[Federal Register Volume 88, Number 98 (Monday, May 22, 2023)]
[Proposed Rules]
[Pages 32694-32709]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-10447]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 327

RIN 3064-AF93


Special Assessments Pursuant to Systemic Risk Determination

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Notice of proposed rulemaking.

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SUMMARY: The FDIC is seeking comment on a proposed rule that would 
impose special assessments to recover the loss to the Deposit Insurance 
Fund (DIF or Fund) arising from the protection of uninsured depositors 
in connection with the systemic risk determination announced on March 
12, 2023, following the closures of Silicon Valley Bank, Santa Clara, 
CA, and Signature Bank, New York, NY, as required by the Federal 
Deposit Insurance Act (FDI Act). The assessment base for the special 
assessments would be equal to an insured depository institution's (IDI) 
estimated uninsured deposits, reported as of December 31, 2022, 
adjusted to exclude the first $5 billion in estimated uninsured 
deposits from the IDI, or for IDIs that are part of a holding company 
with one or more subsidiary IDIs, at the banking organization level. 
The FDIC is proposing to collect special assessments at an annual rate 
of approximately 12.5 basis points, over eight quarterly assessment 
periods, which it estimates will result in total revenue of $15.8 
billion. Because the estimated loss pursuant to the systemic risk 
determination will be periodically adjusted, the FDIC would retain the 
ability to cease collection early, extend the special assessment 
collection period one or more quarters beyond the initial eight-quarter 
collection period to collect the difference between actual or estimated 
losses and the amounts collected, and impose a final shortfall special 
assessment on a one-time basis after the receiverships for Silicon 
Valley Bank and Signature Bank terminate. The FDIC is proposing an 
effective date of January 1, 2024, with special assessments collected 
beginning with the first quarterly assessment period of 2024 (i.e., 
January 1 through March 31, 2024, with an invoice payment date of June 
28, 2024).

DATES: Comments must be received on or before July 21, 2023.

ADDRESSES: Interested parties are invited to submit written comments, 
identified by RIN 3064-AF93, by any of the following methods:
     Agency Website: https://www.fdic.gov/resources/regulations/federal-register-publications/. Follow the instructions for 
submitting comments on the agency website.
     Email: [email protected]. Include RIN 3064-AF93 in the 
subject line of the message.
     Mail: James P. Sheesley, Assistant Executive Secretary, 
Attention: Comments-RIN 3064-AF93, Federal Deposit Insurance 
Corporation, 550 17th Street NW, Washington, DC 20429.
     Hand Delivery: Comments may be hand delivered to the guard 
station at the rear of the 550 17th Street NW building (located on F 
Street NW) on business days between 7 a.m. and 5 p.m.
     Public Inspection: Comments received, including any 
personal information provided, may be posted without change to https://www.fdic.gov/resources/regulations/federal-register-publications/. 
Commenters should submit only information that the commenter wishes to 
make available publicly. The FDIC may review, redact, or refrain from 
posting all or any portion of any comment that it may deem to be 
inappropriate for publication, such as irrelevant or obscene material. 
The FDIC may post only a single representative example of identical or 
substantially identical comments, and in such cases will generally 
identify the number of identical or substantially identical comments 
represented by the posted example. All comments that have been 
redacted, as well as those that have not been posted, that contain 
comments on the merits of this document will be retained in the public 
comment file and will be considered as required under all applicable 
laws. All comments may be accessible under the Freedom of Information 
Act.

FOR FURTHER INFORMATION CONTACT: Division of Insurance and Research: 
Michael Spencer, Associate Director, Financial Risk Management Branch, 
202-898-7041, [email protected]; Kayla Shoemaker, Acting Chief, 
Banking and Regulatory Policy, 202-898-6962, [email protected]; 
Legal Division: Sheikha Kapoor, Senior Counsel, 202-898-3960, 
[email protected]; Ryan McCarthy, Counsel, 202-898-7301, 
[email protected].

SUPPLEMENTARY INFORMATION: 

I. Background

    On March 10, 2023, Silicon Valley Bank was closed by the California 
Department of Financial Protection and Innovation, followed by the 
closure of Signature Bank by the New York State Department of Financial 
Services. The

[[Page 32695]]

FDIC was appointed as the receiver for both institutions.1 2
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    \1\ FDIC PR-16-2023. ``FDIC Creates a Deposit Insurance National 
Bank of Santa Clara to Protect Insured Depositors of Silicon Valley 
Bank, Santa Clara, California.'' March 10, 2023. https://www.fdic.gov/news/press-releases/2023/pr23016.html.
    \2\ FDIC PR-18-2023. ``FDIC Establishes Signature Bridge Bank, 
N.A., as Successor to Signature Bank, New York, NY.'' March 12, 
2023. https://www.fdic.gov/news/press-releases/2023/pr23018.html.
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    Section 13(c)(4)(G) of the FDI Act permits the FDIC to take action 
or provide assistance to an IDI for which the FDIC has been appointed 
receiver as necessary to avoid or mitigate adverse effects on economic 
conditions or financial stability, following a recommendation by the 
FDIC Board of Directors (Board), with the written concurrence of the 
Board of Governors of the Federal Reserve System (Board of Governors), 
and a determination of systemic risk by the Secretary of the U.S. 
Department of Treasury (Treasury) (in consultation with the 
President).\3\
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    \3\ 12 U.S.C. 1823(c)(4)(G). As used in this proposed rule, the 
term ``bank'' is synonymous with the term ``insured depository 
institution'' as it is used in section 3(c)(2) of the FDI Act, 12 
U.S.C. 1813(c)(2).
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    On March 12, 2023, the Secretary of the Treasury, acting on the 
recommendation of the FDIC Board and Board of Governors and after 
consultation with the President, invoked the statutory systemic risk 
exception to allow the FDIC to complete its resolution of both Silicon 
Valley Bank and Signature Bank in a manner that fully protects all 
depositors.\4\ The full protection of all depositors, rather than 
imposing losses on uninsured depositors, was intended to strengthen 
public confidence in the nation's banking system.
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    \4\ 12 U.S.C. 1823(c)(4)(G). See also: FDIC PR-17-2023. ``Joint 
Statement by the Department of the Treasury, Federal Reserve, and 
FDIC.'' March 12, 2023. https://www.fdic.gov/news/press-releases/2023/pr23017.html. See also: ``Remarks by Chairman Martin J. 
Gruenberg on Recent Bank Failures and the Federal Regulatory 
Response before the Committee on Banking, Housing, and Urban 
Affairs, United States Senate.'' March 27, 2023. https://www.fdic.gov/news/speeches/2023/spmar2723.html.
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    On March 12 and 13, 2023, the FDIC transferred all deposits--both 
insured and uninsured--and substantially all assets of these banks to 
newly created, full-service FDIC-operated bridge banks, Silicon Valley 
Bridge Bank, N.A. (Silicon Valley Bridge Bank) and Signature Bridge 
Bank, N.A. (Signature Bridge Bank), in an action designed to protect 
all depositors of these banks.\5\ The transfer of all deposits was 
completed under the systemic risk exception declared on March 12, 2023.
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    \5\ A bridge bank is a chartered national bank that operates 
under a board appointed by the FDIC. It assumes the deposits and 
certain other liabilities and purchases certain assets of a failed 
bank. The bridge bank structure is designed to ``bridge'' the gap 
between the failure of a bank and the time when the FDIC can 
stabilize the institution and implement an orderly resolution.
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    On March 19, 2023, the FDIC announced it entered into a purchase 
and assumption agreement for substantially all deposits and certain 
loan portfolios of Signature Bridge Bank.\6\ On March 27, 2023, the 
FDIC entered into a purchase and assumption agreement for all deposits 
and loans of Silicon Valley Bridge Bank. This announcement also 
disclosed that the FDIC and First-Citizens Bank & Trust Company (First 
Citizens) entered into a loss-share transaction on the commercial loans 
it purchased from Silicon Valley Bridge Bank.\7\
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    \6\ FDIC PR-21-2023. ``Subsidiary of New York Community Bancorp, 
Inc. to Assume Deposits of Signature Bridge Bank, N.A., From the 
FDIC.'' March 19, 2023. https://www.fdic.gov/news/press-releases/2023/pr23021.html. The purchase and assumption agreement did not 
include approximately $4 billion of deposits related to the former 
Signature Bank's digital-asset banking business. The FDIC announced 
that it would provide these deposits directly to customers whose 
accounts are associated with the digital-asset banking business.
    \7\ FDIC PR-23-2023. ``First-Citizens Bank & Trust Company, 
Raleigh, NC, to Assume All Deposits and Loans of Silicon Valley 
Bridge Bank, N.A., From the FDIC.'' March 26, 2023. https://www.fdic.gov/news/press-releases/2023/pr23023.html.
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II. Legal Authority and Policy Objectives

    Under section 13(c)(4)(G) of the FDI Act, the loss to the DIF 
arising from the use of a systemic risk exception must be recovered 
from one or more special assessments on IDIs, depository institution 
holding companies (with the concurrence of the Secretary of the 
Treasury with respect to holding companies), or both, as the FDIC 
determines to be appropriate.\8\ As required by the FDI Act, the 
proposed special assessment, detailed below, is intended and designed 
to recover the losses to the DIF incurred as the result of the actions 
taken by the FDIC to protect the uninsured depositors of Silicon Valley 
Bank and Signature Bank following a determination of systemic risk.\9\
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    \8\ 12 U.S.C. 1823(c)(4)(G)(ii)(I).
    \9\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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    Section 13(c)(4)(G) of the FDI Act provides the FDIC with 
discretion in the design and timeframe for any special assessments to 
recover the losses to the DIF as a result of the systemic risk 
determination. As detailed in the sections that follow, in implementing 
special assessments under section 13(c)(4)(G) of the FDI Act, the FDIC 
considered the types of entities that benefit from any action taken or 
assistance provided under the determination of systemic risk, economic 
conditions, the effects on the industry, and such other factors as the 
FDIC deemed appropriate and relevant to the action taken or assistance 
provided.\10\
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    \10\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
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III. Description of the Proposed Rule

A. Summary

    The FDIC is seeking comment on a proposed rule that would impose 
special assessments to recover the loss to the DIF arising from the 
protection of uninsured depositors in connection with the systemic risk 
determination announced on March 12, 2023, following the closures of 
Silicon Valley Bank and Signature Bank, as required by the FDI Act. The 
total amount collected for the special assessments would be 
approximately equal to the losses attributable to the protection of 
uninsured depositors at these two failed banks, which are currently 
estimated to total $15.8 billion.
    The FDIC proposes an annual special assessment rate of 
approximately 12.5 basis points. The assessment base for the special 
assessments would be equal to an IDI's estimated uninsured deposits as 
reported in the Consolidated Reports of Condition and Income (Call 
Report) or Report of Assets and Liabilities of U.S. Branches and 
Agencies of Foreign Banks (FFIEC 002) as of December 31, 2022, with 
certain adjustments. The special assessments would be collected over an 
eight-quarter collection period, at a quarterly special assessment rate 
of 3.13 basis points. Over such collection period, the FDIC estimates 
that it would collect an amount sufficient to recover estimated losses 
attributable to the protection of uninsured depositors of Silicon 
Valley Bank and Signature Bank, which are currently estimated to total 
$15.8 billion, totaling approximately $2.0 billion per quarter.
    The assessment base for the special assessments would be adjusted 
to exclude the first $5 billion from estimated uninsured deposits 
reported as of December 31, 2022, applicable either to the IDI, if an 
IDI is not a subsidiary of a holding company, or at the banking 
organization level, to the extent that an IDI is part of a holding 
company with one or more subsidiary IDIs.\11\
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    \11\ As used in this proposal, the term ``banking organization'' 
includes IDIs that are not subsidiaries of a holding company as well 
as holding companies with one or more subsidiary IDIs.

