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Monday, September 28, 2009

FDIC Considers Having Banks Prepay Assessments

by Calculated Risk on 9/28/2009 04:25:00 PM

From the Financial Times: FDIC considers calling for bank advances

The FDIC’s board, which meets on Tuesday to discuss options, is currently leaning towards asking banks to pay several years’ worth of its fees in advance ...
excerpted with permission
The other alternatives are 1) borrowing from the Treasury, 2) borrowing from healthy banks, or 3) assessing banks another special fee.

The options of borrowing from the Treasury, or from healthy banks, are apparently off the table for now. On Friday, FDIC Chairwoman Sheila Bair said about borrowing from banks: "It's a possibility, I assume. I don't see that as a preferred option, but it is something in the statute."

So it appears the FDIC will ask for three years of assessments in advance, or about $36 billion according to Reuters.

The advantage to the banks of prepaying assessments (as opposed to another special assessment) is the banks don't have to record the expense immediately.