WASHINGTON - A key constituency has yet to join the deposit insurance reform fray - big banks.

While community banks have long clamored for increasing the per-account coverage level, and agitated against fast-growing institutions that add billions of dollars to insured deposits without paying any premiums, larger banks have been largely silent on the key issues. Given that many in the industry are still trying to digest the recommendations issued April 5 by the Federal Deposit Insurance Corp., reform's fate may hinge on the big banks' support.

These banks remain undecided on the matter, but early indications are that when they look at the entire package they will not like what they see.

"Big banks are going to hate this, because it will cost them money unnecessarily," said Bert Ely, an independent analyst in Alexandria, Va.

For many, the issue will likely come down to the bottom line. More than 92% of institutions pay nothing in deposit insurance premiums, because they fall into the best risk category. Under the FDIC's plan, only 42% of banks could claim the best risk category, and even they would be charged a small premium.

Using factors such as Camels ratings, the amount of real estate holdings and noncore funding, and asset growth, the FDIC would develop a score for each institution and assign each to a risk category with an appropriate premium.

Even the best risk category would cost banks a 1-basis-point charge and could equal big bucks - a $10 billion-asset institution would pay $653,408, for instance. For the 26.5% of banks in the next category, that premium would jump to $1.9 million. That may not seem excessive for such a large bank, but is a lot more than the zero-premium banks are charged now: zero.

Joe Belew, president of the Consumer Bankers Association, said large banks are watching closely.

"The industry is going to be looking at how the regulators define risk in the variable premiums," Mr. Belew said. "The issue is that if the banks have fully funded and overfunded the bank fund, I question the baseline assumption that everybody ought to have to pay something. But it is too early to judge the effect on any given institution. People will have to crunch some numbers."

To counter the increased premiums, the FDIC has proposed a rebate, based on past contributions, that would kick in once the ratio of reserves to insured deposits topped 1.35%.

Mr. Ely argued that the new FDIC system is slanted so that bigger banks will pay large sums, even with a rebate. Under his analysis of the scoring system, Mr. Ely said he expects most large banking organizations to face a 6-basis-point premium. For a $10 billion-asset bank, that would be $3.9 million.

He pointed to the fact that the agency's proposal would give institutions with a ratio of noncore funding to total assets of 30% or more a higher score, and nearly automatically pushes them into a higher risk-category.

"No big bank has noncore funding below 30%," Mr. Ely said. "The FDIC admits that most banks, even with the rebates, are still going to have a net cost in premiums. The big banks will say, 'What are we getting out of this?' "

Indeed, smaller banks have advocated the need for increased coverage as a principal reason for reform. Larger bank groups are still studying the FDIC proposal, but coverage is not as important to them because their funding does not rely on domestic deposits and they have already decided that more coverage could lead to more government regulation.

"We are strongly opposed to increasing coverage," Steve Bartlett, president of the Financial Services Roundtable, though he said the larger banks nonetheless have given the issue little attention.

"There are not strong feelings on any other elements," he said. "Other than discussing the $100,000 limit, this is not a high topic of conversation."

A focal area in this debate has been fast-growing institutions such as Merrill Lynch & Co. and Salomon Smith Barney that are moving money from uninsured sweep accounts to insured deposits, thereby diluting the bank fund's reserve ratio.

Though its stance on the FDIC's recommendations is not known, Merrill Lynch opened the door to supporting heavier risk-based premiums in a February letter to the agency.

"We believe those depository institutions that present the highest risk profile to the deposit insurance funds should bear a greater cost of deposit insurance than institutions engaging in less risky activities," wrote Peter C. Hagan, chairman of Merrill Lynch Bank USA in Plainsboro, N.J.

But the brokerage firm also argued that quick growth does not constitute higher risk.

Other fast-growing companies' positions remain unclear. Citigroup Inc., which owns Salomon Smith Barney, is expected to share other large banking organizations' view of the situation.

Industry representatives said the larger banks will keep tabs and determine their own costs before weighing in.

"I think banks of any size have to make the calculation," said James Chessen, chief economist with the American Bankers Association. "We have to look at the costs over time and with some expected losses to the reserve funds."

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