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[[Page 32696]]

    If an IDI is part of a holding company with one or more subsidiary 
IDIs, the $5 billion deduction would be apportioned based on its 
estimated uninsured deposits as a percentage of total estimated 
uninsured deposits held by all IDI affiliates in the banking 
organization.12 13
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    \12\ As used in this proposal, the term ``affiliate'' has the 
same meaning as defined in section 3 of the FDIC Act, 12 U.S.C. 
1813(w)(6), which references the Bank Holding Company Act (``any 
company that controls, is controlled by, or is under common control 
with another company''). See 12 U.S.C. 1841(k).
    \13\ IDIs with less than $1 billion in total assets as of June 
30, 2021, were not required to report the estimated amount of 
uninsured deposits on the Call Report for December 31, 2022. 
Therefore, for IDIs that had less than $1 billion in total assets as 
of June 30, 2021, the amount and share of estimated uninsured 
deposits as of December 31, 2022, would be zero.
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    The estimated loss attributable to the protection of uninsured 
depositors pursuant to the systemic risk determination is currently 
estimated to total $15.8 billion. However, as with all failed bank 
receiverships, this estimate will be periodically adjusted as assets 
are sold, liabilities are satisfied, and receivership expenses are 
incurred. The exact amount of losses incurred will be determined when 
the FDIC terminates the receiverships.
    If, prior to the end of the eight-quarter collection period, the 
FDIC expects the loss to be lower than the amount it expects to collect 
from the special assessments, the FDIC would cease collection in the 
quarter after it has collected enough to recover actual or estimated 
losses. Alternatively, if at the end of the eight-quarter collection 
period, the estimated or actual loss exceeds the amount collected, the 
FDIC would extend the collection period over one or more quarters, as 
needed, to recover the difference between the amount collected and the 
estimated or actual loss, at a rate that would not exceed the 3.13 
basis point quarterly special assessment rate applied during the 
initial eight-quarter collection period.
    Receiverships are terminated once the FDIC has completed the 
disposition of the receivership's assets and has resolved all 
obligations, claims, and other impediments. The termination of the 
receiverships to which the March 12, 2023, systemic risk determination 
applied may occur years after the initial eight-quarter collection 
period and any extended collection period. In the likely event that the 
final loss amount at the termination of the receiverships is not 
determined until after the special assessments have been collected, and 
if the actual losses calculated as of the termination of the 
receiverships exceed the amount collected through such special 
assessments, the FDIC would impose a one-time final shortfall special 
assessment to collect the amount of actual losses in excess of the 
amount of special assessments collected, if any.

B. Estimated Special Assessment Amount

    By statute, the FDIC is required to recover through special 
assessments any losses to the DIF incurred as a result of the actions 
of the FDIC pursuant to the determination of systemic risk, which, in 
the case of the determination pursuant to the closures of Silicon 
Valley Bank and Signature Bank, was to protect uninsured 
depositors.\14\ To determine the amount of the cost of the failures 
attributable to the cost of covering uninsured deposits, the FDIC 
determined the percentage of deposits that were uninsured at the time 
of failure and applied that percentage to the total cost of the failure 
for each bank. At Signature Bank, for which 67 percent of deposits were 
uninsured at the point of failure, the portion of the total estimated 
loss of $2.4 billion that is attributable to the protection of 
uninsured depositors is $1.6 billion.
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    \14\ 12 U.S.C. 1823(c)(4)(G)(ii).
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    At Silicon Valley Bank, for which 88 percent of deposits were 
uninsured at the point of failure, the portion of the total estimated 
loss of $16.1 billion that is attributable to the protection of 
uninsured depositors is $14.2 billion. The cost estimate for the sale 
of the Silicon Valley Bridge Bank to First Citizens has been revised 
from the original estimate of $20.0 billion to approximately $16.1 
billion due to a decrease in the amount of liabilities assumed by First 
Citizens relative to the initial estimate, higher anticipated 
recoveries from certain other assets in receivership, and an increase 
in the market value of receivership securities. This revised cost 
estimate forms the basis for the Silicon Valley Bank portion of the 
current special assessment calculation, and, as with all failed bank 
receiverships, will be periodically adjusted as assets are sold, 
liabilities are satisfied, and receivership expenses are incurred. As 
noted below, the amount of the special assessment will be adjusted as 
the loss estimate changes.
    In total, of the $18.5 billion in estimated losses at the two banks 
and incurred by the DIF in the first quarter of 2023, the estimated 
loss attributable to the protection of uninsured depositors was $15.8 
billion.

C. Rate for the Special Assessments

    Under the proposal, the FDIC would impose a special assessment 
equal to approximately 12.5 basis points annually. The special 
assessment rate was derived by dividing the current loss estimate 
attributable to the protection of uninsured depositors of $15.8 billion 
by the proposed assessment base calculated for all IDIs subject to 
special assessments as of December 31, 2022, totaling $6.3 trillion. As 
described in detail below, the proposed assessment base is equal to 
estimated uninsured deposits reported as of December 31, 2022, after 
applying the $5 billion deduction. The resulting rate is then divided 
by two to reflect the two year (eight-quarter) collection period, as 
described below, resulting in an annual rate of approximately 12.5 
basis points, or a quarterly rate of 3.13 basis points. The special 
assessment rate is subject to change prior to any final rule depending 
on any adjustments to the loss estimate, mergers or failures, or 
amendments to reported estimates of uninsured deposits.\15\ Over the 
eight-quarter collection period, the FDIC estimates that it would 
collect an amount sufficient to recover estimated losses attributable 
to the protection of uninsured depositors of Silicon Valley Bank and 
Signature Bank, which are currently estimated to total $15.8 billion, 
totaling approximately $2.0 billion per quarter.
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    \15\ Estimates of the special assessment rate and expected 
effects in this proposed rule generally reflect any amendments to 
data reported through February 21, 2023, for the reporting period 
ending December 31, 2022. Given the closure of First Republic Bank, 
San Francisco, CA announced on May 1, 2023, estimates in this 
proposed rule exclude First Republic Bank in addition to Silicon 
Valley Bank and Signature Bank. See FDIC: PR-34-2023. ``JPMorgan 
Chase Bank, National Association, Columbus, Ohio Assumes All the 
Deposits of First Republic Bank, San Francisco, California.'' May 1, 
2023. https://www.fdic.gov/news/press-releases/2023/pr23034.html.
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D. Assessment Base for the Special Assessments

    Under the proposal, each IDI's assessment base for the special 
assessments would be equal to estimated uninsured deposits as reported 
in the Call Report or FFIEC 002 as of December 31, 2022, with certain 
adjustments.\16\ The assessment base for the special assessments would 
be adjusted to exclude the first $5 billion from estimated uninsured 
deposits reported as of December 31, 2022, applicable either to the 
IDI, if an IDI is not a subsidiary of a holding company,

[[Page 32697]]

or at the banking organization level, to the extent that an IDI is part 
of a holding company with one or more subsidiary IDIs. Estimated 
uninsured deposits as of December 31, 2022, are the most recently 
available data reflecting the amount of uninsured deposits in each 
institution near or at the time the determination of systemic risk was 
made and the uninsured depositors of the failed institutions were 
protected. Using estimated uninsured deposits as of December 31, 2022, 
in calculating special assessments would result in institutions that 
had the largest amounts of uninsured deposits at the time of the 
determination of systemic risk paying a larger share of the special 
assessments.
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    \16\ Estimated uninsured deposits are reported in Memoranda Item 
2 on Schedule RC-O, Other Data for Deposit Insurance Assessments of 
both the Call Report and FFIEC 002.
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    Defining the assessment base for the special assessment as 
estimated uninsured deposits reported as of December 31, 2022, and 
deducting $5 billion from an IDI or banking organization's assessment 
base, would have the result that any banking organization that reported 
less than $5 billion in uninsured deposits would not be subject to the 
special assessment.
    In general, large banks and regional banks, and particularly those 
with large amounts of uninsured deposits, were the banks most exposed 
to and likely would have been the most affected by uninsured deposit 
runs. Indeed, shortly after Silicon Valley Bank was closed, a number of 
institutions with large amounts of uninsured deposits reported that 
depositors had begun to withdraw their funds. The failure of Silicon 
Valley Bank and the impending failure of Signature Bank raised concerns 
that, absent immediate assistance for uninsured depositors, there could 
be negative knock-on consequences for similarly situated institutions, 
depositors and the financial system more broadly. Generally speaking, 
larger banks benefited the most from the stability provided to the 
banking industry under the systemic risk determination.
    With the rapid collapse of Silicon Valley Bank and Signature Bank 
in the space of 48 hours, concerns arose that risk could spread more 
widely to other institutions and that the financial system as a whole 
could be placed at risk. Shortly after Silicon Valley Bank was closed 
on March 10, 2023, a number of institutions with large amounts of 
uninsured deposits reported that depositors had begun to withdraw their 
funds. The extent to which IDIs rely on uninsured deposits for funding 
varies significantly. Uninsured deposits were used to fund nearly 
three-quarters of assets at Silicon Valley Bank and Signature Bank.
    On average, the largest banking organizations by asset size fund a 
larger share of assets with uninsured deposits, as depicted in Table 1 
below, based on data as of December 31, 2022. Among banking 
organizations that report uninsured deposits, those with total assets 
between $1 billion and $5 billion are generally the least reliant on 
uninsured deposits for funding, with uninsured deposits averaging 28.1 
percent of assets, compared with the largest banking organizations with 
total assets greater than $250 billion, which had uninsured deposits 
that averaged 35.8 percent of assets.

    Table 1--Average Share of Assets Funded by Uninsured Deposits, by
                     Banking Organization Asset Size
                                [Percent]
------------------------------------------------------------------------
                                                      Average share of
                                                      assets funded by
        Asset size of banking organization           uninsured deposits
                                                          (percent)
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$1 to $5 Billion..................................                  28.1
$5 to $10 Billion.................................                  28.9
$10 to $50 Billion................................                  32.1
$50 to $250 Billion...............................                  34.2
Greater than $250 Billion.........................                  35.8
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    Deposits are the most common funding source for many institutions; 
however, other liability sources such as borrowings can also provide 
funding. Deposits and other liability sources are often differentiated 
by their stability and customer profile characteristics. While some 
uninsured deposit relationships remain stable when a bank is in good 
condition, such relationships might become less stable due to their 
uninsured status if a bank experiences financial problems or if the 
banking industry experiences stress events.
    Uninsured deposit concentrations of IDIs, meaning the percentage of 
domestic deposits that are uninsured, also vary significantly. At 
Silicon Valley Bank, 88 percent of deposits were uninsured at the point 
of failure compared to 67 percent at Signature Bank. On average, the 
largest banking organizations by asset size reported significantly 
greater uninsured deposit concentrations relative to smaller banking 
organizations, as illustrated in Table 2 below, based on data as of 
December 31, 2022. Banking organizations with total assets between $1 
billion and $5 billion generally reported the lowest percentage of 
uninsured deposits to total domestic deposits, averaging 33.2 percent, 
compared with the largest banking organizations with total assets 
greater than $250 billion, which averaged 51.8 percent.

