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FDIC sets DIF's long-term designated reserve ratio at 2 percent

The Board of Directors of the FDIC voted on Dec. 14 for a final rule to set the insurance fund's designated reserve ratio (DRR) at two percent of estimated insured deposits.

The Dodd-Frank Wall Street Reform and Consumer Protection Act set a minimum DRR of 1.35 percent, and left unchanged the requirement that the FDIC Board set a DRR annually. The Board must set the DRR according to the following factors: risk of loss to the insurance fund; economic conditions affecting the banking industry; preventing sharp swings in the assessment rates; and any other factors it deems important.

The decision to set the DRR at two percent was based on a historical analysis of losses to the insurance fund. The analysis showed in order to maintain a positive fund balance and steady, predictable assessment rates, the reserve ratio must be at least two percent as a long-term, minimum goal.

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