Michael P. Smith
President
August 16, 2006
Mr. Robert E. Feldman
Executive Secretary
ATTN: Comments
Federal Deposit Insurance Corporation
RE: Assessments-RIN-3064-AD03
Dear Mr. Feldman:
In response to the notice of
proposed rule making published in the May 18 Federal Register, The New York
Bankers Association is submitting these comments on the proposed amendments to
the deposit insurance assessment system designed to make the system react more
quickly and accurately to changes in institutions’ risk profiles.
The proposal would provide for the collection of assessments after the end of
each quarter, rather than in advance, and make other changes designed to
reflect actual, rather than projected, deposits subject to assessment.
Our Association supports the proposal with two modifications. The New
York Bankers Association is comprised of the money center, regional and
community commercial banks and thrift institutions doing business in
This proposal arises under the
Federal Deposit Insurance Reform Act of 2005 (the Act) and is one of a number
designed to upgrade and improve the deposit insurance system. The Act,
among other provisions, requires the Federal Deposit Insurance Corporation (The
“Corporation” or FDIC”) to revise its current risk-based
premium structure. In preparation for the revision, this proposal is
designed to provide the Corporation with more accurate and current information
on the insured deposit base subject to assessment. Among the proposed
changes designed to improve the timeliness of assessment information, the
proposal would require institutions in excess of $300 million dollars in
deposits to use average daily balances in determining their assessment bases,
eliminate the float deduction, simplify rules governing institutions that go
out of business, and require newly insured institutions, for the first time, to
be assessed for the assessment period during which they become insured.
The proposal would also alter the assessment schedule, providing quarterly
assessments, rather than the semi-annual assessments that have been statutorily
required since the Corporation was created (although the effect has been a
quarterly payment system, because assessments were collected in two
installments). Other accounting and reporting changes are designed to
reflect these proposals.
Our Association believes that the
proposed amendments reflect changes in technology that will permit insured
institutions to provide more timely and accurate assessment information to the
FDIC without creating significant additional paperwork, accounting or reporting
burdens. In addition, because most of the changes proposed reflect
changes in timing of information reported rather than overall deposit changes,
they should not impose additional assessment burdens on insured institutions.
Importantly, the proposal should eliminate sources of friction between the FDIC
and insured institutions by allowing the Corporation to assess deposit
insurance premiums more accurately.
Our Association would suggest two
minor modifications in the proposal that will ensure that smaller banks are not
inadvertently and unnecessarily burdened by it. First, we would suggest
that the cut-off for institutions required to use average daily balances,
rather than quarter-end balances, in reporting their insured deposits be
increased from $300 million to $1 billion. This increase would be
consistent with other FDIC regulations and reporting requirements (such as the
threshold for streamlined CRA examinations) and would affect only a very small
proportion of insured deposits. We would suggest that banks below $1
billion be authorized to file either on the basis of average daily balances or
end-of-quarter balances, at their option, in order to encourage a transition to
the use of average daily balances.
In addition, we would suggest that
those institutions that continue to file on the basis of end-of-quarter
deposits be allowed a continued deduction for float. Filing on an average
daily balance basis should account for continued float in the system, but those
who file on an end-of-quarter basis, as the corporation’s proposal
recognizes, continue to have some level of float in their reported
numbers. We would suggest that FDIC determine a level of float consistent
with current practices (recognizing that the current 16 2/3% float deduction
appears to be outdated) and allow end-of-quarter filers to make use of it.
With these modifications, the New
York Bankers Association supports this proposal and urges that it be adopted.
Sincerely,
Michael P. Smith