 Table 2--Uninsured Deposits as a Percentage of Total Domestic Deposits,
                   by Banking Organization Asset Size
                                [Percent]
------------------------------------------------------------------------
                                                     Ratio of uninsured
                                                      deposits to total
        Asset size of banking organization            domestic deposits
                                                          (percent)
------------------------------------------------------------------------
$1 to $5 Billion..................................                  33.2
$5 to $10 Billion.................................                  35.0
$10 to $50 Billion................................                  39.9

[[Page 32698]]

 
$50 to $250 Billion...............................                  44.2
Greater than $250 Billion.........................                  51.8
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    Based on Federal Reserve data reported by a sample of domestically 
chartered banks, domestic deposits declined by over 2 percent during 
the first two months of 2023, predominately among the top 25 commercial 
banks by asset size. This followed similar declines in domestic 
deposits over the prior three quarters, likely driven by the shift of 
certain types of deposits into higher-yielding alternatives. Following 
the March 2023 bank failures and the determination of systemic risk, 
deposits of the top 25 commercial banks grew slightly while deposit 
outflows rapidly accelerated, with banks outside of the top 25 
experiencing a four percent decline in two weeks. Since late March, 
Federal Reserve data indicates that deposit flows have stabilized, with 
some reversal of prior outflows.\17\ First quarter earnings releases of 
select regional banks confirmed sizeable outflows of deposits, while 
other large and regional banks reported more modest declines or 
inflows.
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    \17\ Board of Governors of the Federal Reserve System. Assets 
and Liabilities of Commercial Banks in the United States--H.8. 
Available at: https://www.federalreserve.gov/releases/h8/default.htm.
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    Following the announcement of the systemic risk determination, the 
FDIC observed a significant slowdown in uninsured deposits leaving 
certain institutions, evidence that the systemic risk determination 
helped stem the outflow of these deposits while providing stability to 
the banking industry.
    Under the proposal, the banks that benefited most from the 
assistance provided under the systemic risk determination would be 
charged special assessments to recover losses to the DIF resulting from 
the protection of uninsured depositors, with banks of larger asset 
sizes and that hold greater amounts of uninsured deposits paying higher 
special assessments.
    For banking organizations that have more than one subsidiary IDI, 
the assessment base for the special assessments would be equal to its 
total estimated uninsured deposits reported as of December 31, 2022, 
less its share of the $5 billion deduction, which would be based on its 
share of total estimated uninsured deposits held by all IDI affiliates 
in the banking organization. 18 19 Table 3 provides an 
example of the calculation of special assessments for a banking 
organization with three subsidiary IDIs.
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    \18\ As used in this NPR, the term ``affiliate'' has the same 
meaning as defined in section 3 of the FDIC Act, 12 U.S.C. 
1813(w)(6), which references the Bank Holding Company Act (``any 
company that controls, is controlled by, or is under common control 
with another company''). See 12 U.S.C. 1841(k).
    \19\ IDIs with less than $1 billion in total assets as of June 
30, 2021, were not required to report the estimated amount of 
uninsured deposits on the Call Report for December 31, 2022. 
Therefore, for IDIs that had less than $1 billion in total assets as 
of June 30, 2021, and that are part of a banking organization with 
more than one IDI subsidiary, the amount and share of estimated 
uninsured deposits as of December 31, 2022, would be zero.

         Table 3--Calculation of Special Assessments within a Banking Organization With More Than One Insured Depository Institution Subsidiary
                                                              [Dollar amounts in millions]
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                                              Column A          Column B             Column C                  Column D                  Column E
                                        ----------------------------------------------------------------------------------------------------------------
                                                              IDI share of
                                                                 banking                                                           IDI Share of special
                                              Estimated       organization   IDI share of $5 billion     Assessment base for      assessments  (Column D
                                         uninsured deposits     estimated     deduction  (Column B *      special assessment       * 25 basis points)/
                                          as reported as of     uninsured          $5 billion)          (Column A - Column C)     current loss estimate
                                          December 31, 2022     deposits                                                                (percent)
                                                                (percent)
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IDI A..................................             $50,000              50                   $2,500                    $47,500                     0.75
IDI B..................................              40,000              40                    2,000                     38,000                     0.60
IDI C..................................              10,000              10                      500                      9,500                     0.15
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The adjustments to the assessment base for the special assessments 
would serve several purposes. First, IDIs without affiliates and 
banking organizations, that reported $5 billion or less in estimated 
uninsured deposits as of December 31, 2022, would not contribute to the 
special assessments. IDIs and banking organizations that reported more 
than $5 billion in estimated uninsured deposits would pay based on the 
marginal amounts of uninsured deposits they reported, helping to 
mitigate a ``cliff effect'' that might otherwise apply if a different 
method, such as an asset size threshold, were used to determine 
applicability, and thereby ensuring more equitable treatment. 
Otherwise, a banking organization just over a particular size threshold 
would pay special assessments, while a banking organization just below 
such size threshold would pay none. In general, large banks and 
regional banks, and particularly those with large amounts of uninsured 
deposits, were the banks most exposed to and likely would have been the 
most affected by uninsured deposit runs. Indeed, shortly after

[[Page 32699]]

Silicon Valley Bank was closed, a number of institutions with large 
amounts of uninsured deposits reported that depositors had begun to 
withdraw their funds. The failure of Silicon Valley Bank and the 
impending failure of Signature Bank raised concerns that, absent 
immediate assistance for uninsured depositors, there could be negative 
knock-on consequences for similarly situated institutions, depositors 
and the financial system more broadly. Generally speaking, larger banks 
benefited the most from the stability provided to the banking industry 
under the systemic risk determination. With the adjustments to the 
assessment base, the banks that benefited the most--banks of larger 
asset sizes and that hold greater amounts of uninsured deposits--would 
be responsible for paying special assessments.
    Second, the proposed methodology also would result in most small 
IDIs and IDIs that are part of a small banking organization not paying 
anything towards the special assessments. As proposed, the FDIC 
estimates that the special assessments would not be applicable to any 
banking organizations with total assets under $5 billion.
    Based on data reported as of December 31, 2022, and as illustrated 
in Table 4 below, the FDIC estimates that 113 banking organizations, 
which include IDIs that are not subsidiaries of a holding company and 
holding companies with one or more subsidiary IDIs and which comprise 
83.0 percent of industry assets, would be subject to special 
assessments, including 48 banking organizations with total assets over 
$50 billion and 65 banking organizations with total assets between $5 
and $50 billion. No banking organizations with total assets under $5 
billion would pay special assessments, based on data as of December 31, 
2022. The number of banking organizations subject to special 
assessments may change prior to any final rule depending on any 
adjustments to the loss estimate, mergers or failures, or amendments to 
reported estimates of uninsured deposits.

  Table 4--Banking Organizations Required To Pay Special Assessments, Based on Data Reported as of December 31,
                                                      2022
----------------------------------------------------------------------------------------------------------------
                                                                  Percentage of
                                                   Number of         banking
                                                    banking       organizations      Share of        Share of
      Asset size of banking organization         organizations   required to pay      special        industry
                                                required to pay      special        assessments       assets
                                                    special        assessments       (percent)       (percent)
                                                  assessments       (percent)
----------------------------------------------------------------------------------------------------------------
Greater than $50 billion......................               48              1.1            95.2            76.0
Between $5 and $50 billion....................               65              1.5             4.8             7.0
Under $5 billion..............................                0              0.0             0.0             0.0
                                               -----------------------------------------------------------------
    Total.....................................              113              2.6           100.0            83.0
----------------------------------------------------------------------------------------------------------------

    Finally, deducting $5 billion from the assessment base of estimated 
uninsured deposits at the banking organization level for those with 
more than one IDI would ensure that banking organizations with similar 
amounts of estimated uninsured deposits pay a similar special 
assessment. For example, a banking organization with multiple IDIs with 
large amounts of estimated uninsured deposits would not have an 
advantage over other similarly-positioned IDIs that are not 
subsidiaries of a holding company because instead of excluding $5 
billion of estimated uninsured deposits for each IDI in one banking 
organization, the $5 billion deduction would be distributed across 
multiple affiliated IDIs.
    The proposed methodology ensures that the banks that benefited most 
from the assistance provided under the systemic risk determination 
would be charged special assessments to recover losses to the DIF 
resulting from the protection of uninsured depositors, with banks of 
larger asset sizes and that hold greater amounts of uninsured deposits 
paying higher special assessments.

E. Collection Period for Special Assessments

    Under the proposal, the special assessments would be collected 
beginning with the first quarterly assessment period of 2024 (i.e., 
January 1 through March 31, 2024, with an invoice payment date of June 
28, 2024). In order to preserve liquidity at IDIs, and in the interest 
of consistent and predictable assessments, the special assessments 
would be collected over eight quarters.
    The estimated loss attributable to the protection of uninsured 
depositors pursuant to the systemic risk determination is currently 
estimated to total $15.8 billion. However, loss estimates for failed 
banks are periodically adjusted as assets are sold, liabilities are 
satisfied, and receivership expenses are incurred.
    The FDIC would review and consider any revisions to loss estimates 
each quarter of the collection period. If, prior to the end of the 
eight-quarter collection period, the FDIC expects the loss to be lower 
than the amount it expects to collect from the special assessments, the 
FDIC would cease collection of special assessments before the end of 
the initial eight-quarter collection period, in the quarter after it 
has collected enough to recover actual or estimated losses. The FDIC 
would provide notice of the cessation of collections at least 30 days 
before the next payment is due.
    The FDIC is required by statute to place the excess funds collected 
through special assessments in the DIF.\20\ By spreading out the 
collection period over eight quarters, a length of time that would 
enable the FDIC to develop a more precise estimate of loss, and 
allowing for early cessation after the FDIC has collected enough to 
recover actual or estimated losses, the FDIC mitigates the risk of over 
collecting.
---------------------------------------------------------------------------

    \20\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
---------------------------------------------------------------------------

F. Extended Special Assessment Period

    If, at the end of the eight-quarter collection period, the 
estimated or actual loss exceeds the amount collected, the FDIC would 
extend the collection period over one or more quarters as needed in 
order to collect the difference between the amount collected and the 
estimated or actual loss at the end of the eight-quarter collection 
period, (the shortfall amount), after providing notice of at least 30 
days

[[Page 32700]]

before the first payment of any extended special assessment is due.
    In the event that extended special assessments are needed, the FDIC 
would collect the shortfall amount on a quarterly basis. In the 
interest of consistency and predictability, the quarterly rate would 
not exceed the 3.13 basis point quarterly special assessment rate 
applied during the initial eight-quarter collection period, and such 
extended special assessments would be collected for the minimum number 
of quarters needed to recover the shortfall amount at such quarterly 
rates.
    The assessment base for such extended special assessment would be 
as described above, based on estimated uninsured deposits reported as 
of December 31, 2022, with a $5 billion deduction for each banking 
organization. However, each banking organization's assessment base for 
such extended special assessments may differ from its assessment base 
for special assessments over the initial eight-quarter collection 
period, due to mergers or failures that occurred during the eight-
quarter collection period.

