On May 22, 2009, the FDIC adopted a final rule imposing a 5 basis point special assessment and authorizing the FDIC to impose additional special assessments of 5 basis points, if necessary.  The initial special assessment and any additional special assessment will be based on an institution’s assets minus Tier 1 capital as of June 30, 2009.  This final rule differs significantly from the interim rule that FDIC issued on March 2, 2009.

The interim rule contemplated a 20 basis point special assessment, based on an institution’s deposits, which is the assessment base used for the regular quarterly risk-based assessments.  The interim rule also contemplated imposing additional special assessments of up to 10 basis points at the end of each remaining calendar quarter of 2009.

The final rule lowered the initial special assessment from 20 to 5 basis points, and any additional special assessment from 10 to 5 basis points, but changed the assessment base from deposits to assets minus Tier 1 capital.  The memorandum from the FDIC’s director of the insurance and research division indicates that the “departure from the regular risk-based assessment base is appropriate in the current circumstances because it better balances the burden of the special assessment.”

As to the industry as a whole, the FDIC estimated that a 5 basis point special assessment on assets minus Tier 1 capital would result in an amount approximately equal to a 7 basis point assessment on deposits.  In effect, many larger institutions will face a significantly higher special assessment then they would have under the regular risk-based assessment base, but this increase is limited by capping the special assessment at the amount that would be 10 basis points of the institution’s deposits.  Similarly, any additional special assessment would be capped at the amount that would be 10 basis points of the institution’s deposits for the relevant reporting period.

Although the FDIC has the authority to impose two additional special assessments, by vote of the board, before its authority expires on January 1, 2010, Chairman Sheila Bair indicated during the FDIC board meeting that she expected to impose only one additional assessment.  She further provided that she believed if two additional special assessments were required, then the FDIC would seek public comment again.

The FDIC felt comfortable lowering the total amount of the initial special assessment because on May 20, 2009, Congress increased the FDIC’s authority to borrow from the Treasury from $30 billion to $100 billion under the Helping Families Save Their Homes Act of 2009, which we discuss here.  This Act also temporarily allows, until December 31, 2010, the FDIC to borrow up to $500 billion from the Treasury with the concurrence of the FDIC’s board, the Federal Reserve board, and the Secretary of the Treasury, in consultation with the President.

The final rule was adopted by a vote of 4 to 1.  Comptroller of the Currency, John C. Dugan, was the sole dissenting board member, and his comments from the board meeting can be found here.