WASHINGTON (CN) – The Federal Deposit Insurance Corporation is developing rules that could maintain a positive balance in the deposit insurance fund even during a banking crisis, and requests public input.
During the most recent spate of bank failures, the deposit insurance fund-which depository institutions pay into as insurance against the funds of their account holders-reached a record low of negative $20.9 billion in 2009. The FDIC made emergency increases to the insurance premiums charged to member institutions, and emergency levees to maintain fund solvency.
The size of the deposit insurance fund is mandated by statute as a percentage of the total amount of funds insured at depository institutions.
As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the minimum size of the fund was raised to 1.35 percent of total funds on deposit from 1.15 percent and the cap of 1.5 percent was lifted. In addition, the FDIC was granted sole authority to determine when to pay fund dividends that had been required when the fund reached its maximum size.
To have maintained a positive balance during the last banking crisis, the FDIC has determined that the size of the fund would have had to have been at least 2 percent of all funds on deposit.
The FDIC is asking for help in determining how high premiums should be to get the fund back to its minimum size, and how to graduate a lowering of premiums as the fund reaches the 2 percent of insured funds the agency has determined would have been needed to maintain a positive balance in the most recent banking crisis.