G. One-Time Final Shortfall Special Assessment

    The FDIC is required by statute to recover the loss to the DIF 
attributable to protecting uninsured depositors of Silicon Valley Bank 
and Signature Bank.\21\ The exact amount of losses will be determined 
when the FDIC terminates the receiverships. Receiverships are 
terminated once the FDIC has completed the disposition of the 
receivership's assets and has resolved all obligations, claims, and 
other impediments. The termination of the receiverships to which the 
March 12, 2023, systemic risk determination applied may occur years 
after the initial eight-quarter collection period and any extended 
collection period.
---------------------------------------------------------------------------

    \21\ 12 U.S.C. 1823(c)(4)(G)(ii).
---------------------------------------------------------------------------

    In the likely event that a final loss amount at the termination of 
the receiverships is not determined until after the initial special 
assessments and any extended special assessments have been collected, 
and if losses at the termination of the receiverships exceed the amount 
collected through such special assessments (the final shortfall 
amount), the FDIC would impose a one-time final shortfall special 
assessment.
    The assessment base for such one-time final shortfall special 
assessment would be as described above, based on estimated uninsured 
deposits reported as of December 31, 2022, with a $5 billion deduction 
for each banking organization. However, each banking organization's 
assessment base for the one-time final shortfall special assessment may 
differ from its assessment base for previous special assessments 
collections, due to mergers or failures that occurred up to the 
determination of the shortfall amount. The FDIC would determine the 
assessment rate for the one-time final shortfall special assessment 
based on the amount needed to recover the final shortfall amount and 
the total amount of estimated uninsured deposits reported as of 
December 31, 2022, after applying the $5 billion deduction to banking 
organizations as of the date that the final shortfall is calculated.
    The entire final shortfall amount would be collected in one quarter 
so that there are no missed amounts due to mergers or other 
arrangements, and to streamline the operational impact on banking 
organizations. The FDIC would provide banking organizations notice of 
at least 45 days before payment of the one-time shortfall special 
assessment is due and would consider the statutory factors, including 
economic conditions and the effects on the industry, in deciding on the 
timing of such payments.
    The FDIC would notify each IDI subject to a one-time shortfall 
special assessment of the final shortfall special assessment rate and 
its share of the final shortfall assessment no later than 15 days 
before payment is due. The notice would be included in the IDI's 
invoice for its regular quarterly deposit insurance assessment.

H. No Prior Period Amendments

    Each IDI's assessment base for the special assessments would be 
based on its estimated uninsured deposits reported on its Call Report 
for December 31, 2022. Amendments to an IDI's Call Report for the 
December 31, 2022, reporting period made after the date of adoption of 
any final rule would not affect an institution's rate or base for the 
special assessments. While the rule would not change existing reporting 
policies and procedures around prior period amendments, the FDIC would 
use data on estimated uninsured deposits for the quarter ending 
December 31, 2022, reported as of the date of adoption of any final 
rule to calculate special assessments for the duration of the 
collection period.

I. Collection of Special Assessments and Any Shortfall Special 
Assessment

    The special assessments and any shortfall special assessment would 
be collected at the same time and in the same manner as an IDI's 
regular quarterly deposit insurance assessment. Invoices for an IDI's 
regular quarterly deposit insurance assessment would disclose the 
amount of any special assessments or shortfall special assessments due.

J. Payment Mechanism for the Special Assessments and Shortfall Special 
Assessment

    Each IDI would be required to take any actions necessary to allow 
the FDIC to debit its special assessment and shortfall special 
assessment from the bank's designated deposit account used for payment 
of its regular assessment. Before the dates that payments are due, each 
IDI would have to 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 would constitute 
nonpayment of the special assessment. Penalties for nonpayment would be 
as provided for nonpayment of an IDI's regular assessment.\22\
---------------------------------------------------------------------------

    \22\ See 12 CFR 327.3(c).
---------------------------------------------------------------------------

K. Mergers, Consolidations and Terminations of Deposit Insurance

    First, under existing regulations, an IDI that is not the resulting 
or surviving IDI in a merger or consolidation must file a quarterly 
Call Report for every assessment period prior to the assessment period 
in which the merger or consolidation occurs. The surviving or resulting 
IDI is responsible for ensuring that these Call Reports are filed. The 
surviving or resulting IDI is also responsible and liable for any 
unpaid assessments on the part of the IDI that is not the resulting or 
surviving IDI.\23\ The FDIC proposes that unpaid assessments would also 
include any unpaid special assessments and any shortfall special 
assessments.
---------------------------------------------------------------------------

    \23\ 12 CFR 327.6(a).
---------------------------------------------------------------------------

    Second, if an IDI acquires--through merger or consolidation--
another IDI during the collection period of the special assessments, 
the acquiring IDI would be required to pay the acquired IDI's special 
assessments, if any, in addition to its own special assessments from 
the quarter of the acquisition through the remainder of the collection 
period. The FDIC would not adjust the acquiring institution's special 
assessments. The FDIC also would not adjust the calculation of the 
acquired institution's special assessments. Any shortfall special 
assessments following the eight-quarter collection period would be 
calculated as described above, based on estimated uninsured deposits 
reported as of December 31, 2022. However, to ensure full recovery of 
the

[[Page 32701]]

difference between amounts collected and losses related to the systemic 
risk determination, each organization's extended special assessments or 
final shortfall special assessments would reflect mergers, 
consolidations, failures, or other terminations of deposit insurance 
that occurred between December 31, 2022, and the date in which such 
extended special assessments or final shortfall special assessments are 
determined.
    Third, existing regulations provide that, when the insured status 
of an IDI is terminated and the deposit liabilities of the IDI are not 
assumed by another IDI, the IDI 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.\24\ The FDIC proposes that these provisions would also 
apply to the special assessments and any shortfall special assessments.
---------------------------------------------------------------------------

    \24\ 12 CFR 327.6(c).
---------------------------------------------------------------------------

    Finally, in the case of one or more transactions in which one IDI 
voluntarily terminates its deposit insurance under the FDI Act and 
sells certain assets and liabilities to one or more other IDIs, each 
IDI must report the increase or decrease in assets and liabilities on 
the Call Report due after the transaction date and be assessed 
accordingly under existing FDIC assessment regulations. The IDI whose 
insured status is terminating must, among other things, continue to pay 
assessments for the assessment periods that its deposits are 
insured.\25\ The FDIC proposes that the same process would also apply 
to the special assessments and any shortfall special assessments.
---------------------------------------------------------------------------

    \25\ 12 CFR 327.6(c).
---------------------------------------------------------------------------

L. Accounting Treatment

    Each institution should account for the special assessment in 
accordance with U.S. generally accepted accounting principles (GAAP). 
In accordance with Financial Accounting Standards Board Accounting 
Standards Codification Topic 450, Contingencies (FASB ASC Topic 450), 
an estimated loss from a loss contingency shall be accrued by a charge 
to income if information indicates that it is probable that a liability 
has been incurred and the amount of loss is reasonably estimable.\26\ 
Therefore, an institution would recognize in the Call Report and other 
financial statements the accrual of a liability and estimated loss 
(i.e., expense) from a loss contingency for the special assessment when 
the institution determines that the conditions for accrual under GAAP 
have been met.
---------------------------------------------------------------------------

    \26\ FASB ASC paragraph 450-20-25-2.
---------------------------------------------------------------------------

    Similarly, each institution should account for any shortfall 
special assessment in accordance with FASB ASC Topic 450 when the 
conditions for accrual under GAAP have been met.

M. Request for Revisions

    An IDI may submit a written request for revision of the computation 
of any special assessment or shortfall special assessment pursuant to 
existing regulation 12 U.S.C. 327.3(f).\27\
---------------------------------------------------------------------------

    \27\ Consistent with Section M above, amendments filed by an IDI 
to its Call Report or FFIEC 002 after the date of adoption of the 
final rule by the Board, would not be eligible as a basis for a 
request for revision under 12 U.S.C 327.3(f). Existing regulation 12 
U.S.C. 327.4(c) allows an IDI to submit a request for review of the 
IDI's risk assignment. Because the amount of an IDI's special 
assessment or shortfall special assessment is not determined based 
on the IDI's risk assignment as proposed, the request for review 
provision under 12 U.S.C. 327.4(c) would not be applicable to an 
IDI's special assessment or shortfall special assessment.
---------------------------------------------------------------------------

IV. Analysis and Expected Effects

A. Analysis of the Statutory Factors

    Section 13(c)(4)(G) of the FDI Act provides the FDIC with 
discretion in the design and timeframe for any special assessments to 
recover the losses from the systemic risk determination. As detailed in 
the sections that follow, and as required by the FDI Act, the FDIC has 
considered the types of entities that benefit from any action taken or 
assistance provided under the determination of systemic risk, effects 
on the industry, economic conditions, and any such other factors as the 
Corporation deems appropriate and relevant to the action taken or the 
assistance provided.\28\
---------------------------------------------------------------------------

    \28\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
---------------------------------------------------------------------------

The Types of Entities That Benefit
    In implementing special assessments under section 13(c)(4)(G) of 
the FDI Act, the FDIC is required to consider the types of entities 
that benefit from any action taken or assistance provided pursuant to 
determination of systemic risk.\29\
---------------------------------------------------------------------------

    \29\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
---------------------------------------------------------------------------

    With the rapid collapse of Silicon Valley Bank and Signature Bank 
in the space of 48 hours, concerns arose that risk could spread more 
widely to other institutions and that the financial system as a whole 
could be placed at risk. Shortly after Silicon Valley Bank was closed 
on March 10, 2023, a number of institutions with large amounts of 
uninsured deposits reported that depositors had begun to withdraw their 
funds. The extent to which IDIs rely on uninsured deposits for funding 
varies significantly. Uninsured deposits were used to fund nearly 
three-quarters of the assets at Silicon Valley Bank and Signature Bank. 
On March 12, 2023, the FDIC Board and the Board of Governors voted 
unanimously to recommend, and the Treasury Secretary, in consultation 
with the President, determined that the FDIC could use emergency 
systemic risk authorities under the FDI Act to complete its resolution 
of both Silicon Valley Bank and Signature Bank in a manner that fully 
protects all depositors.\30\ The full protection of all depositors, 
rather than imposing losses on uninsured depositors, was intended to 
strengthen public confidence in the nation's banking system.
---------------------------------------------------------------------------

    \30\ 12 U.S.C. 1823(c)(4)(G). See also: FDIC PR-17-2023. ``Joint 
Statement by the Department of the Treasury, Federal Reserve, and 
FDIC.'' March 12, 2023. https://www.fdic.gov/news/press-releases/2023/pr23017.html.
---------------------------------------------------------------------------

    In the weeks that followed the determination of systemic risk, 
efforts to stabilize the banking system and stem potential contagion 
from the failures of Silicon Valley Bank and Signature Bank ensured 
that depositors would continue to have access to their savings, that 
small businesses and other employers could continue to make payrolls, 
and that other banks could continue to extend credit to borrowers and 
serve as a source of support.
    In general, large banks and regional banks, and particularly those 
with large amounts of uninsured deposits, were the banks most exposed 
to and likely would have been the most affected by uninsured deposit 
runs. Indeed, shortly after Silicon Valley Bank was closed, a number of 
institutions with large amounts of uninsured deposits reported that 
depositors had begun to withdraw their funds. The failure of Silicon 
Valley Bank and the impending failure of Signature Bank raised concerns 
that, absent immediate assistance for uninsured depositors, there could 
be negative knock-on consequences for similarly situated institutions, 
depositors and the financial system more broadly. Generally speaking, 
larger banks benefited the most from the stability provided to the 
banking industry under the systemic risk determination. Under the 
proposal, the banks that benefited most from the assistance provided 
under the systemic risk determination would be charged special 
assessments to recover losses to the DIF resulting from the protection 
of uninsured depositors, with banks of larger asset sizes and that hold 
greater amounts of uninsured deposits paying higher special 
assessments.

