FOR IMMEDIATE RELEASE
ICBA: FDIC Vote Helps Level Playing Field for Community Banks
Washington, D.C. (November 9, 2010)-The Independent Community Bankers of America (ICBA) lauded the Federal Deposit Insurance Corporation (FDIC) board of directors for taking initial steps to strengthen and impose parity in the deposit-insurance system. Updating the nation's deposit-insurance system-a top ICBA priority-will bolster the FDIC Deposit Insurance Fund (DIF) and enhance community banks' ability to lend in their communities.
"The FDIC today took an important step in leveling the playing field for the nation's community banks," said Jim MacPhee, ICBA chairman and CEO of Kalamazoo County State Bank, Kalamazoo, Mich. "The new rate schedule proposed today will mean substantial savings for community banks and will ensure the largest Wall Street institutions pay for the risks they pose to our nation's financial system. Meanwhile, greater parity in assessments will allow community banks to reinvest their savings in their local Main Street communities to stimulate the economic recovery."
The FDIC board approved a notice of proposed rulemaking to base the deposit-insurance assessment base on total assets (minus tangible equity) instead of domestic deposits, which ICBA has long advocated. Under the current system, banks with less than $10 billion in assets pay approximately 30 percent of total FDIC premiums, even though they only hold 20 percent of total bank assets. Updating the system will lower assessments for 98 percent of these banks, saving community banks roughly $4.5 billion over the next three years and allowing them to reinvest those savings in their communities.
The proposed new initial base rate schedule will be substantially lower than the current one. Institutions in Risk Category I, which includes more than 90 percent of community banks, will be paying 5-9 basis points instead of the current base rate schedule of 12-16 basis points. Institutions in Risk Categories II, III and IV will pay 14, 23 and 35 basis points, respectively, compared to the current rates of 22, 32 and 45 basis points, respectively. In addition, the secured liability adjustment would be eliminated under the proposal. The new rate schedule would go into effect during the second quarter of 2011 chiefly because of operational reasons due to proposed changes to the call report system.
The DIF is the industry-sponsored fund that insures a customer's bank deposits. Because of the DIF, no one has ever lost a penny of FDIC-insured deposits.
For more information, visit http://www.icba.org/.