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ICBA Supports Broadening Resolution Authority of FDIC, Calls for Systemic-Risk Regulator

Washington, D.C. (May 6, 2009)—The Independent Community Bankers of America (ICBA) today voiced ongoing support for the Treasury Department’s proposal to vest the FDIC with resolution authority, including acting as conservator or receiver, for systemically important financial companies that fail or are in danger of failing. ICBA also called for the establishment of a systemic-risk regulator.

“The FDIC is the appropriate agency to be vested with these proposed resolution powers because it has extensive experience administering the resolution of banks and thrifts, and the agency has an infrastructure already in place to exercise conservatorship and receivership powers over banks that can be extended to other types of financial companies, including holding companies and their non-depository subsidiaries,” said R. Michael Menzies, ICBA chairman and president and CEO of Easton Bank and Trust Co., Easton, Md. “Other federal agencies would have to build such an infrastructure from scratch, which would be costly and inefficient, especially since the resolution authority would likely be used on a cyclical basis.”

If the FDIC does obtain the broader resolution authority, a separate fund should be set up to cover the potential and actual FDIC expenses. The Deposit Insurance Fund (DIF) should not be used directly or indirectly to subsidize efforts to resolve the failure of systemically important non-bank financial companies. Instead, the FDIC could also establish a separate division that would handle only the resolution of the systemic risk institutions and that would be completely funded from premiums assessed on those institutions.

ICBA also supports the Treasury’s proposal for a new systemic-risk regulator with authority to establish higher standards to account for the risk that these companies pose to our financial system and to our economy. These higher standards should include the establishment of more robust capital requirements, stricter liquidity, counterparty and credit risk management requirements and a prompt corrective-action regime.

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