[[Page 32702]]

Effects on the Industry
    In calculating the assessment base for the special assessments, the 
FDIC would deduct $5 billion from each IDI or banking organization's 
aggregate estimated uninsured deposits reported as of December 31, 
2022. As a result, any institution that did not report any uninsured 
deposits as of December 31, 2022, would not be subject to the special 
assessment. Additionally, most small IDIs and IDIs that are part of a 
small banking organization would not pay anything towards the special 
assessment. Some small and mid-size IDIs would be subject to the 
special assessment if they were subsidiaries of a banking organization 
with more than $5 billion in uninsured deposits and such IDIs reported 
positive amounts of uninsured deposits after application of the 
deduction, or if they directly held more than $5 billion in estimated 
uninsured deposits as of December 31, 2022, which for smaller 
institutions would constitute heavy reliance on uninsured deposits.
    Based on data reported as of December 31, 2022, and as captured in 
Table 4 above, the FDIC estimates that 113 banking organizations would 
be subject to special assessments, including 48 banking organizations 
with total assets over $50 billion and 65 banking organizations with 
total assets between $5 and $50 billion. No banking organizations with 
total assets under $5 billion would pay special assessments, based on 
data reported as of December 31, 2022.\31\ It is anticipated that the 
same banking organizations subject to special assessments would also be 
subject to any extended special assessments or final shortfall special 
assessment, absent the effects of any mergers, consolidations, 
failures, or other terminations of deposit insurance that occur through 
the determination of such extended special assessments or final 
shortfall special assessment.
---------------------------------------------------------------------------

    \31\ The number of banking organizations subject to special 
assessments may change prior to any final rule depending on any 
adjustments to the loss estimate, mergers or failures, or similar 
activities, or amendments to reported estimates of uninsured 
deposits.
---------------------------------------------------------------------------

Capital and Earnings Analysis
    The FDIC has analyzed the effect of the special assessments on the 
capital and earnings of banking organizations, including IDIs that are 
not subsidiaries of a holding company. This analysis incorporates data 
on estimated uninsured deposits reported by banking organizations as of 
December 31, 2022, and assumes that pre-tax income for the quarter in 
which a banking organization would recognize the accrual of a liability 
and an estimated loss (i.e., expense) from a loss contingency for the 
special assessments, will equal the average of their pre-tax income 
from January 1, 2022, through December 31, 2022.\32\
---------------------------------------------------------------------------

    \32\ All income statement items used in this analysis were 
adjusted for the effect of mergers. Institutions for which four 
quarters of non-zero earnings data were unavailable, including 
insured branches of foreign banks, were excluded from this analysis.
---------------------------------------------------------------------------

    To avoid the possibility of underestimating effects on bank 
earnings or capital, the analysis also assumes that the effects of the 
special assessments are not transferred to customers in the form of 
changes in borrowing rates, deposit rates, or service fees. Because 
special assessments are a tax-deductible operating expense for all 
institutions, increases in the assessment expense can lower taxable 
income.\33\ The analysis considers the effective pre-tax cost of 
special assessments in calculating the effect on capital.\34\
---------------------------------------------------------------------------

    \33\ The Tax Cuts and Jobs Act of 2017 placed a limitation on 
tax deductions for FDIC premiums for banks with total consolidated 
assets between $10 and $50 billion and disallowed the deduction 
entirely for banks with total assets of $50 billion or more. 
However, the definition of FDIC premiums under the Act is limited to 
any assessment imposed under section 7(b) of the FDI Act (12 U.S.C. 
1817(b)), and therefore does not include special assessments 
required under section 13(c)(4)(G) of the FDI Act. See the Tax Cuts 
and Jobs Act, Public Law 115-97 (Dec. 22, 2017).
    \34\ The analysis does not incorporate any tax effects from an 
operating loss carry forward or carry back.
---------------------------------------------------------------------------

    A banking organization's earnings retention and dividend policies 
influence the extent to which special assessments affect equity levels. 
If a banking organization maintains the same dollar amount of dividends 
when it recognizes the accrual of a liability and an estimated loss 
(i.e., expense) from a loss contingency for the special assessments or 
shortfall special assessment as proposed, equity (retained earnings) 
will be reduced by the full amount of the pre-tax cost of the special 
assessments or shortfall special assessment. This analysis instead 
assumes that a banking organization will maintain its dividend rate 
(that is, dividends as a percentage of net income) unchanged from the 
weighted average rate reported over the four quarters ending December 
31, 2022. In the event that the ratio of Tier 1 capital to assets falls 
below four percent, however, this assumption is modified such that a 
banking organization retains the amount necessary to reach a four 
percent minimum and distributes any remaining funds according to the 
dividend payout rate.\35\
---------------------------------------------------------------------------

    \35\ The analysis uses four percent as the threshold because 
IDIs generally need to maintain a Tier 1 leverage ratio of 4.0 
percent or greater to be considered ``adequately capitalized'' under 
Prompt Corrective Action Standards, in addition to the following 
requirements: (i) total risk-based capital ratio of 8.0 percent or 
greater; (ii) Tier 1 risk-based capital ratio of 6.0 percent or 
greater; (iii) common equity tier 1 capital ratio of 4.5 percent or 
greater; and (iv) does not meet the definition of ``well 
capitalized.'' Beginning January 1, 2018, an advanced approaches or 
Category III FDIC-supervised institution will be deemed to be 
``adequately capitalized'' if it satisfies the above criteria and 
has a supplementary leverage ratio of 3.0 percent or greater, as 
calculated in accordance with 12 CFR 324.10. See 12 CFR 
324.403(b)(2). Additionally, Federal Reserve Board-regulated 
institutions must generally must maintain a Tier 1 leverage ratio of 
4.0 percent or greater to meet the minimum capital requirements, in 
addition to the following requirements: (i) total capital ratio of 
8.0 percent; (ii) Tier 1 capital ratio of 6.0; (iii) common equity 
tier 1 capital ratio of 4.5; and (iv) for advanced approaches 
Federal Reserve Board-regulated institutions, or for Category III 
Federal Reserve Board-regulated institutions, a supplementary 
leverage ratio of 3 percent. See 12 CFR 217.10(a)(1). For purposes 
of this analysis, Tier 1 capital to assets is used as the measure of 
capital adequacy.
---------------------------------------------------------------------------

    As proposed, the FDIC estimates that it would collect the estimated 
loss from protecting uninsured depositors at Silicon Valley Bank and 
Signature Bank of approximately $15.8 billion, over the eight-quarter 
collection period. Banking organizations would recognize the accrual of 
a liability and an estimated loss (i.e., expense) from a loss 
contingency for the special assessment when the institution determines 
that the conditions for accrual under GAAP have been met. This analysis 
assumes that the effects on capital and income of the entire amount of 
the special assessments to be collected over eight quarters would occur 
in one quarter only.
    Given this estimate and the assumptions in the analysis, the FDIC 
estimates that, on average, the proposed special assessments would 
decrease the dollar amount of Tier 1 capital of banking organizations 
that would be required to pay special assessments by an estimated 61 
basis points.\36\ No banking organizations are estimated to fall below 
the minimum capital requirement (a four percent Tier 1 capital-to-
assets ratio) as a result of the proposed special assessments.
---------------------------------------------------------------------------

    \36\ Estimated effects on capital are calculated based on data 
reported as of December 31, 2022, on the Call Report and the 
Consolidated Financial Statements for Holding Companies (FR Y-9C), 
respectively, for IDIs that are not subsidiaries of a holding 
company or that are part of a banking organization with only one 
subsidiary IDI required to pay special assessments, and for banking 
organizations, to the extent that an IDI is part of a holding 
company with more than one subsidiary IDI required to pay special 
assessments.
---------------------------------------------------------------------------

    The banking industry reported full-year 2022 net income lower than 
full-

[[Page 32703]]

year 2021 net income, but still above the pre-pandemic average. The 
effect of the proposed special assessments on a banking organization's 
income is measured by calculating the amount of the special assessments 
as a percent of pre-tax income (hereafter referred to as ``income''). 
This income measure is used in order to eliminate the potentially 
transitory effects of taxes on profitability.
    While special assessments are allocated based on estimated 
uninsured deposits reported at the banking organization level, IDIs 
will be responsible for payment of the special assessments. The FDIC 
analyzed the effect of the special assessments on income reported at 
the IDI-level for IDIs subject to special assessments that are not 
subsidiaries of a holding company or that are subsidiaries of a holding 
company with only one IDI subsidiary. For IDIs that are subsidiaries of 
a holding company with more than one IDI subsidiary, the FDIC analyzed 
the effect of the special assessments by aggregating the income 
reported by all IDIs subject to special assessments within each banking 
organization since the IDIs will be responsible for payment. The FDIC 
analyzed the impact of the special assessments on banking organizations 
that were profitable based on their average quarterly income from 
January 1, 2022, to December 31, 2022.\37\
---------------------------------------------------------------------------

    \37\ There were no banking organizations that would be required 
to pay special assessments that were unprofitable based on average 
quarterly income from January 1, 2022, to December 31, 2022.
---------------------------------------------------------------------------

    The effects on income of the entire amount of special assessments 
to be collected over eight quarters are assumed to occur in one quarter 
only. Given the assumptions and the estimated loss amount, the FDIC 
estimates that the proposed special assessments would result in an 
average one-quarter reduction in income of 17.5 percent for banking 
organizations subject to special assessments.\38\
---------------------------------------------------------------------------

    \38\ Earnings or income are quarterly income before assessments 
and taxes. Quarterly income is assumed to equal average income from 
January 1, 2022, through December 31, 2022.
---------------------------------------------------------------------------

    Table 5 shows that approximately 66 percent of profitable banking 
organizations subject to the proposal are projected to have special 
assessments of less than 20 percent of income, including 23 percent 
with special assessments of less than 5 percent of income. Another 34 
percent of profitable banking organizations subject to the proposal are 
projected to have special assessments equal to or exceeding 20 percent 
of income.

 Table 5--Estimated One-Quarter Effect of Entire Amount of Special Assessments on Income for Profitable Banking
                                Organizations Subject to Special Assessments \1\
----------------------------------------------------------------------------------------------------------------
                                                                                     Assets of
                                                   Number of        Percent of        banking       Percent of
   Special assessments as percent of income         banking          banking       organizations      assets
                                                 organizations    organizations    ($ billions)
----------------------------------------------------------------------------------------------------------------
Over 30%......................................               13               12           4,455              23
20% to 30%....................................               25               22          10,713              56
10% to 20%....................................               34               30           2,577              13
5% to 10%.....................................               14               13             307               2
Less than 5%..................................               26               23           1,117               6
                                               -----------------------------------------------------------------
    Total.....................................              112              100          19,170             100
----------------------------------------------------------------------------------------------------------------
\1\ Income is defined as quarterly pre-tax income. Quarterly income is assumed to equal the average of income
  from January 1, 2022, through December 31, 2022. For purposes of this analysis, the effects on income of the
  entire amount of special assessments to be collected over eight quarters are assumed to occur in one quarter
  only. Special assessments as a percent of income is an estimate of the one-time accrual of a full eight
  quarters of special assessments as a percent of a single quarter's income. Profitable banking organizations
  are defined as those having positive average income for the 12 months ending December 31, 2022. Excludes two
  insured U.S. branches of one foreign banking organization subject to special assessments. Some columns do not
  add to total due to rounding.

