FDIC Approves New Risk-Based Premiums for Deposit Insurance

Basel II
GuidanceFederal Deposit Insurance Corporation (FDIC)Risk Management

The Federal Deposit Insurance Corporation (FDIC) today adopted final regulations that implement the Federal Deposit Insurance Reform Act of 2005 passed by Congress earlier this year to create a stronger and more stable insurance system. Among the final regulations is a new rule on the risk-based assessment system that will enable the FDIC to more closely tie each bank's premiums to the risk it poses to the deposit insurance fund. In addition, the FDIC has new flexibility to manage the deposit insurance fund's reserve ratio within a range, which in turn will help prevent sharp swings in assessment rates that were possible under the design of the former system.

"Throughout the FDIC's push for deposit insurance reform, our goals have been to provide for long-term stability and less procyclicality in the deposit insurance system," said FDIC Chairman Sheila C. Bair. "This new system will enable the FDIC to achieve our goals, and also will add incentives for good risk management at insured institutions."

> Read entire regulation (log in required - registration is free)