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Last update: 08/02/14

ICBA Policy Resolutions for 2014
Track I: Legislation and Regulation

DEPOSIT INSURANCE

Position

  • Our nation’s federal deposit insurance system is critical to depositor confidence in the banking system, to the protection of small depositors and the funding base of community banks. A strong Deposit Insurance Fund is important to maintaining public confidence that the FDIC has adequate resources to protect the nation’s depositors.

  • ICBA strongly supported the FDIC’s changes to the deposit insurance assessment system which incorporated the new assessment base. The new rates and the change in the assessment base will save community banks $4.5 billion over three years.

  • ICBA will seek effective implementation of the “hold harmless” provision of Dodd-Frank that shields banks under $10 billion in assets from premiums that will result from increasing the Deposit Insurance Fund minimum reserve ratio from 1.15% to 1.35%. ICBA further supports the FDIC strategy of reducing pro-cyclicality in the risk-based assessment system by allowing moderate, steady assessments throughout economic and credit cycles.

  • ICBA is concerned about the use of pass-through FDIC deposit insurance in connection with the national distribution of cards by certain large businesses. These cards function as checking and debit alternatives and should be regulated as such.

Background

Deposit insurance has been the stabilizing force of our nation’s banking system for 80 years. It promotes public confidence by providing safe and secure depositories for small businesses and individuals alike.

Deposit Insurance Victories. ICBA achieved several significant and long-sought deposit insurance victories in the Dodd-Frank Wall Street Reform and Consumer Protection Act. The law permanently increased deposit insurance coverage to $250,000 per depositor which otherwise would have lapsed and reverted to $100,000 as of January 1, 2014. The Dodd-Frank Act also provides for community bank indemnification from any recapitalization costs associated with raising the DIF minimum reserve ratio from 1.15 to 1.35 percent, and a redefinition of the assessment base as average total consolidated assets minus average tangible equity. These changes helped create parity in the deposit insurance system, by reducing community bank assessments, and helping community banks offset the advantage that large banks have in attracting deposits.

ICBA Strongly Supported the Revised Rate Schedule. ICBA strongly supported the changes to the assessment system which incorporated the new assessment base and established a revised schedule of initial base assessment rates of 5-35 basis points as opposed to 12-45 basis points. The revised rate schedule is saving community banks more than $4.5 billion over a period of three years beginning in 2011. Under the Dodd-Frank Act, the DIF must reach a reserve ratio of 1.35% by September 30, 2020. ICBA fully supports the FDIC strategy of having only moderate and steady assessments until that time.

ICBA Concerned about FDIC Pass-Through Insurance. ICBA is concerned about the use of pass-through FDIC deposit insurance in connection with the national distribution of cards by certain large businesses, such as Wal-Mart, that function as checking and debit alternatives. ICBA believes that this is a significant and inappropriate interpretation of FDIC General Counsel’s Opinion No. 8 and should be addressed by regulation after notice and public comment. The banking agencies and the CFPB should regulate these types of arrangements like traditional banking accounts with all the disclosure, consumer protection, and other laws and regulations associated with traditional deposit taking. These cards should not be a way for Wal-Mart and other non-banks to get into the business of banking while avoiding bank supervision and regulation.

Staff Contact: Chris Cole

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