The federal bank deposit insurance fund is still expected to reach its statutory minimum of 1.35% of insured deposits ahead of its statutory deadline of Sept. 30, 2028, agency staff said Thursday.
The Federal Deposit Insurance Corp. (FDIC) Board, meeting in open session, received a briefing on the Deposit Insurance Fund (DIF) restoration plan that was put in place in 2020 and acted on the fund’s designated reserve ratio (DRR) for 2025. The board approved continuing the current DRR of 2%, a level that has been unchanged since it was first set for 2011. Staff meanwhile said the fund remains on track to achieve its statutory minimum ratio of 1.35% ahead of its statutory deadline of Sept. 30, 2028.
During a briefing, staff told the agency board that since the semiannual update this April, the DIF reserve ratio increased by 6 basis points – from 1.15% as of Dec. 31, 2023, to 1.21% as of this June 30 – due to growth in the fund balance and slower-than-average insured-deposit growth.
Staff also indicated that the fund, if conditions are right, could return to 1.35% sometime in 2026.
The board adopted the DIF restoration plan in 2020 after the fund’s reserve ratio (ratio of the fund balance to insured deposits) had dropped to 1.3%; federal law requires such a plan when the fund falls below its statutory minimum. It revised the plan in 2022, when projections suggested the fund would not meet its required minimum on time, and increased deposit insurance assessment rates by 2 basis points for all insured institutions. The increase became effective in the first quarterly assessment period of 2023.
By June 2023, the DIF ratio had dropped to 1.11% (down from 1.25% at year-end 2022). The FDIC attributed that to increased loss provisions, including for three bank failures in 2023 (of Silicon Valley Bank [SVB] of Santa Clara, Calif., and Signature Bank of New York, N.Y., in 2023 and First Republic Bank of San Francisco in May), coupled with strong insured deposit growth. To address the failures, the board last November approved a special assessment on 114 banks having large amounts of uninsured deposits.
FDIC Board of Directors Releases Semiannual Update on Deposit Insurance Fund Restoration Plan