WASHINGTON - How much will the government charge banks for deposit insurance? Don't expect to find out tomorrow.
The Federal Deposit Insurance Corp. will meet Tuesday, but absent from the agenda is anything to do with bank premium rates.
Industry representatives had been hoping the FDIC would set the range of premiums by June 30 - the day the agency collects payment for the third quarter.
"Uncertainty hurts everything and everybody," said Harold Stones, executive vice president of the Kansas Bankers Association. "The sooner the FDIC can tell us where we are, the better off we'll all be."
But the FDIC has been maddeningly unclear about its plans. Last week an agency spokesman said a final vote on the premium range would take place "reasonably soon."
The premium debate has been dragging on since January, when the FDIC announced plans to cut bank rates by 83% to an average of 4.5 cents per $100 of domestic deposits. The range of rates proposed was 4 cents for the safest banks to 31 cents for the riskiest banks.
The industry expected the FDIC to adopt this rate schedule in May; the agency postponed making a final decision. FDIC Chairman Ricki Helfer has repeatedly said it agency is bogged down analyzing the 3,200 comment letters the proposal attracted.
This excuse, however, is wearing thin for banking leaders who worry the FDIC will not cut premiums until the industry agrees to help pay for the thrift insurance fund's rescue.
"Everyday that passes and Chairman Helfer doesn't announce the range, she loses good will in the banking industry," said Kenneth A. Guenther, executive vice president at the Independent Bankers Association of America. "It's a major cost item for banks, and banks have to plan."
"They could wait on this thing into September if they want to keep the pressure on the banking industry," said Bert Ely, president of Ely & Associates in Alexandria, Va.
Before bank premiums can be lowered, the Bank Insurance Fund must hold $1.25 for every $100 of insured deposits. In speeches to banking groups, Ms. Helfer has insisted the FDIC will not know for certain that the 1.25% ratio was achieved until mid-September. That's because it will take 10 weeks to analyze the June 30 Call Reports and determine the level of insured deposits held by banks, one piece of the fund's reserving equation.
However, the FDIC announced June 14 that the bank fund reached a 1.22% ratio at the end of the first quarter. It's not too big a stretch to assume the fund increased .03% in the second quarter.
In fact, the FDIC admits the fund hit its recapitalization target in the second quarter.
"I don't think there's any dispute whatsoever that the 1.25% was met in the second quarter," Mr. Ely said. "The issue is: Did the fund make it in April, or did it make it in May?"
When rates finally are lowered, the FDIC will refund premiums back to the first day of the month after the 1.25% ratio was met. For example, if BIF reached 1.25% on April 25, the FDIC will refund premiums made after May 1.
If the FDIC implements the rate cut in September, as Ms. Helfer has said, the refund will total between $1.52 billion and $1.9 billion plus interest, according to Mr. Ely.
