FDIC Study Finds Changing Assessment Rates Had Procyclical Effects During the Financial Crisis
A new FDIC staff study tackles an immediate concern in the wake of the FDIC’s proposal to raise DIF premiums (see FSM Report DEPOSITINSURANCE114): procyclicality. In what its authors describe as one of the first studies to provide large-scale empirical evidence on deposit insurance’s procyclical effects, this model-driven study looks at the effect of changing deposit insurance assessment rates during the period between 2009 and 2011. Using credit unions as a control group, it finds a 1.6 percent decrease in bank lending after a 7 bp increase in the assessment rate and a 0.3 increase after a 5-10 bp rate decrease.
Fed Tries to Sooth Payment-Access Critics with New Policy
Doubtless reflecting all the political pressure it’s under regarding payment-system access, the FRB today not only finalized its payment-system access rules, but also made sure to use an e-mail subject line containing the release that these rules are “transparent, risk-based, and consistent.” The board also states that the final standards are consistent with both its 2021 proposal (see FSM Report PAYMENT22) and the 2022 “supplemental” proposal (see FSM Report PAYMENT24) even though the supplemental was considerably more detailed than the initial attempt to give the Reserve Banks broad discretion without the appearance of inconsistent or even insider decision-making.