FDIC proposes new structure for bank fees

WASHINGTON – Federal bank regulators on Tuesday proposed a new system of fees paid by U.S. banks that would shift more of the burden to bigger institutions to support the deposit insurance fund.

The board of the Federal Deposit Insurance Corp. voted to propose rules to change the basis for assessing a bank’s insurance fees from the amount of its deposits to its assets. The change is required by the financial overhaul law enacted in July. Officials said it would more clearly reflect the risks to the insurance fund.

It would be the first time since 1935, during the Great Depression, that insurance premiums wouldn’t be based on deposits.

The regulators also proposed changes to the way the FDIC determines how much it charges big banks to insure their deposits.

FDIC Chairman Sheila Bair said that while the amounts paid by individual banks would change, the proposal is designed “to keep the total amount collected from the industry very close to unchanged.”

Also, because banks’ assets provide a much larger base for insurance premiums than deposits, the FDIC said, it is proposing to reduce the overall assessment rates.

The FDIC board opened the proposals to public comment for 45 days. They could be formally adopted sometime after that.

For big banks – defined as those with at least $10 billion in assets – insurance premiums would be determined by an institution’s risk, so that banks deemed to pose a higher risk of failure would pay higher premiums. Also, the current risk categories and debt ratings for large banks would be replaced by “scorecards” with various measures of risk.

As the financial crisis ground on, small and community banks protested against fees based on deposits, saying they were being unfairly hit even though they didn’t contribute to the crisis with reckless lending.

Last month, the FDIC decided against raising the insurance premiums after determining that the losses from bank failures this year have been lower than anticipated. The board canceled a scheduled fee increase and instead proposed a new plan for ensuring that the insurance fund, now in deficit, reaches the level mandated by Congress.

The FDIC staff provided a new estimate of $52 billion in losses to the insurance fund from 2010 to 2014, down from a previous projection of $60 billion. The agency also proposed last month to end a policy that allowed banks to receive rebates on fees when the insurance fund reaches healthy levels. Instead, the proposal would reduce the fees when the fund hits those levels.

So far this year, 143 banks have failed – more than all of last year. This time, the failed banks are smaller, on average, than in 2008 and 2009. That has meant the FDIC has had to pay about $21 billion to cover losses this year, down from $36 billion last year.