FDIC to Collect Three Years of Premiums in Advance

The FDIC has just adopted a rule to require banks to pay at the end of 2009 the amount they would owe the FDIC for insurance premiums over the next three years. This rule change will collect $45 billion from banks to help shore-up the severely depleted deposit insurance fund. CRFB reported on this potential rule change back in early October (click here to see our original post).

Each FDIC insured institution must pay the FDIC a risk-adjusted quarterly premium for the insurance. Rates vary from 12 cents per $100 in deposits for the safest banks to 45 cents for those considered to be risky. Since banks make loans in proportion to their existing capital reserves, FDIC premiums reduce lending capacity but help to create financial stability through deposit insurance.

According to a Washington Post article today, this rule change reflects the FDIC’s projections that the number of bank failures will not peak until next year and the total cost of all failures resulting from the economic downturn will reach $100 billion.

Since the beginning of 2008, the FDIC has closed 146 banks, 120 of which occurred in 2009. Based on CRFB calculations at Stimulus.org, total bank closings over the past two years have cost the FDIC deposit insurance fund just under $53 billion.

Visit Stimulus.org for more details and a full list of FDIC bank closings.