83 FR 14565 - Assessment Regulations

FEDERAL DEPOSIT INSURANCE CORPORATION

Federal Register Volume 83, Issue 66 (April 5, 2018)

Page Range		14565-14568
FR Document		2018-06920
The FDIC is making technical amendments to its rules governing deposit insurance assessments. The FDIC believes that the amendments will have little or no effect on the deposit insurance assessments for insured depository institutions (IDIs), and any potential effect would result in lower assessments. The first technical amendment makes clear that small bank assessment credits will be applied for assessment periods in which the reserve ratio of the Deposit Insurance Fund (DIF) is at least 1.38 percent instead of, as currently provided, just when the ratio exceeds 1.38 percent. The second technical amendment removes a data item from the assessment regulations that most small banks can no longer report on the Consolidated Report of Income and Condition (Call Report). The third technical amendment re-incorporates, for assessment purposes, the capital definitions and ratio thresholds used for prompt corrective action (PCA) that were inadvertently removed in a 2016 rulemaking.
Federal Register, Volume 83 Issue 66 (Thursday, April 5, 2018)
[Federal Register Volume 83, Number 66 (Thursday, April 5, 2018)]
[Rules and Regulations]
[Pages 14565-14568]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-06920]



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Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 

========================================================================


Federal Register / Vol. 83, No. 66 / Thursday, April 5, 2018 / Rules 
and Regulations

[[Page 14565]]



FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 327


Assessment Regulations

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule; technical amendments.

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SUMMARY: The FDIC is making technical amendments to its rules governing 
deposit insurance assessments. The FDIC believes that the amendments 
will have little or no effect on the deposit insurance assessments for 
insured depository institutions (IDIs), and any potential effect would 
result in lower assessments. The first technical amendment makes clear 
that small bank assessment credits will be applied for assessment 
periods in which the reserve ratio of the Deposit Insurance Fund (DIF) 
is at least 1.38 percent instead of, as currently provided, just when 
the ratio exceeds 1.38 percent. The second technical amendment removes 
a data item from the assessment regulations that most small banks can 
no longer report on the Consolidated Report of Income and Condition 
(Call Report). The third technical amendment re-incorporates, for 
assessment purposes, the capital definitions and ratio thresholds used 
for prompt corrective action (PCA) that were inadvertently removed in a 
2016 rulemaking.

DATES: Effective April 5, 2018.

FOR FURTHER INFORMATION CONTACT: Nefretete Smith, Counsel, Legal 
Division, (202) 898-6851 or [email protected]; or Ashley Mihalik, 
Senior Policy Analyst, Banking and Regulatory Policy Section, Division 
of Insurance and Research, (202) 898-3793 or [email protected].

SUPPLEMENTARY INFORMATION:

I. Technical Amendment Regarding Use of Credits for Small Banks

    The FDIC is correcting a drafting error regarding a provision of 
the deposit insurance assessment regulations that governs the use of 
assessment credits for small banks.\1\ Under the FDIC's assessment 
regulations, the FDIC will provide small banks with assessment credits 
for the portion of their regular assessments that contribute to the 
increase in the DIF reserve ratio from 1.15 percent to 1.35 percent. 
The regulatory text further states that the FDIC will apply assessment 
credits to a small bank's deposit insurance assessments for assessment 
periods in which the reserve ratio of the DIF exceeds 1.38 percent. 
Consistent with the preamble language of the final rule in which this 
provision was adopted (the Minimum Reserve Ratio final rule \2\), the 
regulatory text should state that small bank assessment credits will be 
applied for assessment periods in which the DIF reserve ratio is at 
least 1.38 percent--that is, at or above 1.38 percent and not just 
above 1.38 percent.
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    \1\ As used herein, the term ``bank'' is synonymous with 
``insured depository institution.'' Generally, for deposit insurance 
assessment purposes, a ``small bank'' is an insured depository 
institution with less than $10 billion in total consolidated assets. 
See 12 CFR 327.8(e).
    \2\ 81 FR 16059 (Mar. 25, 2016). The final rule implemented 
section 334 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act, which: (1) Raises the minimum reserve ratio for the 
DIF to 1.35 percent (from the former minimum of 1.15 percent); (2) 
requires that the DIF reserve ratio reach 1.35 percent by September 
30, 2020; and (3) requires that, in setting assessments, the FDIC 
``offset the effect of [the increase in the minimum reserve ratio 
from 1.15 percent to 1.35 percent] on insured depository 
institutions with total consolidated assets of less than 
$10,000,000,000.''
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    The FDIC also is making a technical edit to update a cross 
reference in the same subsection. Currently, the subsection refers to 
section 327.9. However, as of June 30, 2016, Sec.  327.9 ceased to be 
in effect, and the operative section is now Sec.  327.16. As a result, 
the reference is being updated to refer to Sec.  327.16.

