Atlanta Fed chief predicts FDIC hike in '92.

ATLANTA -- Robert Forrestal, president of the Federal Reserve Bank of Atlanta, said there was a "probability" that the Federal Deposit Insurance Corp. would raise its insurance premium in 1992.

"Deposit insurance has become more costly this year, and there is a possibility - a probability - the FDIC will raise the rates yet again next year," he said in a speech to a conference sponsored by the American Banker.

Consolidation Favored

Federal policymaker should ease unneeded burdens on banking industry consolidation by ending restrictions on interstate branching, he added.

"To achieve this transition and to allow weaker banks to be absorbed by stronger institutions, remaining unnecessary barriers to consolidation such as restrictions on interstate branching should be removed," he said.

Mr. Forrestal said policy must not encourage "socially costly mergers" in which banks become "too big to fail." Those that "cannot cope with the new environment" should be allowed to leave the system.

Farewell to 'Too Big to Fail'

"Congress has provided a very strong mandate to the regulatory agencies to close banks before they incur large losses. No bank, no matter how large it becomes, can be completely confident that it will be too big to fail after the new legislation takes full effect in 1995," Mr. Forrestal said.

Banks face the danger of more regulation if they don't take preemptive action, he said.

For example, "If banks do not show more creativity and energy" in meeting their Community Reinvestment Act requirements, "they could be subjected to even more restrictive regulation."

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