WASHINGTON-Senators Michael Enzi (R-Wyo.) and Tim Johnson(D-S.D.) introduced deposit insurance reform legislation July 29,which some are calling the best shot the legislation has had atbecoming law in several years. The Federal Deposit Insurance ReformAct of 2005 (S. 1562) does not include the coverage increase to$130,000 in the House bill, but does index coverage to inflation,increases coverage for retirement and municipal accounts, mergesthe Bank Insurance and Savings Association Insurance Funds, andstabilizes premiums. The BIF has the potential of aggravating thereserves trigger soon, instigating a premium assessment, if thelegislation does not go through, providing an additional impetus topassing the bill. FDIC staff has estimated the reserve ratio at1.26% at year-end, just above the 1.25% that can trigger a steeppremium, according to FDIC's Web site(http://www.fdic.gov/deposit/insurance/risk/2005_02/Bif_2005_02.html)."One of the most important changes the bill makes is giving banksthat have capitalized the fund credit for their past payments,"American Bankers Association President and CEO Edward Yinglingsaid. "It also puts a cap on the fund so that, at some point in thefuture, too much money won't accumulate in Washington when it canbe put to better use in America's communities. And by indexing thenation's deposit insurance levels for inflation, we are ensuringthat the insurance policy that covers our customers' deposits holdsits value over time. Furthermore, by raising coverage forretirement accounts, the bill offers additional security forcurrent and near-term retirees." ICBA, too, welcomed theintroduction of the bill. "The strength of our nation is our localcommunities, and this legislation will help keep more deposits inour local communities working for its citizens," ICBA ChairmanDavid E. Hayes, president of Security Bank in Dyersburg, Tenn.said. "While there may be parts of the bill that need to bereviewed and discussed," America's community Bankers Executive VicePresident and Managing Director of Government Relations RobertDavis commented, "the importance of today's action cannot beoverlooked. We are making progress toward real deposit insurancereform and there is both consensus and momentum to get it done."Credit union trade associations are following the legislationclosely but have said it is not of great importance to most creditunions so long as the National Credit Union Share Insurance Fundreceives parity in insurance coverage, which is currently in thebill. NAFCU President and CEO Fred Becker said that some membershave expressed an interest in increasing deposit insurance coveragefor retirement accounts, but not the overall limits. CUNA VicePresident of Legislative Affairs and Senior Legislative CounselGary Kohn said the legislation as introduced "is significantbecause it's a scaled-back version of previous Senate Bankingbills." Senate Banking Committee Chairman Richard Shelby (R-Ala.)had opposed an increase in coverage, but the compromise measuremight do the trick. Kohn said "many people" think this could pavethe way to passage later this year or early next year. However,NAFCU Director of Legislative Affairs Brad Thaler said the bigsticking point still could be the coverage level because the Houseversion of the bill raises the funding level to $130,000 andindexes from there. Still, he said, it has a "decent shot" ofbecoming law this Congress. If it does, NCUA Director ofGovernmental and Congressional Affairs Cliff Northup said theagency does not foresee any operational changes for itself at thistime, but credit unions would have to adjust their 1% [email protected]