NEWS RELEASE
Nov. 12, 2009
ABA Media Contact: Peter Garuccio    
(202) 663-5452
E-mail: pgarucci@aba.com

ABA STATEMENT ON FDIC’S APPROVAL OF PRE-PAID PREMIUM ASSESSMENT PLAN

by James Chessen, ABA chief economist

          “The FDIC’s approval of the pre-paid assessment plan reinforces the notion that it is the banking industry that is fully responsible for ensuring the financial integrity of the agency.  Banks have paid all of the FDIC’s costs for the last 75 years and not a single penny of customer deposits has ever been lost. 

          “Bankers recognize the importance of maintaining public confidence in the FDIC and remain committed to assuring its health. This year banks will pay nearly $18 billion in premiums – including the large $5.6 billion special assessment paid in the second quarter.

          “Pre-paid assessments will provide a huge amount of cash to FDIC – to the tune of $45 billion – to ensure that depositors remain fully protected.  This represents money that the FDIC expects to receive from banks anyway over the next several years, but having the cash on hand sooner rather than later provides more flexibility for dealing with any contingencies over the foreseeable future.

          “The prepaid assessment does come at a cost to the banking industry, impacting bank liquidity and reducing resources available for lending.  However, we believe this approach is preferable at this time to the other options available for meeting the costs of bank failures and rebuilding the Deposit Insurance Fund.  It strikes the right balance between making sure the FDIC has the cash necessary to meet its obligations and not unduly impairing banks’ ability to meet their obligations to their communities. The pre-paid assessment is far superior to another special assessment, which would likely do more harm than good as it would directly hinder capital growth and make lending much more difficult.”

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The American Bankers Association brings together banks of all sizes and charters into one association. ABA works to enhance the competitiveness of the nation's banking industry and strengthen America’s economy and communities. Its members – the majority of which are banks with less than $125 million in assets – represent over 95 percent of the industry’s $13.5 trillion in assets and employ over 2 million men and women.