The Federal Deposit Insurance Corporation board voted not to raise deposit insurance assessments on banks in order to recapitalize its insurance fund. The FDIC board, instead, will continue monitoring the situation, as the staff expect the pandemic-related surge in deposits as the reason the Deposit Insurance Fund reserve ratio fell below its statutory minimum of 1.35 percent, despite the DIF reaching a record level of $119 billion.
“As the effects of the pandemic on the banking industry and the economic outlook continue to become more apparent, staff will reassess its analysis of insured deposit growth, potential losses, and other factors that affect the reserve ratio,” an FDIC staff memo said.
The law requires the FDIC to implement a plan to recapitalize the DIF within eight years when it falls below its minimum, which normally involves raising the assessment schedules. While the ratio declined from 1.38 percent in March 2020 to 1.3 percent last June, “the growth in insured deposits associated with the pandemic may recede as depositor behavior returns to normal and individuals and businesses redirect deposits toward consumption and higher-yielding investments,” the memo said.
The board decision recognized that the banking sector remains strong, “with robust levels of capital and liquidity, after serving as a source of strength throughout the pandemic last year,” said Jelena McWilliams, the FDIC chair.