Magazine article American Banker

Bank Panels Agree to Seek 1.25% Cap on FDIC Reserves

Magazine article American Banker

Bank Panels Agree to Seek 1.25% Cap on FDIC Reserves

Article excerpt

The Federal Deposit Insurance Corp. would be barred from building its reserves beyond 1.25% under a compromise between the House and Senate banking committees.

The reserve cap would be a victory for banks, setting the stage for 92% of the industry to get deposit insurance for free. Industry leaders have argued that banks should not have to pay premiums once the insurance fund reaches its congressionally mandated level of $1.25 for every $100 of insured deposits. Currently, the bank fund's reserve ratio is 1.30%. Still unclear Monday: how the government will determine which institutions are exempt from paying premiums.

These questions are wrapped up in legislation to rescue the Savings Association Insurance Fund. Last week, House Banking Committee Chairman Jim Leach agreed to accept the Senate's narrow financial fix.

In return, his Senate counterpart, Alfonse M. D'Amato, pledged to move separate legislation by April to merge the bank and thrift insurance funds and eliminate the thrift charter.

As part of the deal, industry sources say, the committees also have agreed to cut by as much as $350 million the bill faced by the so-called Oakars, banks that own thrift deposits.

To pay for the rescue, Congress wants to charge an 85-cent fee on every $100 of thrift deposits. However, Oakars have been arguing that they should not have to pay the full fee because the thrift deposits they bought have run off.

Lawmakers have agreed to reduce Oakar banks' thrift holdings by 20% before levying the fee, and make the assessment tax-deductible. …

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