FDIC’s Hill previews proposed updates to resolution planning, assessments

FDIC Chairman Travis Hill said his agency’s historical approach to resolution planning for large institutions needs to be fundamentally reexamined.

Resolution Proposal: In a speech this week, Hill said the FDIC is working to propose a new approach that would slim down IDI Rule requirements on hypothetical resolution strategies and establish a new “resolution readiness adjustment” to its deposit insurance assessment framework for larger banks.

Adjustments for Large Banks: The adjustment would allow any bank subject to the large bank scorecard to qualify for a downward adjustment to its quarterly assessment if the bank:

• Demonstrates its ability to populate a virtual data room in a short period of time.

• Provides the FDIC with temporary access to the bank’s third-party service providers or internal systems to enable the FDIC to build IT infrastructure to quickly access data in the event of failure.

Assessment Changes: Hill also said the FDIC expects to propose several changes to the assessments framework that would:

• Raise and index the threshold for banks subject to the large bank scorecard, which is currently set at $10 billion, to better reflect the scale, complexity, and risk profile of institutions for which the large bank scorecard is designed.

• Reduce assessments by 2 basis points for banks subject to the small bank scorecard and by a smaller across-the-board rate for larger banks that could achieve a comparable overall reduction via the resolution readiness adjustment.