    In order to preserve liquidity at IDIs, and in the interest of 
consistent and predictable assessments, the special assessments would 
be collected over eight quarters. The proposed special assessments 
would be applicable no earlier than the first quarterly assessment 
period of 2024, providing time for institutions to prepare and plan for 
the special assessments.
Economic Conditions
    On February 28, 2023, the FDIC released the results of the 
Quarterly Banking Profile, which provided a comprehensive summary of 
financial results for all FDIC-insured institutions for the fourth 
quarter of 2022. Overall, key banking industry metrics remained 
favorable in the quarter.\39\
---------------------------------------------------------------------------

    \39\ FDIC Quarterly Banking Profile, Fourth Quarter 2022. 
https://www.fdic.gov/analysis/quarterly-banking-profile/qbp/2022dec/.
---------------------------------------------------------------------------

    Loan growth continued, net interest income grew, and asset quality 
measures remained favorable. Further, the industry remained well 
capitalized and highly liquid, but the report also highlighted a key 
weakness in elevated levels of unrealized losses on investment 
securities due to rapid increases in market interest rates. Unrealized 
losses on available-for-sale and held-to-maturity securities totaled 
$620 billion as of December 31, 2022, and unrealized losses on 
available-for-sale securities have meaningfully reduced the reported 
equity capital of the banking industry. The combination of a high level 
of longer-term asset maturities and a moderate decline in total 
deposits underscored the risk that unrealized losses could become 
actual losses should banks need to sell securities to meet liquidity 
needs.
    The financial system continues to face significant downside risks 
from the effects of inflation, rising market interest rates, and a weak 
economic outlook. Credit quality and profitability may weaken due to 
these risks, potentially resulting in tighter loan underwriting, slower 
loan growth, higher provision expenses, and liquidity constraints. 
Additional short-term interest rate increases, combined with longer 
asset maturities may continue to increase unrealized losses on 
securities and affect bank balance sheets in coming quarters.
    Despite these downside risks, in the weeks that followed the 
failure of Silicon Valley Bank and Signature Bank, the state of the 
U.S. financial system remained sound and institutions are

[[Page 32704]]

well positioned to absorb a special assessment.\40\
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    \40\ Statement of Martin J. Gruenberg, Chairman of the FDIC on 
``Recent Bank Failures and the Federal Regulatory Response,'' before 
the United States Senate Committee on Banking, Housing, and Urban 
Affairs. March 28, 2023. https://www.banking.senate.gov/imo/media/doc/Gruenberg%20Testimony%203-28-23.pdf.
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B. Alternatives Considered

    While the FDIC is required by statute to recover the loss to the 
DIF arising from the use of a systemic risk determination through one 
or more special assessments, the FDI Act in Section 13(c)(4)(G) 
provides the FDIC with discretion in the design and timeframe for any 
special assessments to recover the losses from the systemic risk 
determination.\41\ The FDIC has considered alternatives to this 
proposal to collect special assessments to recover the loss to the DIF 
arising from the protection of all uninsured depositors in connection 
with the systemic risk determination announced on March 12, 2023, as 
required by the FDI Act. The FDIC identified six potentially effective 
and reasonably feasible alternatives to the proposed rule. These 
alternatives are discussed in detail below.
---------------------------------------------------------------------------

    \41\ 12 U.S.C. 1823(c)(4)(G)(ii)(I). In implementing special 
assessments, the FDIC is required to consider the types of entities 
that benefit from any action taken or assistance provided under the 
determination of systemic risk, effects on the industry, economic 
conditions, and any such other factors as the FDIC deems appropriate 
and relevant to the action taken or the assistance provided. See 12 
U.S.C. 1823(c)(4)(G)(ii)(III).
---------------------------------------------------------------------------

Alternative 1: One-Time Special Assessment
    As an alternative to the proposal, the FDIC considered imposing a 
one-time special assessment at the end of the quarter following the 
effective date. The FDIC would impose the one-time special assessment 
in the quarter ending March 31, 2024, and collect payment for such 
special assessment on June 28, 2024, at the same time and in the same 
manner as an IDI's regular quarterly deposit insurance assessment. The 
aggregate amount of a one-time special assessment would equal the 
entire initial loss estimate. Calculation of the special assessments, 
including the special assessment rate, would be the same as proposed, 
but instead of collecting the amount over eight quarters, the FDIC 
would collect the entire amount in one quarter.
    Once actual losses are determined as of the termination of the 
receiverships, and if the actual losses exceeded the amount collected 
under the one-time special assessment, the FDIC would impose a 
shortfall special assessment to collect the amount of losses in excess 
of the amount collected. Collection of the entire shortfall special 
assessment would also occur in one quarter.
    Conversely, if the amount collected under the one-time special 
assessment exceeded actual losses, the FDIC is required by statute to 
place the excess funds collected in the DIF.\42\
---------------------------------------------------------------------------

    \42\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
---------------------------------------------------------------------------

    While under both the proposal and this alternative, the estimated 
amount of the special assessment would be recognized with the accrual 
of a liability and an estimated loss (i.e., expense) from a loss 
contingency when the institution determines that the conditions for 
accrual under GAAP have been met, which impacts capital and earnings, 
this alternative would additionally require payment of the entire 
amount in the second quarter of 2024, and would impact liquidity 
significantly in one quarter. The FDIC rejected this alternative in the 
interest of liquidity preservation in a period of uncertainty and to 
mitigate the risk of over collecting.
Alternative 2: Asset Size Applicability Threshold
    As an alternative to deducting the first $5 billion in estimated 
uninsured deposits in calculating an IDI or banking organization's 
assessment base for the special assessment, the FDIC considered basing 
applicability on an asset size threshold.
    As described previously, in implementing special assessments, the 
FDI Act requires the FDIC to consider the types of entities that 
benefit from any action taken or assistance provided pursuant to 
determination of systemic risk.\43\ Large banks and regional banks, and 
particularly those with large amounts of uninsured deposits, were the 
banks most exposed to and likely would have been the most affected by 
uninsured deposit runs had those occurred as a result of the bank 
failures. Larger banks also benefited the most from the stability 
provided to the banking industry under the systemic risk determination.
---------------------------------------------------------------------------

    \43\ 12 U.S.C. 1823(c)(4)(G)(ii)(III).
---------------------------------------------------------------------------

    While both the proposal, including the $5 billion deduction from 
estimated uninsured deposits, and an asset-size-based applicability 
threshold would effectively remove the smallest institutions from 
eligibility, the proposed deduction of $5 billion from each banking 
organization's estimated uninsured deposits in calculating the special 
assessment would help to mitigate a ``cliff effect'' relative to 
applying a different threshold for applicability, such as applying an 
asset size threshold, thereby ensuring more equitable treatment. With 
an asset size threshold, an IDI just above such threshold would pay a 
significant amount in special assessments, while an IDI just below such 
threshold would pay none. The FDIC rejected this alternative for these 
reasons.
Alternative 3: Assessment Base Equal to All Uninsured Deposits, Without 
$5 Billion Deduction
    A third alternative would be to eliminate the proposed $5 billion 
deduction from the assessment base for the special assessment, and 
therefore allocate the special assessments among IDIs based on each IDI 
or banking organization's estimated uninsured deposits as of December 
31, 2022. This alternative would result in special assessments imposed 
on every IDI that reported a non-zero amount of estimated uninsured 
deposits as of December 31, 2022, or nearly 100 percent of all IDIs 
with total assets of $1 billion or more.\44\ Relative to the proposal, 
more IDIs would pay special assessments under this alternative, and 
IDIs with greater amounts of uninsured deposits would generally pay 
lower special assessments relative to the proposal since the special 
assessments would be allocated across a significantly larger number of 
institutions.
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    \44\ IDIs with less than $1 billion in total assets as of June 
30, 2021, were not required to report the estimated amount of 
uninsured deposits on the Call Report for December 31, 2022. 
Therefore, for IDIs that had less than $1 billion in total assets as 
of June 30, 2021, the amount and share of estimated uninsured 
deposits as of December 31, 2022, would be zero.
---------------------------------------------------------------------------

    However, given the FDIC's statutory requirement to consider the 
types of entities that benefit from any action taken or assistance 
provided under the determination of systemic risk in implementing 
special assessments, the FDIC rejected this alternative in favor of 
allocating the special assessments to larger institutions with the 
largest amounts of uninsured deposits, with the result that smaller 
institutions would not have to contribute to the special assessments. 
In general, large banks and regional banks, and particularly those with 
large amounts of uninsured deposits, were the banks most exposed to and 
likely would have been the most affected by uninsured deposit runs. 
Generally speaking, larger banks benefited the most from the stability 
provided to the banking industry under the systemic risk determination.

[[Page 32705]]

Alternative 4: Special Assessments Based on Each Institution's 
Percentage of Uninsured Deposits to Total Deposits
    A fourth alternative would be to allocate the special assessments 
among IDIs based on each IDI's estimated uninsured deposits as a 
percentage of their total domestic deposits reported as of December 31, 
2022, as a proxy for reliance on uninsured deposits at the time the 
determination of systemic risk was made and uninsured depositors of the 
failed institutions were protected. Similar to the third alternative, 
this would result in a special assessment imposed on every IDI that 
reported a non-zero amount of estimated uninsured deposits as of 
December 31, 2022, or nearly 100 percent of IDIs with total assets of 
$1 billion or more.\45\
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    \45\ IDIs with less than $1 billion in total assets as of June 
30, 2021, were not required to report the estimated amount of 
uninsured deposits on the Call Report for December 31, 2022. 
Therefore, for IDIs that had less than $1 billion in total assets as 
of June 30, 2021, the amount and share of estimated uninsured 
deposits as of December 31, 2022, would be zero.
---------------------------------------------------------------------------

    Under this alternative, IDIs with a greater reliance on uninsured 
deposits would generally pay the greatest amount of special 
assessments; however, the special assessments would be allocated across 
a large number of institutions. This alternative would result in 
institutions of vastly different asset sizes paying a similar dollar 
amount of special assessments. It also would result in some smaller 
IDIs and banking organizations, paying potentially significant amounts 
of special assessments, and the larger banks that have high amounts of 
uninsured deposits and benefited the most from the stability provided 
to the banking industry under the systemic risk determination, but that 
do not have high uninsured deposit concentrations, paying a smaller 
share of special assessments.
    In general, large banks and regional banks, and particularly those 
with large amounts of uninsured deposits, were the banks most exposed 
to and likely would have been the most affected by uninsured deposit 
runs. Generally speaking, larger banks benefited the most from the 
stability provided to the banking industry under the systemic risk 
determination. The FDIC rejected this alternative for these reasons and 
because the proposed methodology results in larger special assessments 
for similarly sized banking organizations reporting greater 
concentrations of uninsured deposits.
Alternative 5: Charge IDIs for 50 Percent of Special Assessment in Year 
One Based on Uninsured Deposits as of December 31, 2022; Charge for the 
Remainder in Year Two Based on Uninsured Deposits Reported as of 
December 31, 2023
    Under the proposal and all alternatives described, the special 
assessments would initially be calculated based on an estimated amount 
of losses, as the exact amount of losses will not be known until the 
FDIC terminates the two receiverships. A final alternative would be to 
collect 50 percent of the special assessments during the initial four-
quarter collection period based on estimated uninsured deposits 
reported by all IDIs as of December 31, 2022, and collect the remaining 
special assessments for an additional four quarter collection period 
based on an updated estimate of losses pursuant to the systemic risk 
determination and estimated uninsured deposits reported by all IDIs as 
of December 31, 2023.
    Under this alternative, for the initial four-quarter collection 
period the special assessment would be allocated to all IDIs based on 
each IDI or banking organization's estimated uninsured deposits as a 
share of estimated uninsured deposits reported by all IDIs as of 
December 31, 2022, as a proxy for the amount of uninsured deposits in 
each institution at the time the determination of systemic risk was 
made and uninsured depositors of the failed institutions were 
protected. Such methodology would allocate the special assessments to 
the institutions that had the largest amounts of uninsured deposits at 
the time of the determination of systemic risk.
    The remaining special assessments would be based on an updated 
estimate of losses as of December 31, 2023, and would be allocated to 
IDIs with total assets of $1 billion or more, based on each IDI or 
banking organization's estimated uninsured deposits as a share of 
estimated uninsured deposits reported by all IDIs as of December 31, 
2023, in order to reflect amounts of uninsured deposits that did not 
run off following the determination of systemic risk.
    The FDIC rejected this alternative given the potential incentives 
for IDIs to reduce their amount of uninsured deposits ahead of the 
December 31, 2023, reporting date, which may result in unintended 
market dislocations and reduced liquidity in the banking sector. This 
alternative may also change the timing of accrual of the contingent 
liability by banks. The proposal's allocation methodology based on 
amounts of uninsured deposits as of December 31, 2022, would result in 
transparent and consistent payments, and a more simplified framework 
for calculating special assessments.
Alternative 6: Apply Special Assessment Rate to Regular Assessment 
Base, With or Without Application of a $5 Billion Deduction
    A sixth alternative would be to apply a special assessment rate to 
an institution's regular quarterly deposit insurance assessment base 
(regular assessment base) for that quarter, with or without applying a 
$5 billion deduction. Generally, an IDI's assessment base equals its 
average consolidated total assets minus its average tangible 
equity.\46\ Under this alternative, the FDIC estimates that it would 
need to charge an annual assessment rate of 3.76 basis points over two 
years to recover estimated losses without the $5 billion deduction, or 
4.57 basis points with the $5 billion deduction; however, a 
significantly larger number of banking organizations would be subject 
to the special assessments relative to the proposal.
---------------------------------------------------------------------------

