28 Feb FDIC Part 370 Mentioned in OIG Report
Each year, Federal Inspectors General are required to identify and report on the top challenges facing their respective agencies. The most recent report from FDIC’s inspector general dated February 14, 2019, outlines the difficulties of regulatory cost-benefit analysis and how to measure and calculate regulatory costs. From page 31 of the report, the OIG spells out the details as follows:
The FDIC experienced challenges in quantifying the costs and benefits of a proposed rule on Recordkeeping for Timely Deposit Insurance Determination. The FDIC engaged a contractor that initially estimated the costs of this rule at $328 million, to be incurred by 36 financial institutions (80 cents per deposit account). However, the FDIC encountered difficulties in determining the benefits of the rule, explaining that “[b]ecause there is no market in which the value of these public benefits can be determined, it is not possible to monetize these benefits.” Based upon the comments received on the proposed rule, the FDIC revised the total cost in the final rule to $478 million (an increase of $150 million). The estimated cost would be allocated to covered institutions at $386 million, while the remaining costs of $92 million were to be borne by bank customers (depositors) and the FDIC.
The FDIC has revised the original per account estimate from $0.80 to $0.94 for covered institutions required to implement the Part 370 rule. Though this is probably not a big surprise to this community, many of whom have tried to meet the recordkeeping and IT requirements on their own or with a partner who may not fully understand the ruleset. This is further complicated by the ongoing clarification ruleset that has occurred over the past two years. There is a little more than a year left for required covered institutions to be compliant.