Tuesday, December 16, 2008

FDIC Increases Insurance Rates

by Bill McBride on 12/16/2008 12:11:00 PM

From the FDIC: FDIC Adopts Assessments for Insured Institutions for 2009

The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) today voted to adopt a final rule increasing risk-based assessment rates uniformly by 7 basis points (7 cents for every $100 of deposits), on an annual basis, for the first quarter of 2009.

"With higher levels of bank failures, the FDIC's resolution costs have increased significantly. ..." said FDIC Chairman Sheila C. Bair. ...

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 (annualized) for the first quarter 2009 assessment. Most institutions would be charged between 12 and 14 basis points.

In October, the FDIC also proposed changes to take effect beginning in the second quarter of 2009 that would make deposit insurance assessments fairer by requiring riskier institutions to pay a larger share.
This doubles (or more) the insurance rate for most insitutions.