II. Technical Amendment Regarding the Loan Mix Index

    The Loan Mix Index (LMI), which measures the relative riskiness of 
a bank's loan portfolio, is one of the measures used in the assessment 
regulations to calculate an established small bank's \3\ assessment 
rate.\4\ The LMI includes Loans to Foreign Governments as a loan 
category.
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    \3\ Generally, an established small bank is one that has been 
federally insured for five years or more. See 12 CFR 327.8(k).
    \4\ See 81 FR 32180, 32186-32188 (May 20, 2016).
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    Effective March 31, 2017, as part of an initiative to reduce Call 
Report burden for community banks, the Federal Financial Institutions 
Examination Council (FFIEC) added a new and streamlined Call Report 
form (FFIEC 051) for banks that have less than $1 billion in total 
assets and no foreign offices. The FFIEC also revised the general Call 
Report form (FFIEC 041) for banks with no foreign offices. As part of 
that initiative, the FFIEC removed the line item for reporting loans to 
foreign governments from Call Report form FFIEC 041 and excluded the 
item from the new Call Report form FFIEC 051. The Call Report form for 
banks with both foreign and domestic offices (FFIEC 031), however, 
still includes a line item for reporting loans to foreign governments.
    Because most small banks are no longer able to report these loans 
as a separate item on the Call Report, the FDIC is removing Loans to 
Foreign Governments from the calculation of the LMI in the established 
small bank deposit insurance pricing methodology.

III. Technical Amendments Regarding Definitions of Capital Categories

    The FDIC is making technical amendments to reinsert PCA capital 
ratios and ratio thresholds used to define capital categories (i.e., 
well-capitalized, adequately capitalized, under-capitalized) in the 
assessment regulations. The definitions of capital categories for 
deposit insurance assessment purposes were inadvertently deleted in a 
2016 rulemaking, known as the Small Bank Pricing rule.\5\ Currently the 
deposit insurance assessment system uses capital categories to 
calculate two ratios that affect assessment rates.\6\
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    \5\ The Small Bank Pricing rule refined the deposit insurance 
pricing methodology for established small banks. See 81 FR 32180 
(May 20, 2016). The Small Bank Pricing rule made no changes to the 
way assessments are calculated for new small banks, keeping in place 
the definitions of capital categories adopted by the FDIC in 2014.
    \6\ The two ratios are the brokered deposit ratio and the 
brokered deposit adjustment. The brokered deposit ratio is one of 
the measures used to determine the assessment rate for an 
established small bank. An established small bank that has a CAMELS 
composite rating of 1 or 2 and is well capitalized may deduct 
reciprocal deposits from the brokered deposit ratio; otherwise, it 
cannot deduct these deposits. See 12 CFR 327.16(a)(1)(ii). The 
brokered deposit adjustment applies only to large banks and highly 
complex institutions that are less than well capitalized or have a 
CAMELS composite rating of 3, 4, or 5. The brokered deposit 
adjustment increases a bank's assessment rate if it has high levels 
of brokered deposits. See 12 CFR 327.16(e)(3). The deposit insurance 
assessment system also uses capital categories to calculate 
assessments for new small banks (i.e., a small bank that has been 
federally insured for less than five years).

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[[Page 14566]]

