Big Banks to Provide Capital to FDIC
With 3 more banks failing this past week and 32 total bank failures for 2009 so far, the reserves at the FDIC that are available to cover deposits at failed financial institutions are being quickly depleted. In order to maintain confidence among bank depositors, the FDIC needs to re-supply their coffers. To do so, they passed a resolution to charge a special, one-time fee to banks that participate in the FDIC program.
Big banks will bear most of the burden to replenish FDIC, since the amount that they have in their deposit base will determine the amount they are asked to pay. Banks will be asked to pay 5 basis points, or .05%, of their deposit base, meaning that the largest banks will bear the heaviest burden. This will be due during the third quarter of 2009, and provisions are in place to assess similar fees during the following two quarters if necessary.
Proponents of this decision say that it makes sense to ask big banks for help in funding FDIC, since many of them would be out of business if it wasn’t for the government bailouts they had received. Big banks that are unhappy with the proposal feel that it’s unfair for them to come up with most of the money when it’s the small banks that are now at the greatest risk of failure.
The FDIC also increased the amount they expect to use to insure bank customer deposits this year from $65 billion to $70 billion. The new ruling changes a previous arrangement in which all banks would have been asked to cover a one-time assessment of 20 basis points (.20%) on all of their domestic deposits. The new fee is smaller than the originally proposed fee, but it’s still more than banks think they should have to pay right now.
If you enjoyed this post, make sure you subscribe to my RSS feed!
Tags: bank failures, banks, FDIC
Related Posts
