Boost in FDIC's Premium Rate Moves to Top of Taylor Agenda

WASHINGTON -- The Federal Deposit Insurance Corp. is likely to take the advice of Senate Banking Committee Chairman Donald W. Riegle and consider whether premiums need to be increased soon, an agency spokesman said.

FDIC spokesman Alan Whitney said the comment from Mr. Riegle puts the issue squarely on the agency's agenda. Under current law, the existing premium would remain in effect through next June unless the FDIC acted by Nov. 1 to raise the rate effective Jan. 1.

Pressure on FDIC

"Is it under discussion here?" Mr. Whitney asked. "Certainly. I would expect it to come up at a board meeting soon." He added that no meeting is scheduled.

Industry lobbyists said Mr. Riegle's comments Wednesday put substantial pressure on the FDIC to hike fees.

"It would be a surprise to a lot of people in the industry if they didn't raise premiums," said lobbyist James Butera, who represents New England savings banks and other financial institutions.

No. 1 on the Agenda

When William Taylor takes office as FDIC chairman, in a matter of days, higher premiums "will be the No. 1 item on his agenda," Mr. Butera said.

"They do have to consider the issue of the appropriate premium level by the end of October," added Edward L. Yingling, executive vice president of the American Bankers Association.

"And there's no reason to believe they are going to lower it," he added. Currently, banks pay 23 cents for each $100 of deposits. Industry sources speculated that a fee increase would bring premiums to 27 cents or 30 cents per $100 of deposits.

Opposition Weak

Anxious to avoid unfavorable comparisons with the thrift industry, which tried to minimize the cost of recapitalizing its insurance fund, bankers have been reluctant to oppose premium increases. Some observers believe the lack of active opposition has emboldened legislators and regulators to propose premium hikes.

"I can't tell you that the industry would actively oppose an increase now," said John S. Rippey, senior vice president of the Association of Bank Holding Companies. "But I think it is fair to anticipate an outcry like you've never seen before," If the FDIC considers higher premiums.

Kenneth Guenther, executive vice president of the Independent Bankers Association of America, warned that the insurance agency may have been maneuvered into a corner by Mr. Riegle and former FDIC Chairman L. William Seidman.

Walking a Plank?

On Wednesday, his last day in office, Mr. Seidman said in a brief letter to Mr. Riegle that the Bush administration's proposed $70 billion recapitalization of the insurance fund could prove insufficient.

"Seidman and Riegle have put Bill Taylor on a plank and given him a nudge," Mr. Guenther said.

Bert Ely, an Alexandria, Va.-based consultant who does work for the Association of Bank Holding Companies, said the Riegle and Seidman statements represent "a new level of hysteria."

The FDIC's Bank Insurance Fund has at least $12 billion available to it through the end of 1991, Mr. Ely said, which should be more than adequate to handle failed institutions for the foreseeable future. The proposed recapitalization would give the FDIC an additional $70 billion in borrowing authority.

PHOTO : Sen. Donald W. Riegle Urging FDIC decision

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