FDIC Okays Premium Increase

All FDIC-insured banks and thrifts will have to pay at least a 5-basis-point deposit insurance premium starting next year under a final rule approved by the Federal Deposit Insurance Corp. board that completely revamps the premium assessment system.However, the majority of banks (72%) will continue to pay a zero premium again in 2007 because Congress awarded assessment credits to pre-1996 banks. By setting insurance premiums at 5 bps for the strongest institutions and 7 bps for weaker ones, the FDIC plans to burn through the credits over the next two years and rebuild the deposit insurance reserve ratio to 1.25%. As of Sept. 30, the reserve ratio stood at 1.22%. During the comment period, concerns were raised that the FDIC's method for determining a bank's financial condition for premium assessment purposes might penalize institutions holding residential mortgages. But the FDIC said it made adjustments so that institutions holding low-risk and low-yielding assets aren't penalized. "The FDIC's analysis shows that institutions specializing in mortgage lending are not charged a higher average assessment rate than other institutions under the final rule," the agency said.

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