FDIC Proposes Banks Prepay Insurance Premiums

This week, the FDIC issued a Notice of Proposed Rulemaking (NPR) to require insured banks to prepay premiums for Q4 2009 all the way through 2012. The FDIC estimates that this change would raise around $45 billion.

Each FDIC insured institution must pay the FDIC a risk-adjusted quarterly premium for the insurance. Rates vary from 12 cents per $100 in deposits for the safest banks to 45 cents for those considered to be risky.

The FDIC is required to replenish the deposit insurance fund (DIF) when the ratio of the fund’s balance to all insured deposits falls below 1.15. As of June 30, that ratio had decreased to 0.22. The barrage of bank closings over the last two years, now totaling 111, have cost the FDIC $48 billion. As a result, the DIF has been wittled down to only $10 billion. The FDIC has said that it will run a deficit on its insurance fund through 2012.

Technically, the FDIC can draw up to $500 billion in credit from the Treasury. However, industry observers say that the FDIC is doing everything it can to avoid asking the Treasury for money. As banks continue to close, though, it may be unavoidable.

Visit Stimulus.org for detailed information on the FDIC and a complete list of failed banks since the start of the economic crisis (2008 closing, 2009 closings).