FDIC In Black; Bankers Want Some Money Back

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WASHINGTON – The FDIC has returned to solvency.

After seven consecutive quarters of being in the red, the FDIC reported that for Q2 2011 it was in the black. In response, a number of the nation’s banks are now requesting that the FDIC refund portions of their prepayments. The agency had previously borrowed three years of premiums in advance from the banks it insures in order to ensure adequate reserves to cover the cost of mounting bank failures. It asked the industry to prepay premiums through 2012 – totaling about $46 billion – in the form of a loan. Banks did not report the expense in advance, but booked the prepayment as an asset that depreciates according to when fees would otherwise be paid.

The number of bank failures in 2011 has been below the FDIC’s projections. A spokesperson for the American Bankers Association said, “We would say they need to look at the level of premiums and look to reduce that burden given the current pace of recapitalization. There is a long way to go to recapitalize the fund. The question is not should the fund be capitalized at an adequate level, it’s a matter of how quickly you get there.”

The Dodd-Frank Act raised the baseline ratio for reserves to insured deposits to 1.35%, from 1.15%, and leaving the fund uncapped. The FDIC recently has proposed a target 2% ratio.


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