    Since the implementation of the risk-based deposit insurance 
assessment system in 1993, the FDIC has used the same capital ratios 
and ratio thresholds to define capital categories for deposit insurance 
assessment purposes as those used for PCA purposes, except that capital 
categories defined for assessment purposes rely solely on capital 
ratios. When the FDIC implemented the risk-based deposit insurance 
assessment system in 1993, it chose not to incorporate other 
supervisory information, such as enforcement orders, used to define 
capital categories for PCA purposes because this information was more 
appropriately considered with regard to supervisory evaluations, which 
were (and continue to be) a separate component of assessment 
pricing.\7\ Thus, while the current PCA standards in the capital rules 
\8\ permit a bank to be reclassified to a lower capital category if the 
bank is subject to certain enforcement orders or other specific 
supervisory findings (even if the bank meets the PCA capital ratio 
requirements for a higher capital category),\9\ such a reclassification 
would be inconsistent with the FDIC's longstanding practice of relying 
solely on capital ratios to define capital categories for deposit 
insurance assessment purposes.
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    \7\ See 57 FR 45263, 45279 (Oct. 1, 1992). ``These assessment 
definitions reflect only the capital ratio standards from the 
proposed PCA definitions, which include other elements as well . . . 
These elements are not incorporated in the definitions of the 
capital groups for risk-based assessment purposes. In the risk-based 
assessment context, these elements are more appropriately considered 
with regard to supervisory subgroup determinations.''
    \8\ See 12 CFR 6.4, 12 CFR 208.43, and 12 CFR 324.403.
    \9\ For PCA purposes, an IDI that otherwise meets the ratio 
threshold requirements for the well capitalized PCA category: (1) 
Will be classified as an adequately capitalized if it is subject to 
a written agreement, order, capital directive, or prompt corrective 
action directive to meet and maintain a specific capital level for 
any capital measure; and (2) may be reclassified as adequately 
capitalized, if, following notice and an opportunity for hearing, 
the bank is determined to be unsafe or unsound or has failed to 
correct a less-than-satisfactory rating for asset quality, 
management, earnings, or liquidity. See 12 CFR 6.4(c)(1)(v) and (e), 
12 CFR 208.43(b)(1)(v) and (c), and 12 CFR 324.403(b)(1)(v) and (d).
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    To remedy the error that resulted from the Small Bank Pricing rule, 
the FDIC is amending its regulations to reincorporate the PCA capital 
ratios and ratio thresholds into the deposit insurance assessment 
system. The technical amendment aligns the regulatory text with the 
FDIC's intent to ``maintain[ ] the consistency between capital 
evaluations for deposit insurance assessment purposes and capital 
ratios and ratio thresholds for PCA purposes that has existed since the 
creation of the risk-based assessment system over 20 years ago.'' \10\ 
The technical amendment will re-incorporate the PCA capital ratios and 
ratio thresholds for defining capital categories in a manner that make 
them applicable to all banks (other than insured branches of foreign 
banks), and will continue to rely solely on capital ratios to define 
capital categories for deposit insurance assessment purposes.\11\
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    \10\ 79 FR 70427, 70429 (Nov. 26, 2014) (the Capital Conforming 
Amendments final rule). In 2014, the FDIC published the Capital 
Conforming Amendments final rule that, among other things, revised 
the ratios and ratio thresholds relating to definitions of capital 
categories for deposit insurance assessment purposes to conform to 
the PCA capital ratios and ratio thresholds adopted by the FDIC, 
Office of the Comptroller of the Currency, and the Board of 
Governors of the Federal Reserve System in 2013. See 79 FR 20754 
(Apr. 14, 2014), 78 FR 55340 (Sept. 10, 2013), and 78 FR 62018 (Oct. 
11, 2013).
    \11\ Current assessment regulations generally incorporate PCA 
capital standards for new small banks, but, as the result of an 
error, they do not incorporate for new small banks the PCA standard 
that an advanced approaches bank will be considered undercapitalized 
if it has a supplementary leverage ratio (SLR) of less than 3.0 
percent. As defined in the PCA capital rules, an advanced approaches 
bank, including one that is a new small bank, will be considered 
undercapitalized if its SLR is below 3.0 percent, even if all other 
ratios meet the ratio thresholds for well capitalized or adequately 
capitalized. See 12 CFR 6.4(c)(3)(iv)(B), 208.43(b)(3)(iv)(B), and 
324.403(b)(3)(v).
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IV. Economic Effects

A. Technical Amendments Regarding Use of Credits for Small Banks

    In the preamble to the Minimum Reserve Ratio final rule, which is 
incorporated here by reference, the FDIC described its anticipated 
economic effects.\12\ The economic effects of that final rule are 
unchanged by the amendments to the regulatory text. No institutions are 
presently affected by correcting the regulatory text to state that 
small bank assessment credits will be applied for assessment periods in 
which the DIF reserve ratio is at least 1.38 percent because the 
reserve ratio has not yet reached that level. These amendments avoid 
any ambiguity regarding when the FDIC will begin applying the small 
bank credits, and will not affect the amount of credits to be awarded 
any small bank. In the event that the DIF reserve ratio is 1.38 percent 
at the end of a quarter, then these amendments will effectuate the 
FDIC's existing intent to permit small banks to use credits in that 
quarter.
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    \12\ See 81 FR at 16066-068.
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B. Technical Amendment to the Loan Mix Index

    The FDIC estimates that the removal of Loans to Foreign Governments 
from the LMI will have virtually no economic effect. Because the FFIEC 
removed the line item for reporting loans to foreign governments from 
Call Report form FFIEC 041 and excluded the item from the new Call 
Report form FFIEC 051, the inclusion of loans to foreign governments in 
the LMI no longer helps to differentiate the relative riskiness of a 
bank's loan portfolio for the purposes of calculating its risk-based 
assessment rate. Further, based on FDIC data, from 2011 through 2016, 
when all banks could report the item, fewer than 10 small banks 
reported a balance for loans to foreign governments and official 
institutions in a given year. During 2017, only one bank out of the 
5,746 established small banks (and out of 26 small banks that filed the 
FFIEC 031) reported a balance for Loans to Foreign Governments, and the 
resulting effect on the bank's assessment rate was immaterial. 
Therefore, for any bank that holds these loans and files the FFIEC 031, 
the amendment would either have no effect or would reduce the bank's 
assessment rate. Removal of the loan category would not affect banks 
that file FFIEC 041 or 051 because they have not been able to report 
loans in this category as a separate item since December 31, 2016.

