FOR IMMEDIATE RELEASE

CONTACT:
Sean Oblack
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Letter calls for assessments to be calculated based on risk

Washington, DC – September 22, 2014 — Today, The Clearing House Association (TCH) filed a comment letter with the Federal Deposit Insurance Corporation (FDIC) on its proposed rule regarding changes to the deposit insurance assessment calculation methodology. In the letter, TCH reiterates its support for maintaining a robust federal deposit insurance fund (DIF), but expresses concern that the proposed rule is inconsistent with the statutory requirement that assessments be based on actual risk to the DIF.

The proposed rule signals yet a further deviation by the FDIC from the statutory mandate that DIF assessments be based on actual risk to the DIF,” said John Court, Managing Director and Senior Associate General Counsel of TCH. “This deviation is most evident in two aspects of the proposal – the failure to recognize the risk mitigation benefits of collateral, and the elimination of the existing option to use more risk-sensitive methodologies to measure counterparty exposures.”

In its comment letter, TCH argues that adhering to the risk-based statutory mandate is essential for multiple reasons: it promotes the integrity of the DIF; it discourages excessive or undue risk-taking; it avoids subsidies; it is more fair; and it is consistent with the fundamental principles of insurance. TCH also provides a number of suggestions intended to make the changes to the assessment methodology more risk-based, including recommended changes that would (1) permit the recognition of collateral in measuring counterparty exposure, consistent with the standardized approach adopted in the capital rules, (2) more appropriately reflect treatment of exposures to certain kinds of CCPs, and (3) retain the option to use an internal model methodology, which is arguably a much more risk-sensitive way to measure counterparty exposure.

About The Clearing House Established in 1853, The Clearing House is the oldest banking association and payments company in the United States. It is owned by the world’s largest commercial banks, which collectively hold more than half of all U.S. deposits and employ over one million people in the United States and more than two million people worldwide. The Clearing House Association L.L.C. is a nonpartisan advocacy organization that represents the interests of its owner banks by promoting and developing policies to support a safe, sound and competitive banking system. Its affiliate, The Clearing House Payments Company L.L.C., provides payment, clearing and settlement services to its member banks and other financial institutions. It clears almost $2 trillion each day, representing nearly half of all automated clearing-house, funds transfer and check-image payments made in the United States. See The Clearing House’s web page at www.theclearinghouse.org.