FDIC Approves ‘Emergency’ Fee on Banks to Bolster Reserves

Alison Vekshin and Margaret Chadbourn
Bloomberg
February 27, 2009

The Federal Deposit Insurance Corp. will charge U.S. banks a one-time assessment and increase other fees to replenish its insurance fund, adding $27 billion in costs to an industry already hobbled by the financial crisis.

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The FDIC board today approved charging banks an “emergency special assessment” in response to an estimate that bank failures could cost the fund $65 billion through 2013. The added fees are projected to generate $27 billion this year, compared with the $3 billion raised in 2008, the FDIC said.

“We’re taking steps today to ensure that the deposit insurance system remains sound,” FDIC Chairman Sheila Bair said today during the board meeting at the agency’s Washington headquarters. “These steps are necessary because banks, and not taxpayers, are expected to fund the system.”

The deposit insurance fund fell to $18.9 billion in the fourth quarter from $34.6 billion the preceding three-month period, the FDIC said yesterday. The fund, used to reimburse customers for deposits of as much as $250,000 when a bank fails, has been shrunk by 39 failures since the beginning of 2008.

The FDIC is required by law to replenish the fund when the reserve ratio, or fund balance divided by insured deposits, falls below 1.15 percent. It stood at 0.40 percent at the end of the fourth quarter, the lowest level since the second quarter of 1993, the agency said yesterday.

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This article was posted: Friday, February 27, 2009 at 1:12 pm

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