WASHINGTON — The Senate voted 98 to 0 on Thursday to approve an amendment championed by community bankers that would base deposit insurance premiums on assets instead of deposits.
The measure, sponsored by Sens. Jon Tester, D-Mont., and Kay Bailey Hutchison, R-Tex., was rolled into the Senate's financial regulatory reform legislation, which is being debated on the Senate floor this week.
With a similar provision already in the House reform bill that passed in December, the deposit insurance shift is all but guaranteed to survive enactment once a final bill makes it to President Obama.
The measure is meant to tie deposit insurance to risk rather than deposits and would mean large banks that rely less on deposits for core funding would face higher premiums.
It would shift deposit insurance calculations to a bank's average asset total during the assessment period, minus its tangible equity.
"Small community banks make rural America run," Tester said in a press release. "They don't deserve to be left holding the bag for the risky behavior of big banks."
If the broader bill is enacted, the shift to assets would benefit the vast majority of community banks that now must rely on domestic deposits for funding.
The amendment was strongly supported by community banks, which have argued for years that calculating insurance rates based on deposits unfairly penalized institutions without the means to pursue other funding options.
In May 2009, the Federal Deposit Insurance Corp. — citing the unprecedented aid for large institutions in the bailout program — said it would use assets to calculate a special assessment in the second quarter of last year to help make up staggering losses in the Deposit Insurance Fund.
The amendment would make the change permanent.