FDIC Finalizes Rule to Resolve Double-Counting Associated with CECL
FDIC published a final rule that amends the risk-based deposit insurance assessment system applicable to all large insured depository institutions, including highly complex insured depository institutions. The final rule is aimed to address the effects of temporary deposit insurance assessment resulting from certain optional regulatory capital transition provisions related to the implementation of the current expected credit losses (CECL) methodology. The primary objective of the final rule is to remove the double-counting issue in several financial measures used to determine deposit insurance assessment rates for large and highly complex banks. The final rule will be effective from April 01, 2021.
The final rule:
- Amends the assessment regulations to remove double-counting of a portion of the CECL transitional amounts in certain financial measures used to determine deposit insurance assessments for large and highly complex banks. Certain financial measures are calculated by summing tier 1 capital, which includes the CECL transitional amounts, and reserves, already reflecting the implementation of CECL. As a result, a portion of the CECL transitional amount is being double-counted in these measures, which in turn affects assessment rates for large and highly complex banks.
- Adjusts the calculation of the loss severity measure to remove double-counting of a specified portion of the CECL transitional amounts for a large or highly complex insured depository institution.
- Amends the deposit insurance system applicable to large and highly complex banks only and does not affect the regulatory capital or the regulatory capital relief provided in the form of transition provisions that allow banking organizations to phase in the effects of CECL on their regulatory capital ratios.
In calculating another measure—that is, the tier 1 leverage ratio—used to determine assessment rates for all insured depository institutions, FDIC would continue to apply the CECL regulatory capital transition provisions, consistent with the regulatory capital relief provided to address concerns that despite adequate capital planning, unexpected economic conditions at the time of CECL adoption could result in higher-than-anticipated increases in allowances. FDIC did not receive feedback to the proposal, which was issued in December 2020, and is adopting the proposed rule as final without change. Under this final rule, amendments to the deposit insurance assessment system and changes to thw regulatory reporting requirements will be applicable only while the regulatory capital relief described above, or any potential future amendment that may affect the calculation of CECL transitional amounts and the double-counting of these amounts for deposit insurance assessment purposes, is reflected in the regulatory reports of banks.
Related Links
Effective Date: April 01, 2021
Keywords: Americas, US, Banking, CECL, Regulatory Capital, Tier 1 Capital, Deposit Insurance, Leverage Ratio, Large Banks, Basel, FDIC
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.
Previous Article
ESMA Seeks Clarity on Accounting Treatment of TLTRO III in EURelated Articles
BIS Examines Use of Big Data and Machine Learning at Central Banks
BIS published a paper that provides an overview on the use of big data and machine learning in the central bank community.
APRA Finalizes Reporting Standard for Operational Risk Requirements
APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.
ECB Publishes Guide for Determining Penalties for Regulatory Breaches
ECB published a guide that outlines the principles and methods for calculating the penalties for regulatory breaches of prudential requirements by banks.
MAS Sets Out Good Practices to Manage Operational Risks Amid COVID
MAS and The Association of Banks in Singapore (ABS) jointly issued a paper that sets out good practices for the management of operational and other risks stemming from new work arrangements adopted by financial institutions amid the COVID-19 pandemic.
ACPR Announces New Data Collection Application for Banks and Insurers
ACPR announced that a new data collection application, called DLPP (Datalake for Prudential), for collecting banking and insurance prudential data will go into production on April 12, 2021.
BCB Maintains CCyB at 0%, Initiates First Cycle of Regulatory Sandbox
BCB announced that the Financial Stability Committee decided to maintain the countercyclical capital buffer (CCyB) for Brazil at 0%, at least until the end of 2021.
EIOPA Launches Study on Non-Life Underwriting Risk in Internal Models
EIOPA has launched a European-wide comparative study on non-life underwriting risk in internal models, also kicking-off of the data collection phase.
SRB Publishes Overview of Resolution Tools Available in Banking Union
SRB published an overview of the resolution tools available in the Banking Union and their impact on a bank’s ability to maintain continuity of access to financial market infrastructure services in resolution.
EBA Consults on Pillar 3 Disclosure Standards for ESG Risks Under CRR
EBA is consulting on the implementing technical standards for Pillar 3 disclosures on environmental, social, and governance (ESG) risks, as set out in requirements under Article 449a of the Capital Requirements Regulation (CRR).
ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting
ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting