ICBA - News - News Release - ICBA: $1.4 Trillion Demonstrates Need for FDIC “TAG” Extension for Community Banks and Small Businesses
ICBA News Release Header


ICBA: $1.4 Trillion Demonstrates Need for FDIC “TAG” Extension for Community Banks and Small Businesses

Washington, D.C. (February 28, 2012)— The Independent Community Bankers of America (ICBA) said today that new figures from the Quarterly Banking Profile released today by the Federal Deposit Insurance Corporation (FDIC) demonstrates the critical importance of extending full FDIC deposit insurance coverage for noninterest-bearing transaction accounts (“TAG”). According to 4th quarter FDIC Quarterly Banking Profile, TAG deposits now total $1.4 trillion. Notably, the amount of TAG insured deposits increased by 15.2 percent, or $185.1 billion, during the fourth quarter.

“This shows that an extension of the TAG program is more important than ever, since it now insures approximately 20 percent of total domestic deposits” said Cam Fine, president and CEO of ICBA. “Banks pay for this coverage through their deposit insurance premiums. Without Congress acting, this coverage will expire on December 31, 2012.”

ICBA has been working hard to bring attention to this critical community bank and small business issue and will continue to urge Congress to act quickly to ensure that a bank-funded program of this magnitude doesn’t lapse. ICBA has advocated for a five-year extension of deposit insurance coverage for non-interest bearing transaction accounts through 2017.

ICBA points out the following reasons why TAG must be renewed for another five years:

  • Full FDIC coverage keeps business and municipal accounts secure. Small businesses and other entities use transaction accounts to meet payroll and other recurring expenses. Municipalities use these accounts to deposit local tax revenues and to pay operating expenses. These entities depend on full insurance coverage to keep their deposits safe and secure.

  • The TAG program is fully paid for by the banking industry. The cost of this additional coverage is reflected in the FDIC’s assessment rate schedule. Premiums paid by banks to the FDIC support a stable FDIC Deposit Insurance Fund.

  • Full coverage keeps deposits in the community with local lenders. For community banks, full FDIC coverage has been essential to retaining business payroll and checking accounts. This coverage helps community banks attract and retain deposits from local businesses and governments, keeping local funds invested in the community.

  • Extending TAG will deter dangerous deposit concentration. Full FDIC coverage allows community banks to compete fairly with the largest banks for deposits and deters dangerous concentration of deposits in a handful of large institutions. If this full coverage ends, transaction account funds in excess of $250,000 immediately become uninsured “hot money” that could flee an institution quickly, destabilizing the banking system in favor of large institutions. Congress must address this FDIC insurance expiration uncertainty to prevent unintended consequences. More than $1.4 trillion in deposits would abruptly become uninsured if Congress does not act.

For more information about TAG and ICBA, visit www.icba.org.