The FDIC Is Taking Back a Job It Handed 31 Big Banks

Since 2016, if your bank had 2 million deposit accounts, the FDIC made it build a machine the FDIC itself is supposed to run: a system that calculates, account by account, how much of your money the government insures if the bank fails. On Friday the FDIC board voted unanimously to propose scrapping that requirement, known as Part 370, and moving the 31 banks it covers to a lighter, older rule.¹ The dollar savings are small. I think the signal is not, and one regional bank sits right in its path.

Key Highlights

• The action: The FDIC proposed rescinding Part 370, which requires banks with 2 million or more deposit accounts to build and maintain their own deposit insurance calculation systems, and would move those banks to an amended Section 360.9.²
• The scale: The 31 banks covered hold about $11.8 trillion of domestic deposits, and the five most complex hold about $6.8 trillion of it.³
• The savings: The FDIC estimates industry savings of about $33 million a year, net savings of $19 million in year one after $14 million of transition costs, and about $310 million over 10 years.⁴
• The growth tax: A bank that newly crosses 2 million accounts faces an estimated $3.5 million build, and the FDIC expects about one new bank to cross that line every year.⁵
• The idea: Regions Financial (RF), which discloses that it is subject to Part 370, closed Friday at $28.57, about 11.2 times trailing earnings and up 3.7% this year.^{6, 7}

Deposit insurance is a government guarantee. Paying it requires a calculation: who owns each account, in what capacity, and how much is over the limit.

The FDIC used to do that math itself from the failed bank's records. In 2016 it told the largest banks to build the calculator for it.

That is the rule coming off. It is not "regulators stop protecting depositors," and I want to be precise about why.

What The Rule Actually Does

Part 370 was adopted in 2016 and requires every bank with 2 million or more deposit accounts to configure its IT systems to calculate the insured and uninsured amount in each account by ownership right and capacity, and to keep complete records of who owns what.⁸ The bank has to be able to run that calculation within 24 hours after the FDIC is appointed receiver, and it has to certify compliance every year.⁹

Section 360.9 is the older rule, from 2008. It applies to banks with at least $2 billion in deposits and either 250,000 accounts or $20 billion in assets. It requires them to hand the FDIC depositor data in a standard format and to place and release provisional holds on accounts automatically at failure.¹⁰

The difference is the calculator. Under 360.9, the bank delivers clean data and the FDIC does the math.

The proposal would move 29 of the 31 Part 370 banks into an amended 360.9 as "larger covered institutions," give them 18 months to transition, and preserve some of Part 370's recordkeeping for them. It would also tweak 360.9 for the 117 banks already under it, without new burdens on them.^{2, 3} Part 370 stays in force until a final rule, and comments are due 60 days after Federal Register publication.¹¹

Why now? The FDIC's own answer is that it got better at this. In its words, "advancements in the FDIC's own capabilities and systems related to deposit insurance determinations render it unnecessary for the largest IDIs to build and maintain their own IT systems capable of calculating deposit insurance coverage".⁹ The ABA's trade journal reported the same rationale, and added that the FDIC plans to revise its data retention practices to hold less sensitive information.¹²

The 2 Million Account Cliff Is The Story

Here is what I keep coming back to. The headline number is $33 million a year. Spread across $11.8 trillion of deposits, that is roughly $2.80 per $1 million of deposits. Nobody's earnings estimate moves on that.

But look at where the cost lands. The FDIC estimates ongoing Part 370 savings of $625 thousand a year for a lowest-complexity bank, $875 thousand for a middle-complexity bank, and $2.125 million for one of the five giants.¹³ The bank that just crossed 2 million accounts faces a different bill: about $3.5 million to implement, based on 28,304 hours of work, with three years to finish.¹⁴

That is a toll on growth. Not size. Growth.

