FDIC board accepts staff's recommendation to keep DIF restoration plan unchanged; staff projects reserve ratio likely to reach 1.35% in 2026

A staff presenter for the Federal Deposit Insurance Corporation delivered the second semiannual 2024 update on the Deposit Insurance Fund (DIF) restoration plan and recommended no changes; the FDIC board voted to accept that recommendation.

The presentation, given to the board at the open meeting, said the DIF balance increased in the first half of 2024 and that assessment revenue and net investment gains were primary contributors. "I'm here today to deliver the second semiannual update of 2024 for the restoration plan of the deposit insurance fund," a staff presenter said. Staff reported that, as of June 30, 2024, the DIF balance and related calculations showed the reserve ratio had risen, and staff projected the reserve ratio is likely to reach the statutory minimum of 1.35% ahead of the statutory deadline and most likely in 2026, while stressing uncertainty around that projection.

Why it matters: Under the Federal Deposit Insurance Act, the FDIC must restore the DIF reserve ratio to at least 1.35% within an eight-year statutory deadline; the restoration plan has been in place since 2020. The board amended the plan in June 2022 and increased initial base assessment rate schedules by 2 basis points effective Jan. 1, 2023. Staff told the board those increases have strengthened the DIF balance and helped the fund move toward the statutory threshold.

Key facts and figures: Staff reported an increase in the DIF balance for the period ending June 30, 2024 and a 6-basis-point rise in the DIF reserve ratio to about 1.21%. Staff stated the DIF balance rose by $7.5 billion from the prior semiannual update and attributed most of the increase to assessment revenue (staff reported assessment revenue of approximately $6.5 billion for the period) and net investment contributions. The presentation also noted that amounts related to protecting uninsured depositors under the prior systemic risk determination and amounts collected from a special assessment in the first half of the year were not included in the reported change in the DIF balance.

Staff projection and uncertainty: Staff told the board that, taking into account deposit trends and projected losses, the most likely outcome is that the reserve ratio will reach 1.35% in 2026, but emphasized that the timing could change if insured deposit growth, losses from future bank failures, or investment yields materially differ from current expectations.

Board discussion and vote: A board member asked for additional context on a slowdown in reciprocal deposit growth; staff gave numerical context, saying quarterly reciprocal-deposit growth that had been about 0.8% after the 2023 bank failures had slowed to roughly flat or 0.1% in the current period. After discussion, a motion to accept staff's recommendation that no changes be made to the amended DIF restoration plan was moved and seconded. The presiding official conducted a roll-call vote; all recorded votes were "aye," and the recommendation was accepted.

What happens next: Staff said it will continue to monitor deposit trends, potential losses, and investment returns and will provide the next semiannual update in the first half of 2025. The board adjourned the open session and moved to closed session.

(Reporting note: Quotations and numerical figures are taken from statements recorded in the meeting transcript; the transcript contains two close but inconsistent reported DIF-balance figures and several inconsistent name spellings in the roll call that are noted in the article's clarifying details and audit.)