FDIC Board Approves Proposal For Risk-Based Premiums
(How much will the risky banks have to pay Russ? Aren't they the least able to pay?)
WASHINGTON (Dow Jones)--The Federal Deposit Insurance Corp.'s board approved a proposed rule Tuesday that would charge banks for deposit insurance by grouping them according to risk - even assessing premiums for banks deemed a low risk.
Under the current insurance premium regime, most banks have avoided paying for FDIC insurance coverage.
Currently, 95% of FDIC insured institutions are exempt from paying insurance premiums, because the least risky banks aren't required to pay as long as the ratio of available FDIC funds to insured deposits remained at a designated reserve ratio of 1.25%.
The current system essentially imposes a uniform rate of zero for most banks, "even though these institutions have not presented uniform risks to the insurance funds," FDIC staff members said in a memo to the board of directors.
But the proposed rule approved Tuesday would require some premium payments from all banks.
The new rules would separate banks into four risk categories, based on factors such as their level of capitalization, and further differentiate between large banks and small banks.
For the larger banks, with assets greater than $10 billion, the risk assessments would incorporate information such as long-term debt issuer ratings and other supervisory ratings.
One member of the FDIC board expressed some concern about the potential complexity of the new system.
"In particular, I worry about its complexity
.. and transparency, especially for smaller banks," Comptroller of the Currency John Dugan said.
Regulators are "entering a bit of a brave new world with this proposal," Dugan said.
The proposed changes follow FDIC overhaul legislation passed by Congress in 2005 that granted the bank supervisor more flexibility to set premium rates and differentiate categories of bank risk.
A second proposed rule approved Tuesday, which also stems from the overhaul law, would set the designated reserve ratio at 1.25%. The law eliminated requirements that the ratio stay at 1.25%, and instead allows the FDIC to set the ratio within a range of 1.15% to 1.50%.
The law stipulates that FDIC has until Nov. 5 to complete its regulatory overhaul of the premium system. Both of the notices of public rulemaking will have a 60-day window for public comment.
(MORE TO FOLLOW) Dow Jones Newswires
July 11, 2006 13:29 ET (17:29 GMT) |
