The designated reserve ratio (DRR), or target reserve ratio, for the federal fund that insures deposits in banks in 2021 will remain where it’s been since 2010 – at 2%, the Federal Deposit Insurance Corp. (FDIC) said in a notice slated for publication in Monday’s Federal Register.
The DRR for the FDIC Deposit Insurance Fund (DIF) is a long-term target the FDIC has set based on analysis of previous crises. The agency, on a page on its website explaining the ratio, says it views this target ratio as “the minimum level needed to withstand future crises of the magnitude of past crises.”
The DIF is facing pressure from deposit growth during the COVID-19 pandemic. In August, the FDIC reported that the DIF reserve ratio fell from 1.39% in the first quarter to 1.3%, which is below the required minimum level of 1.35%. The FDIC, addressing this trend a month before the National Credit Union Administration (NCUA) would announce its own deposit (share) insurance fund’s drop to 1.22%, said it believed deposit growth would normalize in coming quarters and that the reserve ratio would rise above 1.35% without any change in assessment rates “in the near-term.”
The FDIC published a restoration plan in September that provided for continued monitoring but no change, for now, in assessment rates. “While subject to considerable uncertainty, it is the FDIC’s view that raising assessments based on two quarters of extraordinary insured deposit growth would be premature,” the agency said.
Designated reserve ratio (Federal Register notice)
RR: No changes to assessment rates as agency adopts restoration plan for diluted bank deposit insurance fund (Sept. 15, 2020)