    \46\ See 12 CFR 327.5.
---------------------------------------------------------------------------

    Under this alternative, the IDIs with the largest assessment base 
would pay the greatest amount of special assessments. IDIs for which 
certain assets are excluded in the calculation of the regular 
assessment base would pay lower special assessments due to their 
smaller assessment base.
    This alternative would result in smaller IDIs and banking 
organizations, regardless of reliance on uninsured deposits for 
funding, paying potentially significant amounts of special assessments. 
Further, IDIs engaged in trust activities, or with fiduciary and 
custody and safekeeping assets, and for which certain assets are 
excluded from their regular assessment base, would pay lower amounts of 
special assessments due to these exclusions, despite holding 
significant amounts of uninsured deposits. The FDIC rejected this 
alternative for these reasons.
    The FDIC requests comments on the proposal and the alternative 
approaches considered. The FDIC has carefully weighed the available 
options in fulfilling the statutory requirement to recover the loss to 
the DIF arising from the use of a systemic risk determination through 
one or more special assessments.
    In the FDIC's view, the proposal reflects an appropriate balancing 
of the goal of applying special assessments to the types of entities 
that benefited the

[[Page 32706]]

most from the protection of uninsured depositors provided under the 
determination of systemic risk while ensuring equitable, transparent, 
and consistent treatment based on amounts of uninsured deposits at the 
time of the determination of systemic risk. The proposal also allows 
for payments to be collected over an extended period of time in order 
to mitigate the liquidity effects of the special assessments by 
requiring smaller, consistent quarterly payments. On balance, in the 
FDIC's view, the proposal best promotes maintenance of liquidity, which 
will allow institutions to absorb any potential unexpected setbacks 
while continuing to meet the credit needs of the U.S. economy.

C. Comment Period, Effective Date, and Application Date

    The FDIC is issuing this proposal with an opportunity for public 
comment through July 21, 2023. Following the comment period, the FDIC 
expects to issue a final rule with an effective date of January 1, 
2024. The special assessment would be collected beginning with the 
first quarterly assessment period of 2024 (i.e., January 1 through 
March 31, 2024, with an invoice payment date of June 28, 2024), and 
would continue to be collected for an anticipated total of eight 
quarterly assessment periods. Because the estimated loss pursuant to 
the systemic risk determination will be periodically adjusted, the FDIC 
would retain the ability to cease collection early, impose an extended 
special assessment collection period after the eight-quarter collection 
period to collect the difference between losses and the amounts 
collected, and impose a final shortfall special assessment after both 
receiverships terminate.

V. Request for Comment

    The FDIC is requesting comment on all aspects of the notice of 
proposed rulemaking, in addition to the specific requests below.
    Question 1: Should the special assessments be calculated as 
proposed?
    Question 2: Are there alternative methodologies for calculating the 
special assessments the FDIC should consider that would result in 
financial reporting in accordance with U.S. GAAP and could result in 
different timing for the impact to earnings and capital? Please 
describe.
    Question 3: Should the assessment base for the special assessments 
be equal to estimated uninsured deposits reported as of December 31, 
2022, or reported as of some other date, and why?
    Question 4: Should the assessment base for the special assessments 
be equal to estimated uninsured deposits or some other measure?
    Question 5: Is the deduction of $5 billion of aggregate estimated 
uninsured deposits from the assessment base for the special assessments 
for each IDI or banking organization appropriate? Why?
    Question 6: Should the FDIC collect special assessments over an 
eight-quarter collection period, as proposed? Should the collection 
period be longer to spread out the effects of the payment of special 
assessments, or shorter?
    Question 7: Should the FDIC consider an exemption for specific 
types of deposits from the base for special assessments? On what basis?
    Question 8: Should any shortfall special assessments be calculated 
as proposed?

VI. Administrative Law Matters

A. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency, 
in connection with a proposed rule, to prepare and make available for 
public comment an initial regulatory flexibility analysis that 
describes the impact of the proposed rule on small entities.\47\ 
However, an initial regulatory flexibility analysis is not required if 
the agency certifies that the proposed rule will not, if promulgated, 
have a significant economic impact on a substantial number of small 
entities. The Small Business Administration (SBA) has defined ``small 
entities'' to include banking organizations with total assets of less 
than or equal to $850 million.\48\ Certain types of rules, such as 
rules of particular applicability relating to rates, corporate or 
financial structures, or practices relating to such rates or 
structures, are expressly excluded from the definition of ``rule'' for 
purposes of the RFA.\49\ Because the proposed rule relates directly to 
the rates imposed on FDIC-insured institutions, the proposed rule is 
not subject to the RFA. Nonetheless, the FDIC is voluntarily presenting 
information in this RFA section.
---------------------------------------------------------------------------

    \47\ 5 U.S.C. 601 et seq.
    \48\ The SBA defines a small banking organization as having $850 
million or less in assets, where an organization's ''assets are 
determined by averaging the assets reported on its four quarterly 
financial statements for the preceding year.'' See 13 CFR 121.201 
(as amended by 87 FR 69118, effective December 19, 2022). In its 
determination, the ''SBA counts the receipts, employees, or other 
measure of size of the concern whose size is at issue and all of its 
domestic and foreign affiliates.'' See 13 CFR 121.103. Following 
these regulations, the FDIC uses an insured depository institution's 
affiliated and acquired assets, averaged over the preceding four 
quarters, to determine whether the insured depository institution is 
''small'' for the purposes of RFA.
    \49\ 5 U.S.C. 601(2).
---------------------------------------------------------------------------

    The FDIC insures 4,715 institutions as of December 31, 2022, of 
which 3,433 are small entities.\50\ As discussed previously, the 
proposed rule would impose a special assessment on IDIs that are part 
of banking organizations that reported $5 billion or more in uninsured 
deposits, as of December 31, 2022. Given that no small entity has 
reported $5 billion or more in uninsured deposits, the FDIC does not 
believe the proposed rule will have a direct effect on any small 
entity.
---------------------------------------------------------------------------

    \50\ December 31, 2022 Call Report data.
---------------------------------------------------------------------------

    The FDIC invites comments on all aspects of the supporting 
information provided in this RFA section. In particular, would this 
proposed rule have any significant effects on small entities that the 
FDIC has not identified?

B. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 \51\ (PRA) states that no 
agency may conduct or sponsor, nor is the respondent required to 
respond to, an information collection unless it displays a currently 
valid Office of Management and Budget (OMB) control number. The FDIC's 
OMB control numbers for its assessment regulations are 3064-0057, 3064-
0151, and 3064-0179. The proposed rule does not revise any of these 
existing assessment information collections pursuant to the PRA; 
consequently, no submissions in connection with these OMB control 
numbers will be made to the OMB for review.
---------------------------------------------------------------------------

    \51\ 44 U.S.C. 3501-3521.
---------------------------------------------------------------------------

C. Riegle Community Development and Regulatory Improvement Act

    Section 302(a) of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (RCDRIA) \52\ requires that the Federal banking 
agencies, including the FDIC, in determining the effective date and 
administrative compliance requirements of new regulations that impose 
additional reporting, disclosure, or other requirements on IDIs, 
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. Subject to certain exceptions, new 
regulations and amendments to regulations prescribed by a Federal 
banking agency which

[[Page 32707]]

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.\53\
---------------------------------------------------------------------------

    \52\ 12 U.S.C. 4802(a).
    \53\ 12 U.S.C. 4802(b).
---------------------------------------------------------------------------

    The proposed rule would not impose additional reporting, 
disclosure, or other new requirements on insured depository 
institutions, including small depository institutions, or on the 
customers of depository institutions. Accordingly, section 302 of 
RCDRIA does not apply. Nevertheless, the requirements of RCDRIA will be 
considered as part of the overall rulemaking process, and the FDIC 
invites comments that will further inform its consideration of RCDRIA.

D. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act \54\ 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 invites your comments on how to make this proposed rule easier 
to understand. For example:
---------------------------------------------------------------------------

    \54\ Public Law 106-102, section 722, 113 Stat. 1338, 1471 
(1999), 12 U.S.C. 4809.
---------------------------------------------------------------------------

     Has the FDIC organized the material to suit your needs? If 
not, how could the material be better organized?
     Are the requirements in the proposed regulation clearly 
stated? If not, how could the regulation be stated more clearly?
     Does the proposed regulation contain language or jargon 
that is unclear? If so, which language requires clarification?
     Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the regulation easier to 
understand?

List of Subjects in 12 CFR Part 327

    Bank deposit insurance, Banks, banking, Savings associations.

Authority and Issuance

    For the reasons stated in the preamble, the Federal Deposit 
Insurance Corporation proposes to amend 12 CFR part 327 as follows:

PART 327--ASSESSMENTS

0
1. The authority citation for part 327 is revised to read as follows:

    Authority: 12 U.S.C. 1813, 1815, 1817-19, 1821, 1823.

0
2. Add Sec.  327.13 to read as follows:


Sec.  327.13  Special Assessment Pursuant to March 12, 2023, Systemic 
Risk Determination.

