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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: shades who wrote (65843)	7/11/2006 6:26:03 PM
From: shades	Read Replies (1) \| Respond to of 110194

FDIC Board OKs Proposal For Risk-Based Premiums (Updates to include industry comments in paragraphs 11-12 and 19). Karen Thomas, executive vice president at the Independent Community Bankers of America, said there was little in the proposed rules that came as a surprise. Thomas hopes the FDIC takes steps to make sure the new regulations are easy to follow. "We want bankers to be able to easily tell where they fall in the risk categories," Thomas said. 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 (END) Dow Jones Newswires July 11, 2006 16:20 ET (20:20 GMT)