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ICBA Calls FDIC Special Assessment Onerous; Unfairly Penalizes Our Nation’s Common Sense Community Banks

Washington, D.C. (April 2, 2009)—The Independent Community Bankers of America (ICBA) today continued to strongly urge the FDIC to explore all alternatives to a special assessment so that the costs of funding the Deposit Insurance Fund (DIF) can be spread over time. ICBA also called on the FDIC to broaden the current assessment base from domestic deposits to assets (less tangible capital) to more fairly distribute the assessment burden, and to impose a systemic risk premium on too-big-to-fail banks that pose the most risk to the DIF.

“Whether a 20-basis-point or a 10-basis-point assessment, the special assessment, when combined with the high base assessment rates for 2009, is onerous and unfairly penalizes our nation’s more than 8,000 community banks,” said Camden R. Fine, ICBA president and CEO. “It’s critical that the FDIC not underestimate the significant impact that the special assessment, combined with the base assessment, will have on community banks’ ability to lend to consumers and small businesses within their communities during these economically challenging times. The special assessment is counterproductive because it inhibits community banks’ ability to be part of the solution and fully participate in our nation’s economic recovery effort.”

Whether or not legislation is passed that increases the FDIC’s borrowing authority, the FDIC should seriously consider other alternatives before imposing a burdensome and crippling assessment on the community banking industry.

Any special assessment and all future assessments should be based on total assets (minus tangible capital), not total domestic deposits, to more fairly distribute the burden so that the banks that caused the problems pay a bigger share of the assessment. Using an asset-based assessment base will make the assessment system fairer, would more accurately reflect an institution’s risk to the DIF, and be consistent with the system that the FDIC uses when it assesses insured institutions for losses that arise when assistance is provided under the systemic risk provisions of the Federal Deposit Insurance Corporation Act. The FDIC should also impose a systemic risk premium on too-big-to-fail institutions that pose an enormous risk to the DIF because of their size and their activities.

If a special assessment is imposed on the industry, ICBA supports a change in the accounting rules to allow banks to amortize the costs over a period of five to seven years.

To read ICBA’s comment letter, visit www.icba.org.