The community bank lobby’s Minority Bank Council has come out in support of extending the FDIC’s transaction account tag insurance, saying that letting it expire would disproportionately affect their constituencies.
The council, part of the Independent Community Bankers of America, this week urged Congress to approve a proposed five-year temporary extension of the TAG insurance that it said fully covers $1.3 trillion in deposits.
“With so many other risks to the nation’s economic recovery, a premature expiration of TAG is an additional, unnecessary risk we should not take,” said the council’s chairman, Guillermo Diaz-Rousselot of Continental Bank of Miami, and vice chairman, George Andrews of Capitol City Bank & Trust Co.
“The stakes are especially high for minority banks and the communities we serve,” they said in a letter to congressional leaders.
The TAG insurance program was created during the 2008 financial crisis to protect checking accounts used by businesses, local governments, hospitals and other non-profit organizations for payroll and other recurring expenses. Unless extended, it expires on Dec. 31.
Diaz-Rousselot and Andrews noted in their letter that the coverage does not require taxpayer funding, because it’s paid for through FDIC insurance premiums, and said the TAG program has helped the nation’s 184 FDIC-recognized minority banks attract deposits that support loans to small businesses and consumers.
Minority banks are either owned by minority individuals – African Americans, Asian Americans, Hispanic Americans or Native Americans – or have minority boards of directors and serve minority communities.
“The institutions are tailored to the languages, customs and special financial needs of their communities. The loss of TAG coverage will have a direct and adverse impact on the neighborhoods served by minority banks,” the ICBA said.