Bankers brace for FDIC hit

Proposed assessment may ding banks’ bottom lines

Area bankers are waiting to see if they will take a hit from a major one-time assessment from the Federal Deposit Insurance Corp. to insure their deposits.

Charles Brown III, president of Insignia Bank in Sarasota, says the special assessment proposed to help shore up the FDIC’s insurance fund would translate to a six-figure payout from his bank.

“We pay about $70,000 (annually) right now, and it could be anywhere from $200,000 to $300,000,” Brown says. “It would have a significantly negative impact in a banker’s eyes.”

Not surprisingly, the move has been controversial. And it is still up in the air.

The FDIC will discuss the proposed assessment of 20 cents on every dollar of deposits at a meeting Friday.

In late February, the FDIC declared an emergency in its insurance fund, which reimburses deposits to consumers in the event of a bank closure. The fund fell nearly 50 percent in the fourth quarter to $18.9 billion.

FDIC Chairwoman Sheila Bair announced that the FDIC would impose a one-time increase on insurance premiums equivalent to $15 billion on the nation’s roughly 8,300 banks.

The move brought protests from bankers, who are already struggling with non-performing loans and the financial damage caused by the subprime mortgage crisis and current recession.

Critics also said the move would further stifle lending, seen as important to jumpstart the economy again.

Others, like Barney Frank, chairman of the House Financial Services Committee, have suggested that the fees should be tiered based on the size of the banks, with the largest banks bearing more of the burden.

Since then, the FDIC has said it would reduce the special assessment if Congress expands its borrowing power to shore up reserves.

“Our chairman has indicated that there would be a meaningful reduction if Congress approves an increase in our borrowing power from $30 billion to $100 billion,” said David Barr, an FDIC spokesman. “The reason we came up with that number is the $30 billion number was put into place in 1991 and over the last 18 years, the amount of deposits at banks has tripled. So we’re essentially looking at a tripling of the borrowing authority.”

Barr said the FDIC would meet Friday to discuss how much of a reduction in the assessment would be given if Congress approves the expanded borrowing power.

Allen Langford, president of Manatee River Community Bank, said he’s still waiting to see what action the FDIC will take.

Langford said he would see a tripling of his fees if the FDIC implemented the 20-basis-point assessment.

Currently, banks already pay an average of 10 to 14 cents per dollar of deposits, depending on their deposit mix.

The increase would come at a time when all banks are struggling with declining real estate values on their books, Langford said.

But the FDIC may have no other choice but to impose an assessment, he added.

“Unfortunately, I think it (an assessment) is going to be necessary,” Langford said. “But I think the FDIC insurance is the most important thing a bank can have.”