FDIC PROPOSES TO BOOST FAILURE ASSESSMENTS ON LARGE BANKS

http://www.bloomberg.com/news/2010-11-09/fdic-proposes-higher-assessments-for-big-banks-to-protect-against-failures.html

The Federal Deposit Insurance Corp. (FDIC) today proposed shifting the burden for protecting depositors against bank failures toward larger lenders whose reliance on riskier funding sources may pose a greater threat to the financial system, Bloomberg News reported today. The FDIC board today approved two proposals for overhauling assessments for its deposit insurance fund, including one that would base the fees on banks’ liabilities rather than their domestic deposits. The fee proposal, a response to the Dodd-Frank financial-regulation law, would increase assessments on banks with more than $10 billion in assets. “This proposal achieves the goals of the Dodd-Frank Act to change the assessment base to better reflect risks to the deposit insurance fund,” said FDIC Chairman Sheila Bair. The measure is subject to a 45-day comment period.


In related news, the FDIC said that the number of bank failures in 2010 eclipsed the total bank failures seen last year as regulators announced the closure of four banks Friday amid continued weakness in the U.S. economy, Dow Jones Daily Bankruptcy Review reported today. The FDIC yesterday announced the failures of banks in Maryland, California and Washington for a total of 143 bank failures so far this year. In 2009, 140 banks failed. Specifically, regulators closed the K Bank of Randallstown, Md., Western Commercial Bank of Woodland Hills, Calif., First Vietnamese American Bank of Westminster, Calif. and Pierce Commercial Bank of Tacoma, Wash. All of the banks are being purchased by other banks. The FDIC estimates that the cost of the four bank failures to the Deposit Insurance Fund will be about $255 million.