C. Technical Amendments Regarding Definitions of Capital Categories

    The FDIC expects that these technical amendments will not have any 
economic effect. In practice and consistent with the FDIC's intent when 
it adopted the Capital Conforming Amendments final rule, the FDIC has 
relied solely on capital ratios to determine a bank's capital category 
for deposit insurance assessment purposes. Also consistent with 
longstanding practice, the FDIC has not considered enforcement orders 
or other specific supervisory findings that might reclassify a bank to 
a lower capital category. Thus, the technical amendments clarify that 
any bank that meets the PCA ratio thresholds in the capital rules will 
not be reclassified for

[[Page 14567]]

assessment purposes to a lower capital category for other 
reasons.^{13 14}
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    \13\ A bank that meets the quantitative measures for the well 
capitalized PCA category is considered less than well capitalized 
for PCA purposes, for example, if it is subject to a written 
agreement, order, capital directive, or prompt corrective action 
directive to meet and maintain a specific capital level for any 
capital measure or the bank had been determined to be unsafe or 
unsound or had failed to correct a less-than-satisfactory rating for 
asset quality, management, earnings, or liquidity.
    \14\ Consistent with the capital rules and the FDIC's intent in 
the Capital Conforming Amendments final rule, the amendments also 
make clear that any advanced approaches bank that is a new small 
bank will be undercapitalized if the bank has an SLR below 3.0 
percent, even if all other capital ratios meet the ratio thresholds 
for well capitalized or adequately capitalized. Based on Call Report 
data as of December 31, 2017, the most recent date for which data is 
available, no advanced approaches bank will be affected by this 
clarification.
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V. Regulatory Analysis and Procedure

A. Administrative Procedure Act and Effective Date

    Under 5 U.S.C. 553(b)(B) of the Administrative Procedure Act (APA), 
an agency may, for good cause, find (and incorporate the finding and a 
brief statement of reasons therefore in the rules issued) that notice 
and public comment procedure thereon are impracticable, unnecessary, or 
contrary to the public interest. The FDIC finds that notice and comment 
procedures are unnecessary under 5 U.S.C. 553(b)(B), as this rule 
consists only of technical amendments that are minor and will have no 
substantive effect on the public. First, regarding the technical 
amendments on the use of small bank credits, this rule aligns the 
regulatory text with the intent of that final rule. Second, regarding 
the technical amendment to the LMI in the small bank pricing 
methodology, the amendment in this rule aligns with FFIEC's changes to 
Call Report forms to reduce reporting burden for community banks, and 
is immaterial because the inclusion of loans to foreign governments in 
the LMI currently affects only one bank's assessment rate (resulting in 
an insignificant amount). Moreover, these loans no longer help to 
differentiate the relative riskiness of an established small bank's 
loan portfolio. Third, regarding the technical amendments relating to 
definitions of capital categories, this rule aligns the regulatory text 
with the intent of the Capital Conforming Amendments and Small Bank 
Pricing final rules to incorporate the PCA capital ratios and ratio 
thresholds in the capital rules into the definitions of capital 
categories used in the deposit insurance assessment system, but without 
including the PCA provisions that permit a bank to be reclassified to a 
lower capital category for reasons other than capital ratios. The 
amendments regarding the definitions of capital categories will not 
affect the assessment rate of any bank.
    Considering the circumstances mentioned above, the FDIC has 
determined that publishing a notice of proposed rulemaking and 
providing opportunity for comment is unnecessary.
    Under 5 U.S.C. 553(d)(3) of the APA, the required publication or 
service of a substantive rule shall be made not less than 30 days 
before its effective date, except, among other things, as provided by 
the agency for good cause found and published with the rule. As 
explained above, the FDIC finds that this rule consists only of 
technical amendments that are minor and will have no substantive effect 
on the public. Also, because delaying the effective date of these 
technical amendments would serve no purpose, the FDIC finds good cause 
to make this rule effective upon publication.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) does not apply to a rulemaking 
where a general notice of proposed rulemaking is not required.\15\ As 
noted above, the FDIC has determined that it is unnecessary to publish 
a notice of proposed rulemaking for these technical amendments. 
Accordingly, the RFA's requirements relating to an initial and final 
regulatory flexibility analysis do not apply.
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    \15\ See 5 U.S.C. 603 and 604.
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    Moreover, certain types of rules, such as rules of particular 
applicability relating to rates or corporate or financial structures, 
or practices relating to such rates or structures, are expressly 
excluded from the definition of ``rule'' for purposes of the RFA. This 
rule, and the technical amendments in this rule, relate directly to the 
rates imposed on IDIs for deposit insurance and to the assessment 
system that measures risk and determines each IDI's assessment rate.

