FDIC backs new system of fees to replenish fund

Associated Press / May 23, 2009
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WASHINGTON - Federal regulators yesterday adopted a new system of special fees paid by US financial institutions that will shift more of the burden to bigger banks to help replenish the deposit insurance fund.

The move by the Federal Deposit Insurance Corp. cut by about two-thirds' the amount of special fees to be levied on banks and thrifts. It followed protests by small and community banks - with powerful allies in Congress - against a plan adopted in February that charged premiums based on the amount of deposits. The smaller institutions insisted they would be unfairly hit even though they didn't contribute to the financial crisis with reckless lending.

The FDIC board voted 4-to-1 to approve the new fee system. It is intended to raise $5.6 billion in the face of a cascade of bank failures that have depleted the insurance fund.

The FDIC now anticipates that bank failures will cost the bank insurance fund around $70 billion through 2013, up from a previous assessment of around $65 billion. The fund stands at its lowest level in nearly a quarter-century, $18.9 billion as of Dec. 31, compared with $52.4 billion at the end of 2007.