If the government lowers deposit insurance rates to 4.5 cents and stops there, bankers seeking a total elimination of the premium are likely to litigate.
The American Bankers Association plans to drag the Federal Deposit Insurance Corp. to court if the agency insists on keeping bank premiums too high, the group's chief economist James Chessen said Friday.
"I hope they have the courage to look at the numbers and charge zero," Mr. Chessen said. "I think we may end up in court."
The FDIC must maintain the Bank Insurance Fund reserves at $1.25 for every $100 of insured deposits - unless the agency can justify a higher reserve because of "significant risk of substantial future losses."
Mr. Chessen said such circumstances do not exist today. The proposed rate of 4.5 cents per $100 of domestic deposits will generate more revenue that the FDIC needs, he said.
Even the FDIC admits that at 4.5 cents the bank fund will top the target reserve level. But the agency has maintained that it has the authority to build a cushion above 1.25%.
The FDIC is expected to vote on the premium reduction this month, though a date has not been set.