C. Small Business Regulatory Enforcement Fairness Act

    The Office of Management and Budget (OMB) has determined that the 
final rule is not a major rule within the meaning of the relevant 
sections of the Small Business Regulatory Enforcement Fairness Act of 
1996,\16\ and the FDIC will submit the final rule and other appropriate 
reports to Congress and the Government Accountability Office for 
review.
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    \16\ 5 U.S.C. 801, et seq.
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D. Riegle Community Development and Regulatory Improvement Act

    The Riegle Community Development and Regulatory Improvement Act 
(RCDRIA) requires that the FDIC, in determining the effective date and 
administrative compliance requirements of new regulations that impose 
additional reporting, disclosure, or other requirements on IDIs, 
consider, consistent with principles of safety and soundness and the 
public interest, any administrative burdens that such regulations would 
place on depository institutions, including small depository 
institutions, and customers or depository institutions, as well as the 
benefits of such regulations.\17\ Subject to certain exceptions, new 
regulations and amendments to regulations prescribed by a Federal 
banking agency which impose additional reporting, disclosure, or other 
new requirements on IDIs shall take effect on the first day of a 
calendar quarter which begins on or after the date on which the 
regulations are published in final form.\18\
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    \17\ 12 U.S.C. 4802(a).
    \18\ 12 U.S.C. 4802(b).
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    The FDIC has determined that RCDRIA does not apply to the rule 
because the technical amendments do not impose additional reporting, 
disclosures, or other requirements on IDIs.

E. Paperwork Reduction Act

    In accordance with the requirements of the Paperwork Reduction Act 
of 1995 (PRA), 44 U.S.C. 3501-3521, the FDIC may not conduct or 
sponsor, and a respondent is not required to respond to, an information 
collection unless it displays a currently valid OMB control number. The 
FDIC reviewed the rule and concludes that the technical amendments do 
not create any new, or revise any existing, collections of information 
pursuant to PRA. Therefore, no submission will be made to OMB.

F. The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    The FDIC has determined that the final rule will not affect family 
well-being within the meaning of section 654 of the Treasury and 
General Government Appropriations Act, enacted as part of the Omnibus 
Consolidated and Emergency Supplemental Appropriations Act of 1999 
(Pub. L. 105-277, 112 Stat. 2681).

[[Page 14568]]

G. Solicitation of Comments on Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, 113 
Stat. 1338, 1471 (Nov. 12, 1999), requires the Federal banking agencies 
to use plain language in all proposed and final rulemakings published 
in the Federal Register after January 1, 2000. As noted above, the FDIC 
has determined that it is unnecessary to publish a notice of proposed 
rulemaking for these technical amendments. The FDIC has sought to 
present the final rule in a simple and straightforward manner.

List of Subjects in 12 CFR 327

    Bank deposit insurance; Banks, Banking; Savings associations.

Authority and Issuance

    For the reasons set forth in the preamble, chapter III of title 12 
of the Code of Federal Regulations is amended as follows:

PART 327--ASSESSMENTS

0
1. The authority citation for part 327 continues to read as follows:

    Authority: 12 U.S.C. 1441, 1813, 1815, 1817-19, 1821.


0
2. In Sec.  327.8, add paragraph (z) to read as follows:


Sec.  327.8  Definitions.

* * * * *
    (z) Well capitalized, adequately capitalized and undercapitalized. 
For any insured depository institution other than an insured branch of 
a foreign bank, Well Capitalized, Adequately Capitalized and 
Undercapitalized have the same meaning as in: 12 CFR 6.4 (for national 
banks and federal savings associations), as either may be amended from 
time to time, except that 12 CFR 6.4(c)(1)(v) and (e), as they may be 
amended from time to time, shall not apply; 12 CFR 208.43 (for state 
member institutions), as either may be amended from time to time, 
except that 12 CFR 208.43(b)(1)(v) and (c), as they may be amended from 
time to time, shall not apply; and 12 CFR 324.403 (for state nonmember 
institutions and state savings associations), as either may be amended 
from time to time, except that 12 CFR 324.403(b)(1)(v) and (d), as they 
may be amended from time to time, shall not apply.


0
3. In Sec.  327.11, revise paragraphs (c)(3)(i) and (c)(11)(i) to read 
as follows:


Sec.  327.11  Surcharges and assessments required to raise the reserve 
ratio of the DIF to 1.35 percent.

* * * * *
    (c) * * *
    (3) * * *
    (i) Fraction of quarterly regular deposit insurance assessments 
paid by credit accruing institutions. The fraction of assessments paid 
by credit accruing institutions shall equal quarterly deposit insurance 
assessments, as determined under Sec. Sec.  327.9 and 327.16, paid by 
such institutions for each assessment period during the credit 
calculation period, divided by the total amount of quarterly deposit 
insurance assessments paid by all insured depository institutions 
during the credit calculation period, excluding the aggregate amount of 
surcharges imposed under paragraph (b) of this section.
* * * * *
    (11) * * *
    (i) The FDIC shall apply assessment credits awarded under paragraph 
(c) of this section to an institution's deposit insurance assessments, 
as calculated under Sec. Sec.  327.9 and 327.16, only for assessment 
periods in which the reserve ratio of the DIF is at least 1.38 percent.
* * * * *

0
4. In Sec.  327.16, revise paragraphs (a)(1)(ii)(B) and (c)(2) to read 
as follows:


Sec.  327.16  Assessment pricing methods--beginning the first 
assessment period after June 30, 2016, where the reserve ratio of the 
DIF as of the end of the prior assessment period has reached or 
exceeded 1.15 percent.

