WASHINGTON (AFP) — US bank regulators Friday imposed a temporary emergency fee on lenders to shore up deposit insurance reserves that have fallen dramatically amid a wave of failures.
The Federal Deposit Insurance Corp. said its board of directors at a meeting Friday approved the special fee and amended the plan that governs the way banks contribute to the deposit insurance fund that reimburses customers when banks collapse.
An "emergency special assessment" of 20 cents for every 100 dollars in insured deposits will be assessed on the industry on June 30 and collected on September 30, the FDIC said in a statement.
The board also has the option after June 30 to impose another emergency fee of up to 10 cents "if necessary to maintain public confidence in federal deposit insurance."
FDIC also said it would boosts its regular assessment beginning on April 1 to help maintain its reserve that insures customer deposits of up to 250,000 dollars.
For most banks, the rates will rise to between 12 and 16 cents per 100 dollars in insured deposits, from a range of 12 to 14 cents. Rates for banks at risk of failure were set higher.
"Deposit insurance remains a good value," said FDIC chairman Sheila Bair. "Public confidence in the FDIC guarantee has helped assure a stable source of funding for banks in these troubled times."
The board extended the rate schedule to seven years from the five-year horizon approved last October "in recognition of the current significant strains on banks and the financial system and the likelihood of a severe recession."
The American Bankers Association said the increase in fees was a painful but necessary step to back up the banking sector.
"The premium increases announced today by the FDIC are very significant and will pose an extra burden on every bank. However, the industry is committed to maintaining the strength of the deposit insurance fund," said Edward Yingling, president and chief executive of the bankers group.
The FDIC reported Thursday a sharp depletion of the Deposit Insurance Fund in the fourth quarter due to actual and anticipated bank failures to 19 billion dollars from 34.6 billion in the third quarter.
The FDIC said it had set aside an additional 22 billion dollars for estimated losses on failures anticipated in 2009.
The US banking sector lost a combined 26.2 billion dollars in the fourth quarter amid a deepening financial crisis that forced massive writedowns.
For all of 2008, the banking sector earned 16.1 billion dollars, a decline of 83.9 percent from 2007 and the lowest annual total since 1990.
Twelve banks failed during the fourth quarter and one banking organization received assistance. During the year, a total of 25 insured institutions failed.
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