UPDATE 2-US braces for higher bank failures cost, raises fees

Δημοσιεύθηκε: 27 Φεβρουαρίου 2009 - 18:01

By Karey Wutkowski and John Poirier

WASHINGTON, Feb 27 (Reuters) - A deepening recession forced U.S. bank regulators on Friday to more than double to $83 billion the projected cost through 2013 to a fund that protects customer deposits and to raise insurance fees on banks.

Without the extra money, the Federal Deposit Insurance Corp said its insurance fund would be wiped by bank failures this year. Currently the fund insures up to $250,000 per depositor.

The FDIC deposit insurance fund took a big hit during the fourth quarter, plunging almost 50 percent to $18.9 billion in preparation for actual and expected bank failures.

So far this year 14 banks have failed, a pace that could result in the FDIC seizing more than 100 banks by the end of 2009. By comparison, 25 banks failed in 2008 and just 3 in all of 2007.

The FDIC board of directors voted 4-1 to approve a package of measures aimed at raising as much as $27 billion this year in assessment revenues, including $15 billion from a one-time fee in the third quarter. Last year, the FDIC raised $3 billion in fees from banks.

FDIC Chairman Sheila Bair, who voted in favor of the increased fees, said regulators tried to balance the agency's need to restore its insurance fund with banks' ability to lend to consumers and businesses.

'I believe that the regular assessment rates we're considering and the special assessment rate achieve that balance,' she said at an open board meeting.

The FDIC's budget is financed by more than 8,300 banks, which pay the agency to insure customer deposits. Congress is considering making permanent this year's $250,000 deposit coverage, up from $100,000 to boost confidence in banks.

The FDIC's plan for a special assessment represents the first such move since 1996, when regulators took similar action in the aftermath of the savings and loans crisis. The 20 basis point fee, to be paid in the third quarter of 2009, amounts to $200,000 per $100 million in domestic deposits.

The FDIC board also voted to raise the range of regular quarterly fees that banks must pay to obtain deposit insurance, beginning in the second quarter of 2009. If conditions deteriorate, and the FDIC faces an emergency, the agency said it could also impose a special 10 basis point quarterly assessment.

The 25 U.S. bank failures in 2008 cost the agency $18 billion, the FDIC said. Another $65 billion in bank failure costs is expected from 2009 to 2013, it said.

Previously the FDIC had thought $40 billion from 2008-2013 would be adequate.

On Thursday, the FDIC said the number of problem banks jumped by nearly 50 percent to 252 in the fourth quarter of 2008. The list of banks, which were not identified by name, is based on regulators' confidential evaluations of capital adequacy, risk management, asset quality and other factors.

The FDIC has set aside $22 billion for expected payouts by the FDIC insurance fund for bank failures in 2009.

Bair did not rule out the possibility that the FDIC might have to tap a line of credit with the U.S. Treasury Department to cover the costs of bank failures. The FDIC has access to $30 billion from Treasury and Congress is considering raising that to $100 billion.

Board member John Reich, the departing head of the Office of Thrift Supervision, said he voted against the fee increase because it would hurt banks. Reich said he opposed a one-time assessment on banks 'when they can least afford it.'

RELATED INFORMATION:

*US problem bank list soars to 252 in Q4

*Latest Citi aid may give US 36 pct stake

*FACTBOX-US banks' Q4 earnings, data

*FDIC's sold loan pool backed by SW assets

*FACTBOX-14 U.S. banks have failed in 2009

(Reporting by John Poirier and Karey Wutkowski, editing by Jeffrey Benkoe and Tim Dobbyn) Keywords: FINANCIAL/BANKS FAILURES

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