FOR IMMEDIATE RELEASE
ICBA Disappointed With FDIC 2007 Assessment Rates
Washington, D.C. (November 2, 2006)—The Independent Community Bankers of America (ICBA) Executive Vice President and Director of Government Relations Karen Thomas issued the following statement regarding today's decision by the FDIC to set 2007 deposit insurance premium rates for healthy banks (Risk Category I) from five to seven basis points. Under the new risk-based assessment system approved by the FDIC, more than 90 percent of U.S. banks are in Risk Category I.
"ICBA is disappointed that the FDIC did not establish a 2007 assessment rate schedule that was closer to the proposed base schedule of rates. The new 2007 rate schedule is unnecessarily high and will cause most banks to use up next year a large amount of the assessment credits they were granted under the Federal Deposit Insurance Reform Act of 2005.
"We regret that the FDIC did not take full advantage of the flexibility it has under FDIRA to build up reserves to meet the designated reserve ratio steadily and gradually over a three-to-five year period, which would have avoided a substantial increase in assessment rates and allowed banks to use their credits over a longer period. High premiums result in banks having less money available to lend in communities to support economic growth and prosperity.
"While ICBA is disappointed in the rate schedule for 2007, we commend the FDIC for its new risk-based assessment system since it will improve risk differentiation and limit the subsidization of riskier institutions by safer ones. We also commend the agency for eliminating volatile liabilities as one of the financial ratios to assess risk. Time deposits over $100,000 are an important source of core funding for many community banks, and Federal Home Loan Bank advances provide liquidity and funding for loans to support economic development. Community banks should not be penalized for using these sources of funding. The FDIC also improved the final rule by reducing the period in which de novo institutions are automatically charged higher rates from seven to five years and deferring implementation of that provision to 2010."