ABA STATEMENT ON THE HEALTH OF THE BANKING INDUSTRY

AND FUTURE PREMIUM ASSESSMENTS

 

by Wayne Abernathy, executive director, financial institutions policy

and regulatory affairs

 

            "With a very healthy banking industry and deposit growth returning to normal levels, there is little need for high insurance premiums in 2007.  The FDIC fund has been more than adequately capitalized for a decade without the need for premium assessments.

           

            "As all institutions will begin to pay in 2007, there is little need to charge more than one or two basis points to keep the fund at healthy levels.  The short- and long-term goals of the FDIC should be low and stable premiums.  To do otherwise would impose unnecessary hardships on the banking industry, especially new banks striving to be profitable."

 


BACKGROUND

The FDIC's quarterly banking profile released today shows that the banking industry posted record earnings in the second quarter and increased equity capital to nearly $1.2 trillion.  Of particular interest was that insured deposits showed the smallest quarterly increase in almost three years.  This means that the reserve ratio for the deposit insurance fund remained unchanged from the first quarter, rather than declining as FDIC anticipated.  The FDIC had introduced the possibility that there would be significant premiums in 2007 if insured deposits continued to grow at more than twice the normal rate, as had been the case for more than a year.  ABA has recommended t hat the FDIC avoid premium spikes in 2007 and that position is supported by the return of deposit growth to normal levels. 

 

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The American Bankers Association, on behalf of the more than two million men and women who work in the nation's banks, brings together all categories of banking institutions to best represent the interests of this rapidly changing industry.  Its membership-which includes community, regional and money center banks and holding companies, as well as savings associations, trust companies and savings banks-makes ABA the largest banking trade association in the country.