases in Banking Organizations With 
Multiple Large Banks and Affiliated Small Banks

    Table 1.1 gives an example of the calculation of the surcharge 
base for a banking organization that comprises three large banks but 
no affiliated small banks.

              Table 1.1--Example Application of $10 Billion Deduction Within a Banking Organization
                                                 [$ in billions]
----------------------------------------------------------------------------------------------------------------
                                                    Assessment         Share of $10 billion       Surcharge base
                                                       base                  deduction           ---------------
                                                 ------------------------------------------------
             Affiliated large banks                                      %               $
                                                         A       --------------------------------       A-C
                                                                    B (A/$116)      C (B * $10)
----------------------------------------------------------------------------------------------------------------
#1..............................................          $25.00            21.6           $2.16          $22.84
#2..............................................           55.00            47.4            4.74           50.26
#3..............................................           36.00            31.0            3.10           32.90
                                                 ---------------------------------------------------------------
    Total.......................................          116.00             100           10.00          106.00
----------------------------------------------------------------------------------------------------------------
* Some figures are rounded for simplicity of presentation.

    The next tables give an example of the calculation of the 
surcharge base for a banking organization that comprises three large 
banks and two affiliated small banks. Table 1.2 shows the applicable 
amounts by which affiliated small banks' December 31, 2015 regular 
assessment bases will be multiplied to determine growth at a 10 
percent effective annual rate. (The amounts in the table are 
calculated by compounding a quarterly rate of approximately 2.41 
percent from December 31, 2015, to achieve a 10 percent effective 
annual rate.) Table 1.3 shows the calculation of the gross amount of 
the first adjustment (the net increase in affiliated small banks' 
assessment bases after December 31, 2015). Table 1.4 shows the 
apportionment of the first adjustment and the second adjustment (the 
$10 billion deduction) among the large banks in the banking 
organization.
    The first adjustment calculates the cumulative net increase from 
December 31, 2015, in affiliated small banks' aggregate assessment 
bases in excess of an effective annual rate of 10 percent. In the 
example shown in Table 1.3, affiliated small bank X had an 
assessment base of $2.00 billion as of December 31, 2015, and 
affiliated small bank Y had an assessment base of $6.00 billion, or 
$8.00 billion in aggregate. On March 31, 2017, affiliated small bank 
X has increased its assessment base to $6.01 billion, and affiliated 
small bank Y has decreased its assessment base to $5.00 billion, so 
the affiliated small banks' aggregate assessment base is $11.01 
billion. The amount of growth in excess of an effective annual rate 
of 10 percent is calculated by first multiplying the amount 
corresponding with March 31, 2017 in Table 1.2 (1.1265251) by the 
affiliated small banks aggregate assessment base of $8.00 billion as 
of December 31, 2015, and then subtracting the product from the 
affiliated small banks' aggregate assessment base of $11.01 billion 
as of March 31, 2017. The resulting amount, $2.00 billion, is the 
gross amount of the first adjustment.
    The second adjustment deducts $10 billion from large banks' 
assessment bases. Both adjustments are apportioned among all large 
bank affiliates in a holding company in proportion to each large 
bank's regular assessment base. As shown in Table 1.4, each 
affiliated large bank's share of the banking organization's 
assessment base (the large bank share) is calculated by dividing the 
affiliated large bank's assessment base by the sum of all affiliated 
large bank assessment bases. Next, each large bank's share is 
multiplied by the gross amount ($2.0 billion) of the first 
adjustment, as calculated in Table 1.3, and the product is added to 
each large bank's surcharge base. Finally, each large bank's share 
is multiplied by the $10 billion deduction, and the product is 
subtracted from each large bank's surcharge base as increased by the 
first adjustment. The remaining amount constitutes each large bank's 
surcharge base for the quarter.

                      Table 1.2--Multiplier Amounts
------------------------------------------------------------------------
           For the assessment period ending--
------------------------------------------------------------------------
September 30, 2016......................................       1.0740995
December 31, 2016.......................................       1.1000000
March 31, 2017..........................................       1.1265251
June 30, 2017...........................................       1.1536897
September 30, 2017......................................       1.1815094
December 31, 2017.......................................       1.2100000
March 31, 2018..........................................       1.2391776
June 30, 2018...........................................       1.2690587
September 30, 2018......................................       1.2996604
December 31, 2018.......................................       1.3310000
------------------------------------------------------------------------


[[Page 16074]]


                   Table 1.3--Example Calculation of the Gross Amount of the First Adjustment
               [Net increase in affiliated small banks' assessment bases after December 31, 2015]
                                                [$ in billions] *
----------------------------------------------------------------------------------------------------------------
                                                  Assessment base         Growth under a 10%
                                         --------------------------------  effective  annual   Growth in excess
         Affiliated small banks                            First quarter   rate,  compounded   of 10% effective
                                          Year-end  2015       2017            quarterly          annual rate
                                                       A               B      C = A * 1.1265             D = B-C
----------------------------------------------------------------------------------------------------------------
X.......................................           $2.00           $6.01  ..................  ..................
Y.......................................            6.00            5.00  ..................  ..................
                                         -----------------------------------------------------------------------
    Total...............................            8.00           11.01               $9.01               $2.00
----------------------------------------------------------------------------------------------------------------
* Some figures are rounded for simplicity of presentation.


 Table 1.4--Example Apportionment of the First Adjustment and the Second Adjustment (the $10 Billion Deduction)
                                 Among the Large Banks in a Banking Organization
                                                [$ in billions] *
----------------------------------------------------------------------------------------------------------------
                                                     Share of        Share of
                                                    affiliated      affiliated     Share of $10
     Affiliated large banks         Assessment     large banks'    small banks'       billion     Surcharge base
                                       base         assessment      assessment       deduction
                                                    bases  (%)         bases
                                               E               F               G               H       E + G - H
                                                        (E/$113)         (F * D)       (F * $10)
----------------------------------------------------------------------------------------------------------------
#1..............................           $35.0            31.0           $0.62           $3.10          $32.52
#2..............................            22.0            19.5            0.39            1.95           20.44
#3..............................            56.0            49.6            0.99            4.96           52.04
                                 -------------------------------------------------------------------------------
    Total.......................           113.0           100.0            2.00           10.00          105.00
----------------------------------------------------------------------------------------------------------------
* Some figures are rounded for simplicity of presentation.


    By order of the Board of Directors.

    Dated at Washington, DC, this 15th day of March, 2016.

Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
[FR Doc. 2016-06770 Filed 3-24-16; 8:45 am]
 BILLING CODE 6714-01-P