Sun, Mar 01, 2009 - Page 11 News List

US sets emergency fee on banks to build reserves


US bank regulators on Friday imposed a temporary emergency fee on lenders to shore up deposit insurance reserves that have fallen dramatically amid a wave of failures.

The Federal Deposit Insurance Corp (FDIC) said its board of directors at a meeting on Friday approved the special fee and amended the plan that governs the way banks contribute to the deposit insurance fund that reimburses customers when banks collapse.

An “emergency special assessment” of US$0.20 for every US$100 in insured deposits will be assessed on the industry on June 30 and collected on Sept. 30, the FDIC said in a statement.

The board also has the option after June 30 to impose another emergency fee of up to US$0.10 “if necessary to maintain public confidence in federal deposit insurance.”

FDIC also said it would boosts its regular assessment beginning on April 1 to help maintain its reserve that insures customer deposits of up to US$250,000.

For most banks, the rates will rise to between US$0.12 and US$0.16 per US$100 in insured deposits, from a range of US$0.12 to US$0.14. Rates for banks at risk of failure were set higher.

“Deposit insurance remains a good value,” FDIC chairman Sheila Bair said. “Public confidence in the FDIC guarantee has helped assure a stable source of funding for banks in these troubled times.”

The US banking sector lost a combined US$26.2 billion in the fourth quarter amid a deepening financial crisis that forced massive writedowns.

Twelve banks failed during the fourth quarter and one banking organization received assistance. During the year, a total of 25 insured institutions failed.

Meanwhile, banks in Nevada and Illinois were seized by regulators, bringing this year’s tally to 16, as tumbling home prices and surging unemployment caused more borrowers to fall behind on loan payments.

Security Savings Bank of Henderson, Nevada, and Heritage Community Bank of Glenwood, Illinois, with combined assets of US$471.2 million, were shut by state regulators and the FDIC was named receiver, the FDIC said on Friday.

“Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage,” the FDIC said.

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