WASHINGTON — The FDIC Board, in its recent open meeting, approved the final regulations implementing the Federal Deposit Insurance Reform Act. Three major banking trade associations have said that the premiums assessed at that meeting are too high.

The agency established a risk-based assessment system that will allow the insurer to more closely tie a bank's premiums to the risk it presents to the deposit insurance fund. As a result of the final rulemaking, the FDIC set the assessment rates, varying between five and seven cents for every $100 of domestic deposits, that will take effect at the beginning of 2007. "The premiums are much too high considering the FDIC's flexibility under the new system," American Bankers Association Chief Economist James Chessen said. "There is no requirement to boost the revenues of the fund–and no need to given the $50 billion in the fund already. The banking industry is in exceptional health, and there is no indication that large amounts of revenue are needed by the FDIC… Additional money sitting idle in Washington adds little to the financial strength of the FDIC, but has real consequences for the communities that banks serve." He noted that banks with supervisory concerns could pay as much as 43 basis points.

"We regret that the FDIC did not take full advantage of the flexibility it has under FDIRA to build up reserves to meet the designated reserve ratio steadily and gradually over a three- to five-year period," Independent Community Bankers of America Executive Vice President and Director of Government Relations Karen Thomas commented, "which would have avoided a substantial increase in assessment rates and allowed banks to use their credits over a longer period. High premiums result in banks having less money available to lend in communities to support economic growth and prosperity."