    (a) Special assessment. A special assessment shall be imposed on 
each insured depository institution to recover losses to the Deposit 
Insurance Fund, as described in paragraph (b) of this section, 
resulting from the March 12, 2023, systemic risk determination pursuant 
to 12 U.S.C. 1823(c)(4)(G). The special assessment shall be collected 
from each insured depository institution on a quarterly basis as 
described in this section during the initial special assessment period 
as defined in paragraph (f) of this section and, if necessary, the 
extended special assessment period as defined in paragraph (g) of this 
section, and if further necessary, on a one-time basis as described in 
paragraph (l) of this section.
    (b) Losses to the Deposit Insurance Fund. As used in this section, 
``losses to the Deposit Insurance Fund'' refers to losses incurred by 
the Deposit Insurance Fund resulting from actions taken by the FDIC 
under the March 12, 2023, systemic risk determination, as may be 
revised from time to time.
    (c) Calculation of special assessment. An insured depository 
institution's special assessment for each quarter during the initial 
special assessment period and extended special assessment period shall 
be calculated by multiplying the special assessment rate defined in 
paragraph (f)(2) or (g)(3) of this section, as appropriate, by the 
institution's special assessment base as defined in paragraph (f)(3) or 
(g)(4) of this section, as appropriate.
    (d) Invoicing of special assessment. For each assessment period in 
which the special assessment is imposed, the FDIC shall advise each 
insured depository institution of the amount and calculation of any 
special assessment payment due in a form that notifies the institution 
of the special assessment base and special assessment rate exclusive of 
any other assessments imposed under this part. This information shall 
be provided at the same time as the institution's quarterly certified 
statement invoice under Sec.  327.2 for the assessment period in which 
the special assessment was imposed.
    (e) Payment of special assessment. Each insured depository 
institution shall pay to the Corporation any special assessment imposed 
under this section in compliance with and subject to the provisions of 
Sec. Sec.  327.3, 327.6, and 327.7. The date for any special assessment 
payment shall be the date provided in Sec.  327.3(b)(2) for the 
institution's quarterly certified statement invoice for the calendar 
quarter in which the special assessment was imposed.
    (f) Special assessment during initial special assessment period--
(1) Initial special assessment period. The initial special assessment 
period shall begin with the first quarterly assessment period of 2024 
and end the last quarterly assessment period of 2025, except the 
initial special assessment period will cease the first quarterly 
assessment period after the aggregate amount of special assessments 
collected under this section meets or exceeds the losses to the Deposit 
Insurance Fund, where amounts collected and losses are compared on a 
quarterly basis.
    (2) Special assessment rate during initial special assessment 
period. The special assessment rate during the initial special 
assessment period is 3.13 basis points on a quarterly basis.
    (3) Special assessment base during initial special assessment 
period. (i) The special assessment base for an insured depository 
institution during the initial special assessment period that has no 
affiliated insured depository institution shall equal:
    (A) The institution's uninsured deposits, as described in paragraph 
(h) of this section; minus
    (B) The $5 billion deduction; provided, however, that an 
institution's assessment base cannot be negative.
    (ii) The special assessment base for an insured depository 
institution during the initial special assessment period that has one 
or more affiliated insured depository institutions shall equal:
    (A) The institution's uninsured deposits, as described in paragraph 
(h) of this section; minus
    (B) The institution's portion of the $5 billion deduction, 
determined according to paragraph (i) of this section; provided, 
however, that an institution's special assessment base cannot be 
negative.
    (g) Special assessment during extended special assessment period--
(1) Shortfall amount. The shortfall amount is the amount of losses to 
the Deposit Insurance Fund, as reviewed and revised as of the last 
quarterly assessment period of 2025, that exceed the aggregate amount 
of special assessments collected during the initial special assessment 
period.
    (2) Extended special assessment period. If there is a shortfall 
amount after the last quarterly assessment period of 2025, the special 
assessment period will be extended, with at least 30 day notice to 
insured depository institutions, to collect the shortfall amount. The 
length of the extended special assessment period shall be the

[[Page 32708]]

minimum number of quarters required to recover the shortfall amount at 
a rate under paragraph (g)(3) of this section that is at or below 3.13 
basis points per quarter.
    (3) Assessment rate during extended special assessment period. The 
assessment rate during the extended special assessment period will be 
the shortfall amount, divided by the total amount of uninsured deposits 
for the quarter ended December 31, 2022, adjusted for mergers, 
consolidation, and termination of insurance as of the last quarterly 
assessment period of 2025, minus the $5 billion deduction for each 
insured depository institution or each institution's portion of the $5 
billion deduction, determined according to paragraph (i) of this 
section, divided by the minimum number of quarters that results in the 
quarterly rate being no greater than 3.13 basis points.
    (4) Assessment base during the extended special assessment period. 
(i) The special assessment base for an insured depository institution 
during the extended special assessment period that has no affiliated 
insured depository institution shall equal:
    (A) The institution's uninsured deposits, as described in paragraph 
(h) of this section, adjusted for mergers, consolidation, and 
termination of insurance as of the last assessment period of 2025; 
minus
    (B) The $5 billion deduction; provided, however, that an 
institution's special assessment base cannot be negative.
    (ii) The special assessment base for an insured depository 
institution during the extended special assessment period that has one 
or more affiliated insured depository institutions shall equal:
    (A) The institution's uninsured deposits, as described in paragraph 
(h) of this section, adjusted for mergers, consolidation, and 
termination of insurance as of the last assessment period of 2025; 
minus
    (B) The institution's portion of the $5 billion deduction, 
determined according to paragraph (i) of this section; provided, 
however, that an institution's special assessment base cannot be 
negative.
    (h) Uninsured deposits. For purposes of this section, the term 
``uninsured deposits'' means an institution's estimated uninsured 
deposits as reported in Memoranda Item 2 on Schedule RC-O, Other Data 
For Deposit Insurance Assessments in the Consolidated Reports of 
Condition and Income (Call Report) or Report of Assets and Liabilities 
of U.S. Branches and Agencies of Foreign Banks (FFIEC 002) for the 
quarter ended December 31, 2022, reported as of the date this rule is 
adopted. Institutions with less than $1 billion in total assets as of 
June 30, 2021, were not required to report such items; therefore, for 
purposes of calculating special assessments or a shortfall special 
assessment under this section, the amount of uninsured deposits for 
such institutions as of December 31, 2022, is zero. Amendments to an 
institution's Call Report or FFIEC 002 subsequent to the date this rule 
is adopted by the Board do not affect the amount of the institution's 
uninsured deposits for purposes of calculating special assessments or 
shortfall special assessments under this section.
    (i) Special assessment base--institution's portion of the $5 
billion deduction. For purposes of paragraphs (f)(3)(ii)(B) and 
(g)(4)(ii)(B) of this section, an institution's portion shall equal the 
ratio of the institution's uninsured deposits to the sum of the 
institution's uninsured deposits and the uninsured deposits of all of 
the institution's affiliated insured depository institutions, 
multiplied by $5 billion.
    (j) Affiliates. 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).
    (k) Effect of mergers, consolidations, and other terminations of 
insurance on special assessments--(1) Final quarterly certified invoice 
for acquired institution. The surviving or resulting insured depository 
institution in a merger or consolidation shall be liable for any unpaid 
special assessments or final shortfall special assessments outstanding 
at the time of the merger or consolidation on the part of the 
institution that is not the resulting or surviving institution 
consistent with Sec.  327.6.
    (2) Special assessment for quarter in which the merger or 
consolidation occurs. If an insured depository institution is the 
surviving or resulting institution in a merger or consolidation or 
acquires all or substantially all of the assets, or assumes all or 
substantially all of the deposit liabilities, of an insured depository 
institution, then the surviving or resulting insured depository 
institution or the insured depository institution that acquires such 
assets or assumes such deposit liabilities, shall be liable for the 
acquired institutions' special assessment, if any, from the quarter of 
the acquisition through the remainder of the initial or extended 
special assessment period, including any final shortfall special 
assessments.
    (3) Other termination. When the insured status of an institution is 
terminated, and the deposit liabilities of such institution are not 
assumed by another insured depository institution, special assessments 
and any shortfall special assessments shall be paid consistent with 
Sec.  327.6(c).
    (l) One-time final shortfall special assessment. If the aggregate 
amount of special assessments collected during the initial or extended 
special assessment period(s) do not meet or exceed the losses to the 
Deposit Insurance Fund, as calculated after the receiverships resulting 
from the March 12, 2023 systemic risk determination are terminated, 
insured depository institutions shall pay a one-time final shortfall 
special assessment in accordance with this paragraph.
    (1) Notification of final shortfall special assessment. The FDIC 
shall notify each insured depository institution of the amount of such 
institution's final shortfall special assessment no later than 45 days 
before such shortfall assessment is due.
    (2) Aggregate final shortfall special assessment amount. The 
aggregate amount of the final shortfall special assessment imposed 
across all insured depository institutions shall equal the losses to 
the Deposit Insurance Fund, as of termination of the receiverships to 
which the March 12, 2023, systemic risk determination applied, minus 
the aggregate amount of special assessments collected under this 
section through initial and extended special assessment periods.
    (3) Final shortfall special assessment rate. The final shortfall 
special assessment rate shall be the aggregate final shortfall special 
assessment amount divided by the total amount of uninsured deposits for 
the quarter ended December 31, 2022, adjusted for mergers, 
consolidation, and termination of insurance as of the assessment period 
preceding the final shortfall special assessment period, minus the $5 
billion deduction for each insured depository institution or each 
institution's portion of the $5 billion deduction, determined according 
to paragraph (i) of this section.
    (4) Final shortfall special assessment base. (i) The final 
shortfall special assessment base for an insured depository institution 
that has no affiliated insured depository institution shall equal:
    (A) The institution's uninsured deposits, as described in paragraph 
(h) of this section, adjusted for mergers, consolidation, and 
termination of

[[Page 32709]]

insurance as of the assessment period preceding the final short fall 
assessment period; minus
    (B) The $5 billion deduction; provided, however, that an 
institution's final shortfall special assessment base cannot be 
negative.
    (ii) The final shortfall special assessment base for an insured 
depository institution that has one or more affiliated insured 
depository institutions shall equal:
    (A) The institution's uninsured deposits, as described in paragraph 
(h) of this section, adjusted for mergers, consolidation, and 
termination of insurance as of the assessment period preceding the 
final shortfall assessment period; minus
    (B) The institution's portion of the $5 billion deduction, 
determined according to paragraph (i) of this section; provided, 
however, that an institution's final shortfall special assessment base 
cannot be negative.
    (5) Calculation of final shortfall special assessment. An insured 
depository institution's final shortfall special assessment shall be 
calculated by multiplying the final shortfall special assessment rate 
by the institution's final shortfall special assessment base as defined 
in paragraph (l)(4) of this section.
    (6) One-time final special assessment. The one-time final shortfall 
special assessment shall be collected on a one-time quarterly basis 
after final losses to the Deposit Insurance Fund are determined after 
termination of the receiverships to which the March 12, 2023, systemic 
risk determination applied.
    (7) Payment, invoicing, and mergers. Paragraphs (d), (e), and (k) 
of this section are applicable to the one-time shortfall special 
assessment.
    (m) Request for revisions. An insured depository institution may 
submit a written request for revision of the computation of any special 
assessment or shortfall special assessment pursuant to this part 
consistent with Sec.  327.3(f).
    (n) Special assessment collection in excess of losses. Any special 
assessments collected under this section that exceed the losses to the 
Deposit Insurance Fund, as of termination of the receiverships to which 
the March 12, 2023, systemic risk determination applied, shall be 
placed in the Deposit Insurance Fund.
    (o) Rule of construction. Nothing in this section shall prevent the 
FDIC from imposing additional special assessments as required to 
recover current or future losses to the Deposit Insurance Fund 
resulting from any systemic risk determination under 12 U.S.C. 
1823(c)(4)(G).

Federal Deposit Insurance Corporation.

    By order of the Board of Directors.

    Dated at Washington, DC, on May 11, 2023.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2023-10447 Filed 5-19-23; 8:45 am]
BILLING CODE 6714-01-P