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Bank failures spur FDIC premium increase
WASHINGTON (12/17/08)—A higher level of bank failures have increased the Federal Deposit Insurance Corp.’s (FDIC’s) resolution costs significantly and spurred the agency to increase risk-based assessment rates for its insured banks by seven basis points on an annual basis. The FDIC voted Tuesday for the higher fee, which is set for the first quarter of 2009. Currently, banks pay between 5 and 43 basis points of their domestic deposits for FDIC insurance. Under the final rule, risk-based rates would range between 12 and 50 basis points on an annualized basis. The FDIC said most institutions would be charged between 12 and 14 basis points. “This assessment increase creates a path for the fund to return to its statutorily mandated level," said FDIC Chairman Sheila Bair. Calling the banking system “the bedrock of our economy,” Bair said deposit insurance has plays a vital role in providing stability to the system. “Maintaining a strong fund positions the FDIC well to handle future challenges," she added. When the FDIC announced its “restoration plan” last October, National Credit Union Administration (NCUA) Chairman Michael Fryzel said his agency did not have similar intentions to raise fees for share insurance. As of today,” he said Oct. 7, “everything looks fine in terms of the share insurance fund.” At the agency’s November open board meeting, staff reported that the National Credit Union Share Insurance Fund’s equity level is now at 1.27% and is expected to be at that level at the end of this year--precluding the possibility of an NCUSIF dividend to federally insured credit unions. Agency staff noted that its 1.27% estimate for yearend is .01% below October's projection. There are currently 246 CAMEL 4 and 5 credit unions, up from 211 at the end of last year. The total insurance loss expense for 2008 is estimated to be approximately $176.5 million.


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