FDIC Raising Fees on Banks, Adds Emergency Fee
February 27th, 2009Via: AP:
Facing a cascade of bank failures depleting the deposit insurance fund, federal regulators on Friday raised the fees paid by U.S. financial institutions and levied an emergency premium in a bid to collect $27 billion this year.
The Federal Deposit Insurance Corp. now expects that bank failures will cost the insurance fund around $65 billion through 2013, up from an earlier estimate of $40 billion. The bank failures, 14 already this year following 25 last year, reflect the ravages of rising unemployment and falling home prices that have sent loan defaults soaring.
The FDIC said the economic crisis, which has caused the insurance fund to drop to its lowest level in nearly a quarter-century, also warranted extending the plan to rebuild the insurance fund from five years to seven.
The emergency premium, to be levied on the roughly 8,500 federally insured institutions on June 30, will be 20 cents for every $100 of their insured deposits. That compares with an average premium of 6.3 cents paid by banks and thrifts last year.
In addition, the FDIC raised the regular insurance premiums for banks to between 12 and 16 cents for every $100 in deposits starting in April, up from a range of 12 to 14 cents.
The law requires the insurance fund to be maintained at a certain minimum level but it fell below that minimum — 1.15 percent of total insured deposits — in mid-2008.
But 25 U.S. banks failed last year — including two of the biggest thrifts — more than in the previous five years combined and up from only three failures in 2007.
The failures sliced the amount in the deposit insurance fund to $18.9 billion as of Dec. 31, the lowest level since 1987. That compares with $52.4 billion a year earlier.
