FOR IMMEDIATE RELEASE
Community Banks Join Call for Extending Deposit Coverage
32 State Associations Support Extending “TAG”
Washington, D.C. (June 5, 2012)—The Independent Community Bankers of America (ICBA) announced that 32 state community banking associations joined the call for Congress to extend full coverage of noninterest-bearing transaction accounts before it expires at year-end. In a joint letter to members of the House and Senate, the community banking organizations wrote that failing to extend full Federal Deposit Insurance Corp. (FDIC) transaction-account coverage would harm small businesses and disrupt the nation’s financial and economic recovery.
“Because the global banking system and the economic recovery remain fragile, expiration of full insurance coverage for transaction accounts carries the risk of abrupt dislocation of funds and other unintended consequences for the financial sector, particularly community banks,” the associations wrote. “Notably, this coverage is not ‘free’ nor is it supported by tax dollars. Banks fully pay to have this coverage through their FDIC insurance premiums and cannot pay interest on these accounts.”
Today’s letter exemplifies the widespread support for temporarily extending this much-needed deposit coverage and requests a five-year extension. ICBA and community banks nationwide, the Conference of State Bank Supervisors, the International Franchise Association and others have expressed their support for continuing the coverage. The deposit coverage keeps many small business and municipal accounts secure, maintains deposits in local communities and prevents dangerous deposit concentration in a handful of the largest financial institutions.
“The TAG program remains a useful tool to stabilize and strengthen community and regional banks across the nation,” John P. Ducrest, then-chairman of the Conference of State Bank Supervisors, wrote in a March American Banker op-ed. “In turn, these banks fuel small business lending, which spurs economic growth and job creation. … For that purpose, the Conference of State Bank Supervisors…has strongly endorsed the continued need of the TAG program.”
Full coverage of noninterest-bearing transaction accounts was first established by the FDIC in October 2008 as the Transaction Account Guarantee (“TAG”) program, which helped stabilize the banking system and protect depositors. Congress voted in 2010 to modify and extend the program through 2012. However, because of continued economic and financial instability, many are calling for the program to be extended beyond its Dec. 31 expiration date. More than $1.3 trillion in deposits would abruptly become uninsured if Congress does not extend the coverage.
“Temporarily extending this industry-funded coverage is a no-brainer,” Florida Bankers Association President and CEO Alex Sanchez said. “The program keeps deposits secure and in the local economy, allowing small businesses to grow and the economy to recover. So it’s a win-win for community-based borrowers and lenders. That’s why Congress needs to act now to keep our economic recovery on track.”
For more information on extending full FDIC insurance for “TAG” deposits, visit www.icba.org.