$750K FDIC Insured at Countrywide
Up to a $100k you have the FDIC standing between you and Mozillo
Elroy that is incorrect. From countrywide's site:
bank.countrywide.com
By having deposits in separate account ownership categories, the Smiths are able to have $750,000 of their total savings FDIC insured, all at one bank.
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However this should worry you Elroy - won't the banks least able to AFFORD insurance now have the highest rates for it?
Message 22613734
DJ FDIC Board Approves Proposal For Risk-Based Premiums
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.
While plans to levy some premiums across the banking sector may raise industry eyebrows, FDIC Chairman Sheila Bair noted that surging deposit levels have been pushing down the reserve ratio, which could have triggered new premiums anyway.
Under the previous statutory limit, if the reserve ratio fell below 1.25%, the FDIC would likely have to impose premiums to bring the ratio back up. In the fourth quarter of 2005, the reserve ratio was at 1.23%.
So the broader imposition of premiums also reflects the boom in bank deposits, which in turn means the FDIC will likely need to raise more cash for its insurance fund.
"The key issue is what premium rate on average the FDIC will set," said American Bankers Association Chief Economist James Chessen. "The FDIC should be very patient and should set a very long view for how quickly the fund should build up."
As of March 31, the FDIC's insurance fund stands at $49.2 billion. But FDIC projections say that even with the new premium rates, the reserve ratio would dip to 1.19% by the end of 2007, if insured deposits grew by 4%.
Under a more rapid deposit growth scenario of 8%, the reserve ratio would hit 1.15% at the end of 2007, the basement level most recently set by Congress.
On Tuesday, the FDIC also approved a third proposal that would establish a uniform FDIC sign for banks to display at teller stations. The proposed new sign would require for the first time banks and savings institutions to use the same sign for advertising FDIC membership.
-By Benton Ives-Halperin, Dow Jones Newswires; 202-862-9255; Benton.Ives-Halperin@dowjones.com |
