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ICBA Praises FDIC’s Alternatives to Special Assessment

ICBA Calls for Flexibility on Three-Year Prepay for America’s Community Banks

Washington, D.C. (September 29, 2009)—R. Michael Menzies, chairman of the Independent Community Bankers of America (ICBA) and president and CEO of Easton Bank and Trust Co., Easton, Md., today released this statement following the FDIC’s proposal to require a three-year prepaid assessment for FDIC-insured institutions in order to help recapitalize the Deposit Insurance Fund (DIF).

“ICBA praises the FDIC for considering alternatives to another special assessment so our nation’s more than 8,000 community banks can continue to serve their customers in cities and towns throughout America. Another special assessment would have been the worst of the options for providing funds and liquidity to the DIF, by taking capital out of the industry when it is needed for lending. ICBA also appreciates the FDIC extending the time period for restoring the DIF from seven to eight years.

“The prepayment option has the virtue of drawing from available cash and liquidity in the industry while not immediately reducing industry capital and continues to keep the DIF funded by the industry. While ICBA has concerns that the three-year prepaid assessment for banks may be too long, ICBA will work with the FDIC to establish a flexible prepayment option. ICBA also believes that the FDIC should consider a discount for banks that prepay and that the assessment base for the prepayment option should be assets minus Tier 1 capital and not domestic deposits. Community banks, which pose much less risk to the DIF, should not be forced to shoulder a disproportionate share of the assessment. Instead, the large, too-big-to-fail institutions that participated in the risky lending practices that led us to this financial crisis should be required to pay their fair share.

“On behalf of our nation’s community banks, ICBA looks forward to working with the FDIC to put in place an effective and balanced plan to bolster the DIF and to ensure that America’s Main Street community banks can use their resources to continue to lend and make a positive difference in the communities they serve.”

For more information, visit www.icba.org.