$40 Billion Loss Projected For FDIC Deposit Insurance Fund

Posted In: Bank Failures, Banking Crisis, FDIC, U.S. Government

From the Associated Press yesterday:

The head of the FDIC is asking for an increase in premiums that will double the average paid by U.S. banks and thrifts next year to replenish the deposit insurance fund.

Federal Deposit Insurance Corp. Chairman Sheila Bair is making the proposal at a meeting of the agency’s board. It calls for higher-risk institutions to pay bigger insurance fees than others.

The proposed increase is based on a projected $40 billion loss to the insurance fund from bank failures through 2013. It would reduce the industry’s average pretax income by 5.6% next year, according to FDIC estimates.

Question: if higher-risk institutions have to pay larger fees than others, wouldn’t that make them an even higher-risk? Just curious.

Source:

“FDIC chair asks banks to pay more”
Associated Press, October 7, 2008

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