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Support Growing for Extension of Deposit Insurance as Bankers’ Banks Urge Congressional Action

“TAG” Safeguard on $1.3 Trillion in Deposits Would Expire Dec. 31 without Extension

Washington, D.C. (June 26, 2012)—A broad coalition of the nation’s bankers’ banks are urging prompt extension of full Federal Deposit Insurance Corp. coverage for nearly $1.3 trillion in small business deposits, the Independent Community Bankers of America announced. In a letter to congressional leaders, 15 bankers’ banks that serve more than 5,000 community banks said extending the FDIC’s transaction account guarantee (“TAG”) insurance beyond its Dec. 31 expiration date is essential to preserving community bank liquidity and small business lending capacity.

“In the current challenging economic environment, an abrupt contraction in liquidity would pose an unacceptable risk to credit availability and the economic recovery,” the bankers’ banks wrote. “We ask that the Congress extend the FDIC TAG program at the earliest possible opportunity. Banks fully pay for this FDIC insurance coverage through their insurance premiums and no taxpayer money is used.”

Bankers’ banks are financial institutions that serve community banks. They are owned by investor banks and may provide services only to community banks. Bankers’ banks are able to provide many services to community banks that typically would be economically available only to the largest banks, allowing community banks to offer more services to their customers.

In their letter to Congress, the bankers’ banks noted that approximately $200 billion is deposited in community bank TAG accounts, which are essentially checking accounts used by businesses, local governments, hospitals and other non-profit organizations for payroll and other recurring expenses. The average community bank under $10 billion in assets has $23 million in TAG-insured deposits. A lapse in the coverage would likely shift these deposits out of community banks to the nation’s largest banks, furthering excessive and systemically dangerous deposit concentration in just handful of megabanks.

The bankers’ bank letter is the latest show of support for the TAG insurance, which was established in 2008 during the financial crisis to prevent a sudden withdrawal of deposits. A coalition of 32 state community banking associations, the ICBA Minority Bank Council and small business groups recently sent separate letters urging an extension of the coverage beyond the Dec. 31 expiration date.

For more information and to read the letter, visit www.icba.org.