FOR IMMEDIATE RELEASE
ICBA Urges FDIC to “Follow the Charter” and “Follow the Deposit” in Allocating One-Time Assessment Credit
Washington, D.C. (August 14, 2006)—The Independent Community Bankers of America urged the FDIC to use both the "follow the charter" approach and the "follow the deposit" approach in determining the one-time assessment credit for banks under the Deposit Insurance Reform Act so that both deposit transfers and mergers can be taken into account.
The Reform Act provides a one-time $4.7 billion assessment credit for banks in existence on December 31, 1996, or their successors allocated according to their pro rata share of the 1996 assessment base. Since community banks that have purchased deposits during the last ten years will be penalized if the credit allocation system doesn't recognize deposit transfers, ICBA recommended that the FDIC define "successor" to include those institutions resulting from a merger or consolidation, as well as purchasers in a branch sale or deposit transfer.
In its recommendation to the FDIC, ICBA suggested three possible methods to compute a bank's assessment credit using the "follow the deposit" approach: tracking branches using the 1996 Summary of Deposits data, percentage of deposits, or discounted growth rate.
ICBA also told the FDIC that it supports a temporary two-year rule that would allocate future dividends from the Deposit Insurance Fund in the same way that the one-time assessment credit is allocated.
In addition, the association supports the FDIC's proposal to collect premiums in arrears on a quarterly basis and to require institutions with $300 million or more in assets to use average daily deposit balances, rather than quarter-end balances, to compute their assessment base, while smaller institutions should have the option of using either average daily balances or quarter-end balances.
ICBA made its recommendations in three separate comment letters to the FDIC. Read the letters at www.icba.org.