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New FDIC Data Show Substantial Small Business Deposits Backed by “TAG” Insurance

Pending expiration of TAG coverage yet another “fiscal cliff” for businesses, municipalities

Washington, D.C. (Aug. 28, 2012)—New banking data released today show that approximately $1.4 trillion in bank deposits are insured by the Federal Deposit Insurance Corp.’s full coverage of noninterest-bearing transaction accounts, the Independent Community Bankers of America (ICBA) said. According to the FDIC’s second-quarter banking numbers, approximately $212 billion in deposits at banks with less than $15 billion in assets are insured by the Transaction Account Guarantee (TAG) program. This is up by $10 billion from the previous quarter and $32.6 billion from a year ago. Without prompt congressional action to extend the TAG coverage beyond its Dec. 31 expiration, these deposits will become uninsured overnight.

“Failing to extend TAG coverage will create yet another ‘fiscal cliff’ for thousands of businesses and municipalities that use these TAG accounts,” ICBA Executive Vice President and Chief Economist Paul Merski said. “ICBA is urging Congress to promptly enact a temporary extension of this successful bank-funded FDIC insurance until there is greater stability in the global financial sector and interest rates become more normalized.”

Extending the TAG program is a simple way for Congress to help stabilize the economy at an uncertain time. The Congressional Budget Office recently reported that going over the “fiscal cliff” of expiring tax cuts and reduced federal spending at year-end would plunge the economy into a recession. A temporary TAG extension would mean one less obstacle for the economy to overcome.

An extension also would help keep small-business and municipal accounts secure and maintain deposits in the Main Street community banks that do the bulk of the nation’s small-business lending. Community banks with less than $15 billion in assets make more than 60 percent of all small-business loans and use this TAG deposit liquidity to support local lending. An extension also would prevent even greater deposit concentration in a handful of mega-institutions. Further, the program doesn’t cost taxpayers a dime. Banks fully pay for this coverage through their normal deposit-insurance premiums, which totaled $2.9 billion in the second quarter.

There is widespread support for temporarily extending the TAG coverage. ICBA and community banks nationwide, a coalition of 32 state community banking associations, the ICBA Minority Bank Council, a broad coalition of the nation’s bankers’ banks, the American Bankers Association, the American Land Title Association, the Conference of State Bank Supervisors, the International Franchise Association and others have expressed their support for continuing the coverage.

For more information about extending full FDIC insurance for TAG deposits and ICBA, visit www.icba.org/advocacy.