WASHINGTON–Travis Hill, the acting chairman of the Federal Deposit Insurance Corp., wants his agency to reconsider how it calculates the Deposit Insurance Fund’s reserve ratio.

The FDIC has also rescinded an earlier Statement of Policy. 

In a released statement, Hill said he favors using the assessment base – primarily total liabilities (or total consolidated assets minus tangible equity) – as the denominator in the formula rather than insured deposits.

“The FDIC moved away from charging assessments on the basis of insured deposits years ago, creating a mismatch in how assessments are charged and how the health of the DIF is measured,” Hill said in his statement.

The Formula

Under the FDIC’s rules, banks pay into the DIF every quarter. Banks with less than $10 billion in assets are assigned rates using a formula that takes supervisory ratings and financial data into account. For larger institutions, the gauge is a mix of supervisory ratings, stress resilience metrics and the potential impact their failure could have on the FDIC.

By law, the DIF must hold a minimum reserve of 1.35% of the total amount of insured deposits systemwide, although the ratio is currently short of that threshold, standing at 1.28%, which is similar to the ratio of the National Credit Union Share Insurance Fund (NCUSIF). 

Five years ago, the FDIC launched a plan to restore the reserve ratio to 1.35% by 2028, with the agency saying it believes it could hit the threshold by 2026.

Statement of Policy Rescinded

Separately, the FDIC also issued a final rule rescinding a statement of policy that would have more closely scrutinized mergers creating banks with more than $100 billion in assets. Under the earlier policy, banks with $50 billion or more would have more closely considered the impact of mergers on local communities.