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FDIC raises reserve ratio to 2 percent of deposits


The board of directors of the Federal Deposit Insurance Corp. (FDIC) on Tuesday voted on a final rule to set the insurance fund’s designated reserve ratio (DRR) at 2 percent of estimated insured deposits.

The final rule, part of a comprehensive fund management plan proposed by the board on Oct. 19, is designed to provide insured institutions with moderate, steady assessment rates and to maintain a positive fund balance even during severe economic times, FDIC Chairman Sheila Bair said in a press release.

“Given previous statutory limitations on the ability of the FDIC to build reserves in excess of 1.25 percent, our resources heading into the financial crisis were woefully inadequate,” Bair said. “This new rule will allow us to better prepare for the future. It will also give the industry greater certainty around the premium structure.”

The Dodd-Frank Wall Street Reform and Consumer Protection Act set a minimum DRR of 1.35 percent, and left unchanged the requirement that the FDIC board set a DRR annually. The board must set the DRR according to the following factors: risk of loss to the insurance fund; economic conditions affecting the banking industry; the prevention of sharp swings in the assessment rates; and any other factors it deems important.

The analysis showed that in order to maintain a positive fund balance and steady, predictable assessment rates, the reserve ratio must be at least 2 percent as a long-term minimum goal.

The FDIC board expects to act on the remaining aspects of the comprehensive plan — assessment rates and assessment dividends — in the first quarter of next year.

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