    (a) * * *
    (1) * * *
    (ii) * * *
    (B) Definition of loan mix index. The Loan Mix Index assigns loans 
in an institution's loan portfolio to the categories of loans described 
in the following table. The Loan Mix Index is calculated by multiplying 
the ratio of an institution's amount of loans in a particular loan 
category to its total assets by the associated weighted average charge-
off rate for that loan category, and summing the products for all loan 
categories. The table gives the weighted average charge-off rate for 
each category of loan. The Loan Mix Index excludes credit card loans.

   Loan Mix Index Categories and Weighted Charge-Off Rate Percentages
------------------------------------------------------------------------
                                                               Weighted
                                                              charge-off
                                                                 rate
                                                              (percent)
------------------------------------------------------------------------
Construction & Development.................................    4.4965840
Commercial & Industrial....................................    1.5984506
Leases.....................................................    1.4974551
Other Consumer.............................................    1.4559717
Real Estate Loans Residual.................................    1.0169338
Multifamily Residential....................................    0.8847597
Nonfarm Nonresidential.....................................    0.7289274
I-4 Family Residential.....................................    0.6973778
Loans to Depository Banks..................................    0.5760532
Agricultural Real Estate...................................    0.2376712
Agriculture................................................    0.2432737
------------------------------------------------------------------------

* * * * *
    (c) * * *
    (2) Capital evaluations. Each new small institution will receive 
one of the following three capital evaluations on the basis of data 
reported in the institution's Consolidated Reports of Condition and 
Income or Thrift Financial Report (or successor report, as appropriate) 
dated as of the last day of each assessment period: Well Capitalized, 
Adequately Capitalized, or Undercapitalized as defined in Sec.  
327.8(z) of this chapter.
* * * * *

    Dated at Washington, DC, on March 20, 2018.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Valerie Best,
Assistant Executive Secretary.
[FR Doc. 2018-06920 Filed 4-4-18; 8:45 am]
BILLING CODE P
14565

Rules and Regulations Federal Register
Vol. 83, No. 66

Thursday, April 5, 2018

This section of the FEDERAL REGISTER I. Technical Amendment Regarding Use small bank’s 3 assessment rate.4 The LMI
contains regulatory documents having general of Credits for Small Banks includes Loans to Foreign Governments
applicability and legal effect, most of which as a loan category.
are keyed to and codified in the Code of The FDIC is correcting a drafting error Effective March 31, 2017, as part of an
Federal Regulations, which is published under regarding a provision of the deposit initiative to reduce Call Report burden
50 titles pursuant to 44 U.S.C. 1510. insurance assessment regulations that for community banks, the Federal
governs the use of assessment credits for Financial Institutions Examination
The Code of Federal Regulations is sold by
the Superintendent of Documents.
small banks.1 Under the FDIC’s Council (FFIEC) added a new and
assessment regulations, the FDIC will streamlined Call Report form (FFIEC
provide small banks with assessment 051) for banks that have less than $1
FEDERAL DEPOSIT INSURANCE credits for the portion of their regular billion in total assets and no foreign
CORPORATION assessments that contribute to the offices. The FFIEC also revised the
increase in the DIF reserve ratio from general Call Report form (FFIEC 041) for
12 CFR Part 327 1.15 percent to 1.35 percent. The banks with no foreign offices. As part of
regulatory text further states that the that initiative, the FFIEC removed the
Assessment Regulations FDIC will apply assessment credits to a line item for reporting loans to foreign
small bank’s deposit insurance governments from Call Report form
AGENCY: Federal Deposit Insurance assessments for assessment periods in FFIEC 041 and excluded the item from
Corporation (FDIC). which the reserve ratio of the DIF the new Call Report form FFIEC 051.
Final rule; technical
ACTION:
exceeds 1.38 percent. Consistent with The Call Report form for banks with
amendments. the preamble language of the final rule both foreign and domestic offices
in which this provision was adopted (FFIEC 031), however, still includes a
(the Minimum Reserve Ratio final line item for reporting loans to foreign
SUMMARY: The FDIC is making technical rule 2), the regulatory text should state
amendments to its rules governing governments.
that small bank assessment credits will Because most small banks are no
deposit insurance assessments. The be applied for assessment periods in longer able to report these loans as a
FDIC believes that the amendments will which the DIF reserve ratio is at least separate item on the Call Report, the
have little or no effect on the deposit 1.38 percent—that is, at or above 1.38 FDIC is removing Loans to Foreign
insurance assessments for insured percent and not just above 1.38 percent. Governments from the calculation of the
depository institutions (IDIs), and any LMI in the established small bank
The FDIC also is making a technical
potential effect would result in lower deposit insurance pricing methodology.
edit to update a cross reference in the
assessments. The first technical same subsection. Currently, the
amendment makes clear that small bank III. Technical Amendments Regarding
subsection refers to section 327.9. Definitions of Capital Categories
assessment credits will be applied for However, as of June 30, 2016, § 327.9
assessment periods in which the reserve ceased to be in effect, and the operative The FDIC is making technical
ratio of the Deposit Insurance Fund section is now § 327.16. As a result, the amendments to reinsert PCA capital
(DIF) is at least 1.38 percent instead of, reference is being updated to refer to ratios and ratio thresholds used to
as currently provided, just when the § 327.16. define capital categories (i.e., well-
ratio exceeds 1.38 percent. The second capitalized, adequately capitalized,
technical amendment removes a data II. Technical Amendment Regarding under-capitalized) in the assessment
item from the assessment regulations the Loan Mix Index regulations. The definitions of capital
that most small banks can no longer categories for deposit insurance
The Loan Mix Index (LMI), which assessment purposes were inadvertently
report on the Consolidated Report of measures the relative riskiness of a deleted in a 2016 rulemaking, known as
Income and Condition (Call Report). bank’s loan portfolio, is one of the the Small Bank Pricing rule.5 Currently
The third technical amendment re- measures used in the assessment the deposit insurance assessment
incorporates, for assessment purposes, regulations to calculate an established system uses capital categories to
the capital definitions and ratio
calculate two ratios that affect
thresholds used for prompt corrective 1 As used herein, the term ‘‘bank’’ is synonymous
assessment rates.6
action (PCA) that were inadvertently with ‘‘insured depository institution.’’ Generally,
removed in a 2016 rulemaking. for deposit insurance assessment purposes, a ‘‘small
3 Generally, an established small bank is one that
bank’’ is an insured depository institution with less
than $10 billion in total consolidated assets. See 12 has been federally insured for five years or more.
DATES: Effective April 5, 2018. See 12 CFR 327.8(k).
CFR 327.8(e).
4 See 81 FR 32180, 32186–32188 (May 20, 2016).
FOR FURTHER INFORMATION CONTACT: 2 81 FR 16059 (Mar. 25, 2016). The final rule
5 The Small Bank Pricing rule refined the deposit
Nefretete Smith, Counsel, Legal implemented section 334 of the Dodd-Frank Wall
Street Reform and Consumer Protection Act, which: insurance pricing methodology for established
Division, (202) 898–6851 or nefsmith@ (1) Raises the minimum reserve ratio for the DIF to small banks. See 81 FR 32180 (May 20, 2016). The
amozie on DSK30RV082PROD with RULES

