Dollars Out the Door

The impact of FDIC's new assessment rules, adopted Nov. 2, 2006, is that banks will acutally pay deposit insurance premiums for the first time since 1996.  Well-capitalized, well-managed institutions will pay between 5 and 7 basis points of their total domestic deposits.  This assessment is necessary to bring the Designated Reserve Ratio up to 1.25%.  The DRR had dropped to 1.23% in June.  The good news is that the Deposit Insurance Reform Act provided that banks which had paid premiums into the Bank Insurance Fund prior to 1996 receive a credit.  According to a Nov. 2, 2006, American Banker Article by Joe Adler, "FDIC Approves New Premiums on Industry",  approximately 70% of banks can use that credit to avoid paying an assessment in the first year and 30% can use the credit to escape assessment payments for 2 years.

(ag) Nov. 3, 2006, in Deposit Insurance Assessments