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FDIC Scrambles to Cover Losses from 3 Large Bank Failures, Washington DC, 2024
The Federal Deposit Insurance Corporation (FDIC) is working to restore its Deposit Insurance Fund (DIF) after suffering a $19.6 billion loss due to the failure of three large regional banks in 2023. According to a semiannual update released by the FDIC Board of Directors, the DIF reserve ratio has increased by 6 basis points, from 1.15 percent as of December 31, 2023, to 1.21 percent as of June 30, 2024.
FDIC Chairman Martin J. Gruenberg attributed the increase in the DIF balance to assessments earned, which reflect a 2 basis point increase in initial base assessment rate schedules that became effective at the beginning of 2023. However, Gruenberg noted that had the rate increase not been in effect prior to the bank failures, the Board would have had to consider a more sizeable rate increase to restore the reserve ratio to 1.35 percent.
The FDIC Board established the Restoration Plan to restore the DIF reserve ratio to at least 1.35 percent by September 30, 2028. The Plan maintained the assessment rate schedules in place at the time, but was amended in June 2022 to increase deposit insurance assessment rates by 2 basis points for all insured depository institutions, effective the first quarterly assessment period of 2023.
The FDIC Board has also maintained the designated reserve ratio for the DIF at 2 percent for 2025, which is designed to increase the likelihood that the DIF will remain positive throughout periods of significant losses due to bank failures and reduce the risk that the FDIC might need to consider a pro-cyclical assessment rate increase when IDIs can least afford to pay higher assessment rates.
The FDIC’s efforts to restore the DIF come as the industry faces increasing regulatory scrutiny and pressure to improve financial stability. The agency’s Semiannual Update provides a comprehensive overview of the DIF’s financial situation and the steps being taken to restore it.
In a statement, FDIC Chairman Martin J. Gruenberg said, “The increase in the DIF balance was primarily driven by assessments earned, which reflect the 2 basis point increase in initial base assessment rate schedules that became effective at the beginning of 2023.”
The FDIC’s Deposit Insurance Fund Restoration Plan Semiannual Update is available on the agency’s website.
Key Facts
- Agency: FDIC
- Category: Fraud & Financial Crimes
- Source: Official Source â†â€â€ÂÂÂ
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