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Federal Deposit Insurance Reform Act of 2005

The Federal Deposit Insurance Reform Act of 2005 was adopted by Congress as part of the Deficit Reduction Act of 2005 (P.L. 109-171) and signed by the President on Feb. 8, 2006. A companion bill, the Federal Deposit Insurance Reform Conforming Amendments Act of 2005 (P.L. 109-173) was signed on Feb. 15, 2006. This legislation will, without a doubt, come to be seen as a landmark piece of banking legislation. Looking back, it's remarkable how closely the final legislation reflects ABA's position in 1999 and 2000 when the debate began. The final bill includes:

• merging the two deposit insurance funds,
• increasing coverage for retirement accounts to $250,000,
• indexing the insurance level for inflation,
• assessment credits – totaling $4.7 billion – to offset premiums for banks that capitalized the FDIC by 1996 (which deals with the fairness issue of fast growing banks),
• a cap on the level of the fund and cash dividends when it grows past a certain point, and
• the historical basis concept, originally proposed by ABA, for distributing credits and dividends.
• Summary of the Federal Deposit Insurance Reform Act (pdf)

Implementation of the Act

Without the new law, FDIC would have assessed premiums throughout 2006, instead of starting at mid-year 2007. With assessments starting on June 30, 2007, implementation of the law is now complete. For a review of that implementation, please see the reviews of the implementation by ABA and FDIC.

Actions, Rules and Reports Mandated in FDIRA

• ABA Statement on FDIC Premium Assesment Rates, Dec. 16, 2008
• ABA Says Banks Will Continue to Operate During Natural Disasters, Sept. 2, 2008
• ABA Statement on FDIC PremiumAssessment Rates, March 14, 2008
• Merger of the Deposit Insurance Funds, Apr. 21, 2006
• Higher FDIC Coverage for Retirement Account (Final Rule, Sep. 12, 2006)
  • ABA Comment on Call Report Changes, May 22, 2006
• Assessment Credits, Oct. 18, 2006  (ABA Comment, Aug. 15, 2006)
• Dividends (temporary), Oct. 18, 2006  (ABA Comment, Aug. 14, 2006)
• Advance Proposal for Allocation of Dividends, Sept. 18, 2007 (ABA Comment, Nov 19, 2007)
• FDIC Membership and Logo, Nov. 13, 2006  (ABA Comment, Sep. 15, 2006)
• Assessment Procedures, Nov. 13, 2006  (ABA Comment, Aug. 15, 2006)
• Risk-Based Premiums, Nov. 30, 2006  (ABA Comment, Sep. 22, 2006)
• Designated Reserve Ratio, Nov. 30, 2006  (ABA Comment, Sep. 21, 2006)
• Dividends (ANPR for a permanent rule) (cover memo), Sept. 11, 2007

Additional Resources (older, yet still relevant, materials)

• Alan Rice, FDIC Ascending (Jan. 13, 2006)
• Congressional Budget Office, Reconciliation Recommendations of the House Financial Services Committee (Oct. 28, 2005)
• Congressional Budget Office, "Reconciliation Recommendation so f the Senate Committee on Banking, Housing and Urban Affairs" (Cotober 24, 2005)
• Congressional Budget Office, "Modifying Federal Deposit Insurance" (May 9, 2005)
• House Financial Services Committee Financial Institutions Subcommittee Hearing on the Deposit Insurance Reform Act of 2005 (March 17, 2005)
• FDIC, Deposit Insurance: An Annotated Bibliography
• FDIC, Keeping the Promise: Recommendations for Deposit Insurance Reform (April 2001)
• Alan Blinder and Robert Wescott, Reform of Deposit Insurance: A Report to the FDIC (March 20, 2001)
• Mark J. Flannery, Increasing Deposit Insurance Coverage: Implications for the Federal Insurance Funds and for Bank Deposit Balances, (Dec. 2000)
• Summary of Greenwald Deposit Insurance Survey Results, (Dec. 2000)
• Christine Bradley, "Historical Perspective on Deposit Insurance," FDIC Banking Review 13(2) (Dec. 2000)
• FDIC Deposit Insurance Options Paper – Summary (Aug. 2000)

Questions? Please contact Rob Strand, (202) 663-5350, for more information.