Think about who crosses that line. The giants crossed it long ago. The bank that hits 2 million accounts in 2027 is taking customers from somebody: a fast-growing regional, a digital bank, a merger of two mid-size banks. The FDIC says nine banks were added to Part 370 between 2021 and 2025, and it assumes about one new entrant a year going forward.¹⁵

The FDIC even says it out loud. Part 370 is "generally a more burdensome regulatory framework than section 360.9, especially for new entrants to part 370, who must build and maintain their own IT systems capable of calculating deposit insurance in-house".¹⁶

And here is the part people tend to miss. The FDIC also writes that it "expects the actual cost savings to be much greater than these estimates" and that its numbers "substantially understate" real compliance costs.⁵ When the agency doing the scoring tells you its own score is low, I take it at its word.

The Quiet Pattern Behind It

Read alone, this proposal looks like housekeeping. Read it next to the FDIC's other moves this year.

In March, the FDIC rescinded its 2009 policy statement on who can buy failed banks, saying the policy "included a number of restrictions and conditions in excess of regulatory requirements that served as a deterrent for nonbank entities to engage in bidding on failed banks." The stated goal was "removing regulatory barriers to non-bank participation in the resolution process and reducing the cost of failures to the Deposit Insurance Fund".¹⁷

In June, Chairman Travis Hill previewed a broader resolution overhaul that included replacing Part 370 with a modified 360.9.¹⁸ Later that month the FDIC proposed raising the resolution-plan threshold for banks from $50 billion to $100 billion in assets, cutting more than half of the plan content requirements, and pairing that with an assessment adjustment for large banks that can quickly populate a virtual data room for the FDIC.¹⁹

Put those together. The FDIC is moving from "write us a hypothetical plan and build us a calculator" toward "give us clean data fast, and we will handle the rest, with more bidders at the table." I like it.

That combination has consequences. A bank that hands over clean data quickly is cheaper to resolve, and if the assessment adjustment is finalized, being resolvable could show up as a lower insurance bill. Pay for results, not paperwork.

The Free-Market Read

Let me make the pro-market case plainly, because I think it is strong here.

Deposit insurance is a government product. The government sets the price, sets the limit, and makes the payout. When the insurer requires the insured to build the claims engine, it is pushing its own operating cost onto private balance sheets, and through them onto you. The FDIC notes that banks "may pass along some or all of the cost savings" through "lower fees or higher deposit interest rates".²⁰ Someone always pays the compliance bill. It is usually the customer.

There is also duplication. Thirty-one banks each maintain a calculation the FDIC must be able to run anyway. Thirty-one calculators for one insurer.

And the cliff is bad rule design. If you run a bank at 1.9 million accounts, you have a $3.5 million reason, plus three years of IT work, to think twice about the next marketing push. A rule that makes it pricier to become big shields the already big.

The surface is incomplete. The real deregulation here is the FDIC accepting that it, not the regulated firm, should own the core function of its own insurance program.

Winners And Losers

Winners. The 13 lowest-complexity Part 370 banks, which carry the full rule on the smallest deposit bases, about $1.4 trillion across the group.³ Banks just under 2 million accounts, and mid-size banks weighing a merger that would push them over it. And depositors, if savings flow through to rates or fees.

Losers. Vendors and consultants who sell Part 370 compliance work. The FDIC itself notes that many banks contract these activities out.²¹ Banks that already built Part 370 systems also lose something: the sunk cost, plus about $14 million of industry-wide transition spending to rebuild 360.9 provisional hold capabilities they were released from.²²

The Numbers The Market Is Watching

The FDIC's 10-year math, at a 3.7% discount rate: $33.0 million of annual savings from rescinding Part 370, $13.9 million of year-one transition costs, $32.4 million of net savings in each of years two through 10, and $30.8 million annualized.⁴

None of this changes a bank stock's earnings this quarter. What it changes is the cost of growing past a threshold, and the direction of travel at the agency that prices your deposit insurance.

The Bear Case

I want to give the other side its best shot, because it is not a silly argument.

The critics' case: deposit insurance is a public guarantee, and the banks that benefit from it should bear the cost of being resolvable. Part 370 exists because of a real risk. The FDIC's 2016 reasoning was that incomplete depositor records at a very large bank, combined with the bank's size, "could result in deposit insurance determinations being significantly delayed, particularly if a very large IDI fails with little warning".²³ Bank runs now move at the speed of a phone app. A rule built for speed is being loosened just as runs got faster.

