Comments due on FDIC proposal to update Assessments regulation

The FDIC has issued a notice of proposed rulemaking to incorporate updated accounting standards in the risk-based deposit insurance assessment system applicable to all large and highly complex insured depository institutions. The proposal would amend the assessment regulations to include a new term, “modifications to borrowers experiencing financial difficulty,” in two financial measures—the underperforming assets ratio and higher-risk assets ratio—used to determine deposit insurance assessments for large and highly complex insured depository institutions.

The proposal does not apply to FDIC-insured or -supervised institutions with less than $10 billion in total consolidated assets.

The members of the Federal Financial Institutions Examination Council (FFIEC) are planning to revise the Call Report forms and instructions to include references to “modifications to borrowers experiencing financial difficulty.” The term “modifications to borrowers experiencing financial difficulty,“ as it will be defined in the Glossary of the Call Report instructions, will be used in the proposed amendments to the underperforming assets ratio and higher-risk assets ratio.

• The proposal would define restructured loans, a component of the underperforming assets ratio, as “modifications to borrowers experiencing financial difficulty” for large or highly complex institutions that have adopted ASU 2022-02, and would continue to use TDRs for the remaining large or highly complex institutions.
• The proposal would amend the definition of a refinance for the purposes of determining whether a loan is a higher-risk commercial and industrial loan or a higher-risk consumer loan, both elements of the higher-risk assets ratio.
• Under the proposal, a refinance would not include a modification to a loan that would otherwise meet the definition of a refinance, but that results in the classification of a loan as a “modification to borrowers experiencing financial difficulty,” for large or highly complex institutions that have adopted ASU 2022-02, or that results in the classification of a loan as a TDR, for all remaining large or highly complex institutions.
• Comments on the proposed rule will be accepted for 30 days after publication in the Federal Register.

UPDATE of publishing and comment period information: Published at 87 FR 45023 in the 7/27/2022 Federal Register, with a comment period ending 8/26/2022.