fdic.gov; or Ashley Mihalik, Senior 1.35 percent (from the former minimum of 1.15 Small Bank Pricing rule made no changes to the
Policy Analyst, Banking and Regulatory percent); (2) requires that the DIF reserve ratio reach way assessments are calculated for new small
1.35 percent by September 30, 2020; and (3) banks, keeping in place the definitions of capital
Policy Section, Division of Insurance requires that, in setting assessments, the FDIC categories adopted by the FDIC in 2014.
and Research, (202) 898–3793 or ‘‘offset the effect of [the increase in the minimum 6 The two ratios are the brokered deposit ratio and

amihalik@fdic.gov. reserve ratio from 1.15 percent to 1.35 percent] on the brokered deposit adjustment. The brokered
insured depository institutions with total deposit ratio is one of the measures used to
SUPPLEMENTARY INFORMATION: consolidated assets of less than $10,000,000,000.’’ Continued

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14568 Federal Register / Vol. 83, No. 66 / Thursday, April 5, 2018 / Rules and Regulations

G. Solicitation of Comments on Use of (c) * * * LOAN MIX INDEX CATEGORIES AND
Plain Language (3) * * * WEIGHTED CHARGE-OFF RATE PER-
(i) Fraction of quarterly regular CENTAGES—Continued
Section 722 of the Gramm-Leach-
deposit insurance assessments paid by
Bliley Act, Public Law 106–102, 113
credit accruing institutions. The fraction Weighted
Stat. 1338, 1471 (Nov. 12, 1999),
of assessments paid by credit accruing charge-off
requires the Federal banking agencies to
institutions shall equal quarterly deposit rate
use plain language in all proposed and (percent)
insurance assessments, as determined
final rulemakings published in the
under §§ 327.9 and 327.16, paid by such
Federal Register after January 1, 2000. Multifamily Residential .............. 0.8847597
institutions for each assessment period Nonfarm Nonresidential ............ 0.7289274
As noted above, the FDIC has
during the credit calculation period, I–4 Family Residential .............. 0.6973778
determined that it is unnecessary to
divided by the total amount of quarterly Loans to Depository Banks ...... 0.5760532
publish a notice of proposed rulemaking
deposit insurance assessments paid by Agricultural Real Estate ............ 0.2376712
for these technical amendments. The
all insured depository institutions Agriculture ................................. 0.2432737
FDIC has sought to present the final rule
during the credit calculation period,
in a simple and straightforward manner. * * * * *
excluding the aggregate amount of
List of Subjects in 12 CFR 327 surcharges imposed under paragraph (b) (c) * * *
of this section. (2) Capital evaluations. Each new
Bank deposit insurance; Banks,
* * * * * small institution will receive one of the
Banking; Savings associations.
(11) * * * following three capital evaluations on
Authority and Issuance (i) The FDIC shall apply assessment the basis of data reported in the
For the reasons set forth in the credits awarded under paragraph (c) of institution’s Consolidated Reports of
preamble, chapter III of title 12 of the this section to an institution’s deposit Condition and Income or Thrift
Code of Federal Regulations is amended insurance assessments, as calculated Financial Report (or successor report, as
as follows: under §§ 327.9 and 327.16, only for appropriate) dated as of the last day of
assessment periods in which the reserve each assessment period: Well
PART 327—ASSESSMENTS ratio of the DIF is at least 1.38 percent. Capitalized, Adequately Capitalized, or
* * * * * Undercapitalized as defined in
■ 1. The authority citation for part 327 § 327.8(z) of this chapter.
■ 4. In § 327.16, revise paragraphs
continues to read as follows: * * * * *
(a)(1)(ii)(B) and (c)(2) to read as follows:
