The FDIC on Tuesday approved a proposed increase in premiums that will more than double the average paid by U.S. banks and thrifts next year to replenish the deposit insurance fund.
Federal Deposit Insurance Corp. Chairman Sheila Bair made the proposal, which will raise the average insurance premiums paid by banks and thrifts to 13.5 cents for every $100 of their deposits from the current 6.3 cents.
For institutions in strong financial condition – 91 percent of roughly 8,500 insured banks and thrifts – the average rate would be 11.6 cents.
“The U.S. banking industry has the willingness and capacity to provide the necessary backing to the insurance fund,” Bair said. “The entire capital of the banking industry stands behind the fund, as does the full faith and credit of the United States government. The public can be sure that we will always have enough money to protect their insured deposits.”
The FDIC board approved the proposal, putting it out for public comment for 30 days, and it should be formally adopted after that. Thirteen federally insured banks and savings and loans – including two major thrifts – have failed this year, and more collapses are expected. The deposit insurance fund is now at $45.2 billion – below the minimum target level set by Congress and the lowest it has been since 2003.
The FDIC plan calls for higher-risk institutions to pay bigger insurance fees than others. It is based on a projected $40 billion loss to the insurance fund from bank failures through 2013, and would reduce the industry's average pretax income by 5.6 percent next year, according to FDIC estimates.
The FDIC has been working on the plan since July, before the account insurance limit was raised to $250,000 from $100,000, in the $700 billion federal bailout legislation enacted on Friday. The increases proposed Tuesday will cover only up to the previous insured $100,000 limit per account.
The bailout legislation gives the FDIC unlimited temporary authority to borrow from the Treasury if needed to cover the new insurance limit.
If the FDIC needed to borrow from the Treasury to cover the new $250,000 insurance ceiling, the agency would impose an additional fee on U.S. banks and thrifts to cover it. The FDIC hasn't tapped the government coffers for a loan since the early 1990s, toward the end of the savings and loan crisis.