WASHINGTON -- The Federal Deposit Insurance Corp. may vote Tuesday to increase premiums to an average of just under 27 cents per $100 of insured deposits, from 23 cents currently.
Last spring, the FDIC's board members backed a proposal to increase the premium to 28 cents. But after a period of public comment, the board may decide tomorrow that a lesser increase is adequate.
The current premium debate comes at a time when the health of the banking industry is improving. In addition, the amount of the increase is likely to be restrained because of the recent death of FDIC Chairman William Taylor, who favored an increase to at least 28 cents.
Compromise in the Works
As of late Friday, a compromise was being worked out in an effort to get all four FDIC boardmembers to go along with an increase to nearly 27 cents.
Another key change under discussion on Friday: Well-run banks could be charged slightly less than under the previously approved plan, while troubled banks would pay more.
Under a compromise being hammered out last week, the best-run banks would pay 24 cents while the worst-run ones would pay 32 cents.
Previously, the premiums were to range from 25 cents for the best banks to 31 cents for the worst.
Any premium increase voted on Tuesday is expected to take effect on Jan. 1.
The last time around, increasing the premium to 28 cents was opposed by the board's two Treasury Department officials: Timothy Ryan, director of the Office of Thrift Supervision, and Stephen Steinbrink, acting comptroller of the currency.
The increase was supported by the board's other three members, Mr. Taylor, C.C. Hope, and Andrew c. Hove Jr., acting FDIC chairman.
Bankers Cry Foul
In recent months, bankers have criticized the increase approved last spring. They complain that the spread between premiums paid by the good banks and bad banks is too narrow.
A final vote on the premium was set for Sept. 1, but was delayed two weeks at the request of Mr. Ryan and Mr. Steinbrink.
During last spring's meeting on the premium increase, both Mr. Ryan and Mr. Steinbrink endorsed raising the premium rate to 27 cents. Thus, the FDIC staff's recommendation of an average increase just under 27 cents, makes it tough for the two men to oppose.
Nonetheless, the outlook for the banking industry and the FDIC insurance fund have improved since the vote was taken in May. The industry turned in record profits during the first half, and the FDIC whittled its deficit by $1.5 billion. So the fund, not counting hefty reserves against expected losses, is now $5.5 billion in the red.
The plan to increase premiums to just under 27 cents was drafted by FDIC staffers and presented to Mr. Ryan and Mr. Steinbrink. They, in turn brought the proposal to their boss, Deputy Treasury Secretary John Robson, for his review last Thursday.
Mr. Robson was out of the office on Friday and could not be reached for his reaction.
But because he has devoted much of his energy this year to ending the credit crunch, he is widely considered to be resistant to any increase in deposit insurance premiums at all. The logic is that if banks must pay more to the FDIC, they will have less money to lend.