Authority: 12 U.S.C. 1441, 1813, 1815, Dated at Washington, DC, on March 20,
1817–19, 1821. § 327.16 Assessment pricing methods— 2018.
beginning the first assessment period after
■ 2. In § 327.8, add paragraph (z) to read June 30, 2016, where the reserve ratio of the By order of the Board of Directors.
as follows: DIF as of the end of the prior assessment Federal Deposit Insurance Corporation.
period has reached or exceeded 1.15 Valerie Best,
§ 327.8 Definitions. percent. Assistant Executive Secretary.
* * * * * (a) * * * [FR Doc. 2018–06920 Filed 4–4–18; 8:45 am]
(z) Well capitalized, adequately (1) * * * BILLING CODE P
capitalized and undercapitalized. For (ii) * * *
any insured depository institution other (B) Definition of loan mix index. The
than an insured branch of a foreign Loan Mix Index assigns loans in an
bank, Well Capitalized, Adequately institution’s loan portfolio to the DEPARTMENT OF TRANSPORTATION
Capitalized and Undercapitalized have categories of loans described in the
the same meaning as in: 12 CFR 6.4 (for Federal Aviation Administration
following table. The Loan Mix Index is
national banks and federal savings calculated by multiplying the ratio of an
associations), as either may be amended 14 CFR Part 39
institution’s amount of loans in a
from time to time, except that 12 CFR particular loan category to its total [Docket No. FAA–2018–0245; Product
6.4(c)(1)(v) and (e), as they may be assets by the associated weighted Identifier 2018–CE–012–AD; Amendment
amended from time to time, shall not average charge-off rate for that loan 39–19234; AD 2018–07–03]
apply; 12 CFR 208.43 (for state member category, and summing the products for
institutions), as either may be amended RIN 2120–AA64
all loan categories. The table gives the
from time to time, except that 12 CFR weighted average charge-off rate for Airworthiness Directives; Piper
208.43(b)(1)(v) and (c), as they may be each category of loan. The Loan Mix Aircraft, Inc.
amended from time to time, shall not Index excludes credit card loans.
apply; and 12 CFR 324.403 (for state AGENCY: Federal Aviation
nonmember institutions and state LOAN MIX INDEX CATEGORIES AND Administration (FAA), DOT.
savings associations), as either may be WEIGHTED CHARGE-OFF RATE PER- ACTION: Final rule; request for
amended from time to time, except that CENTAGES comments.
12 CFR 324.403(b)(1)(v) and (d), as they
may be amended from time to time, Weighted SUMMARY: We are superseding
shall not apply. charge-off Airworthiness Directive (AD) 2018–02–
rate 05 for certain Piper Aircraft, Inc. Models
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■ 3. In § 327.11, revise paragraphs (percent)
(c)(3)(i) and (c)(11)(i) to read as follows: PA–28–140, PA–28–150, PA–28–151,
Construction & Development .... 4.4965840
PA–28–160, PA–28–161, PA–28–180,
§ 327.11 Surcharges and assessments Commercial & Industrial ........... 1.5984506 PA–28–181, PA–28–236, PA–28–201T,
required to raise the reserve ratio of the DIF Leases ...................................... 1.4974551 PA–28R–180, PA–28R–200, PA–28R–
to 1.35 percent. Other Consumer ....................... 1.4559717 201, PA–28R–201T, PA–28RT–201, and
* * * * * Real Estate Loans Residual ..... 1.0169338 PA–28RT–201T airplanes. AD 2018–02–

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Document Created: 2018-11-01 09:13:29
Document Modified: 2018-11-01 09:13:29
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Rules and Regulations
Action		Final rule; technical amendments.
Dates		Effective April 5, 2018.
Contact		Nefretete Smith, Counsel, Legal Division, (202) 898-6851 or [email protected]; or Ashley Mihalik, Senior Policy Analyst, Banking and Regulatory Policy Section, Division of Insurance and Research, (202) 898-3793 or [email protected]
FR Citation		83 FR 14565