The FDIC concedes the downside in its own analysis. If the change delayed insurance determinations at a failed Part 370 bank, that could lead to "inaccurate deposit insurance payouts," losses to the fund, disruptions for account holders, and "a loss in consumer confidence." It calls that outcome "highly unlikely".²⁰ Highly unlikely is not impossible, and the cost of being wrong here is not $33 million.

My answer: the proposal does not remove the data. Banks still owe the FDIC standardized records and automated holds, and some Part 370 recordkeeping is kept for the larger banks. What goes away is a second calculator. The burden of proof is on the FDIC to show its systems can handle a large failure, publicly, before a final rule. If it cannot, the critics win this one.

There is also a capture argument. Relief for big banks is not automatically pro-market. I think this clears the bar because the steepest cost fell on the challenger crossing 2 million accounts. If the final rule drifts toward relief for only the largest five, I will say so.

The Idea: Regions Financial (RF)

Regions is a Birmingham, Alabama bank holding company with 1,247 branches across the South, Midwest and Texas, $131.1 billion of deposits and $158.8 billion of assets at year-end 2025.⁶ In that filing it states that it is subject to the FDIC's Part 370 recordkeeping requirements.⁶

Let me be honest about the direct effect. Regions reported $4.313 billion of non-interest expense in 2025.⁶ The FDIC does not name which tier each bank falls in, but on its estimates Regions would save $625 thousand or $875 thousand a year. That is about 0.02% of expenses. If you are buying RF for Part 370 savings, you are doing it wrong.

The idea is the stack. Regions is a disclosed Part 370 bank, it sits above even the proposed $100 billion resolution-plan line, so it stays inside the slimmer plan regime rather than exiting it, and it is the kind of large regional most exposed to the FDIC's push to reward banks that deliver clean data quickly.²⁴ Each piece is small. Together they lower the fixed cost of being a large regional that wants to grow.

The operating results are holding up. Regions reported third-quarter earnings of $0.73 per share on Oct. 16 against a $0.67 consensus, on revenue of $1.988 billion.²⁵

The stock closed Friday at $28.57, for a market value of about $24.3 billion and a trailing P/E of 11.2, against a 52-week range of $23.59 to $32.47.⁷ That P/E is the lowest of the peer group in the chart: KeyCorp at 11.6, Huntington at 12.5, Truist at 12.6 and Fifth Third at 18.5.²⁶ The stock is up 3.7% this year but about 12% below its July 16 close of $32.40.²⁷

What the market may be missing: the market prices regional banks on net interest margin and credit. It has not yet priced the cumulative drop in the fixed regulatory cost of being a large regional that the FDIC has been building piece by piece since March. Regions is a clean, disclosed exposure to that drift at a below-peer multiple.

Risks: credit losses in commercial real estate or consumer loans; deposit competition squeezing margin if rates move; the Part 370 proposal stalling or being reversed after comments; the resolution-readiness assessment adjustment never being finalized; and the obvious one, that the direct savings are too small for the market to care about at all.

What would prove me wrong: if the FDIC's final rule keeps the in-house calculator for most Part 370 banks, the deregulatory stack thesis loses its newest piece. And if Regions' fourth-quarter report on Jan. 22, 2027 shows rising expenses with no operating leverage, the "lower fixed cost" story is not showing up where it has to.²⁸

I keep score on every idea here, winners and losers (FMR Idea Scorecard).

What To Watch Next

Three things. First, the Federal Register publication date, which starts the 60-day comment clock, and whether the big bank trade groups ask for relief beyond what the FDIC proposed. Second, whether the FDIC publishes any testing of its own determination systems for a large failure. That is the evidence that settles the bear case. Third, Regions' Jan. 22, 2027 report. I am adding the comment deadline to the Deregulation Investor's Catalyst Calendar once the Federal Register date is set.

The insurer is taking back its own job. Watch which bank grows past 2 million accounts first without paying the toll.

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