WASHINGTON The Federal Deposit Insurance Corp. has rejected an 11th-hour bid by Comptroller of the Currency John D. Hawke Jr. and Office of Thrift Supervision Director Ellen Seidman to have deposit insurance reform include resolution of disparities between exam fees on state-chartered and federally chartered banks.
Mr. Hawke and Ms. Seidman had asked the FDIC to include a statement that Congress should address the issue of higher fees for federally chartered banks and thrifts among its deposit insurance reform recommendations, which are expected to be released Thursday.
An FDIC spokesman said Tuesday that the language would not be included in the recommendations because it was not a deposit insurance issue.
Industry lobbyists had worried that such language could lead to an increase in the exam fees on state-chartered banks. They are already fighting budget legislation in the Senate that would raise fees, and said they were relieved the FDIC rebuffed Mr. Hawke and Ms. Seidman.
It is a totally inappropriate issue to be dealing with in deposit insurance reform paper, said Kenneth Guenther, president and chief executive officer of the Independent Community Bankers of America.
This is a competitive issue between four banking and regulatory agencies, and it should be recognized as such. Its a turf debate. Deposit insurance reform is not meant to juggle the deck in terms of who supervises whom or deal with OCC-perceived incentives or disincentives for the national charter, Mr. Guenther said.
But Mr. Hawke insisted that the issue is relevant to the debate. He said that he was not trying to propose higher fees, and hinted that he was working on alternatives to resolve the problem.
It was a very modest statement, which was intended to be a placeholder, that said this is an issue that should be given consideration, Mr. Hawke said in an interview Tuesday. I am disappointed that the FDIC staff didnt see the connection between deposit insurance and this issue.
Mr. Hawke has long argued that it is unfair that state-chartered banks which have to pay only for the exams by state officials and not for their additional supervision by the FDIC or the Federal Reserve Board pay less in fees than national banks. National banks are charged for each exam, but state banks are assessed for every other exam, which is conducted by state supervisors.
Mr. Hawke said the connection between that issue and deposit insurance reform is very clear.
The FDIC is funding all of its supervision of the state banks from the reserve funds, he said. National banks contributed over 50% of what is in the funds. To say that there is no relationship between the use of the funds to finance state banks supervision while at the same time saying we ought to modernize and address funding issues makes no sense to me.
He said he would have registered his views during an FDIC board meeting if the deposit insurance recommendations had to be approved by the full board, but that this was a staff report to be released by the agency and did not require board approval. (Mr. Hawke and Ms. Seidman control two of the four seats currently occupied on the FDIC board.)
Industry groups had already been fighting a budget proposal to introduce state exam fees for federal regulation the same plan that has been rejected by Congress for the past decade. John Ryan, senior vice president of policy for the Conference of State Bank Supervisors, said that they expected the Senate to pass an amendment from Sen. Tom Carper, D-Del., and Sen. Michael B. Enzi, R-Wyo., that would eliminate the fee proposal. He said the group was gratified by the FDIC response to pressure from Mr. Hawke and Ms. Seidman.
State supervisory fees have nothing to do with deposit insurance reform, Mr. Ryan said. We support the FDIC in their decision.
In a speech before Americas Community Bankers Tuesday morning, Ms. Seidman argued that the exam-fee disparities between state- and federally chartered institutions should be addressed in the deposit insurance reform debate.
The current discussion about deposit insurance reform provides us with a good opportunity to rethink the entire system for paying for bank supervision, including supervision by the states, Ms. Seidman said.
Ms. Seidman suggested three possible solutions: covering the entire cost of supervision for all banks and thrifts from the deposit insurance funds; mandating disclosure of each state and federal regulators supervision and insurance costs as separate line items to highlight inequities; or deducting added supervisory costs incurred by the OTS, the Comptrollers Office, or the states from higher premiums that troubled institutions would have to pay.
I dont have an answer today but as we embark on this new venture in deposit insurance, and as the industry itself continues to change, we would do well to take the opportunity to think through how we want to pay for effective bank supervision in the future, she said.
Industry analysts said that FDIC Chairman Donna Tanoue had decided not to bring the fee issue into the debate because she was afraid of derailing the effort, which has already encountered opposition on Capitol Hill.
I am not surprised that she has rejected the interjection of the state exam-fee issue into her deposit insurance reform proposals, because she wants to keep her proposals as clean as possible, said Bert Ely, an independent consultant in Alexandria, Va.
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