ICBA News Release
FOR IMMEDIATE RELEASE
ICBA Applauds Gutierrez-Manzullo Amendment That Bases FDIC Assessment on Assets, Protects America’s Taxpayers
Amendment Would Enact a Key ICBA Policy Priority
Washington, D.C. (November 19, 2009)—The Independent Community Bankers of America (ICBA) praises Reps. Luis Gutierrez (D-Ill.) and Donald Manzullo (R-Ill.) for proposing an ICBA-backed amendment to the Financial Stability Improvement Act (H.R. 3996) that promotes deposit insurance fairness—a key ICBA policy priority that bolsters the FDIC Deposit Insurance Fund (DIF), enhances community banks’ ability to lend in their communities and, ultimately, protects America’s taxpayers.
“ICBA lauds Reps. Gutierrez and Manzullo for introducing this critical amendment, which will strengthen the FDIC risk-based premium system and recognize the major difference between Main Street community banks and Wall Street institutions,” said R. Michael Menzies, ICBA chairman and president and CEO of Easton Bank and Trust, Co., Easton, Md. “The amendment addresses proportional regulation based on risk, which is long overdue. As this current financial crisis has shown us, the risk to our financial system and economy posed by the failure of one of these mega-institutions is too great. They should have to account for the added risk their size and activities pose by contributing their fair share to the Deposit Insurance Fund.”
ICBA has been a leading advocate for creating parity between large and small banks. The association has led the effort to broaden the assessment base used by the FDIC to determine bank premium assessments by including total assets (minus tangible equity), not just domestic deposits. The amendment includes this ICBA proposal. It also would allow the FDIC to examine risks throughout a bank’s holding company, and would remove any barrier that might prevent the FDIC from considering the amount of a bank’s assets and liabilities, when determining the bank’s risk rating. Additionally, the amendment would lift the hard-cap on the DIF reserve ratio to allow the FDIC to properly build up the fund to protect taxpayers from future large-scale bank failures.
Under the current system, which assesses only domestic deposits, banks with less than $10 billion in assets—mostly community banks—pay approximately 30 percent of total FDIC premiums, even though they only hold 20 percent of total bank assets. The Gutierrez-Manzullo amendment would reduce the assessments of 98 percent of the banks with less than $10 billion in assets, keeping nearly $4.5 billion in community banks and their communities over the next three years.
In addition to the Gutierrez-Manzullo amendment, ICBA fully backs Rep. Gutierrez’s separate amendment that would create a pre-funded systemic resolution fund for the orderly unwinding of a failed large financial company that threatens the financial sector and the national economy. And pre-funding avoids pro-cyclical effects of tapping the industry during times of financial stress.
“A pre-funded systemic resolution fund has a number of advantages over a post event funding system,” said Menzies. “It places the cost on the largest financial institutions that may later fail, rather than only on institutions that have not failed, providing an important equitable balance. It also holds too-big-to-fail institutions accountable for future risks and ensures America’s taxpayers won’t be left holding the tab for problems they didn’t create.”