Banks may bear U.S. FDIC special charges until 2013 – report

August 28, 2009

Aug 28 (Reuters) – The U.S. banking industry may have to continue to bear the burden of replenishing a top regulatory fund, used to back insured deposits when a bank fails, as Federal Deposit Insurance Corp’s (FDIC) special assessments could persist through 2013, investment bank Fox-Pitt Kelton said.

The FDIC’s deposit insurance fund, which safeguards up to $250,000 per account at roughly 8,100 institutions, currently faces a $45 billion shortfall or 34 basis points of industry assets as of the second quarter, Fox-Pitt said in a note to clients.

The agency’s deposit insurance fund dipped 20 percent in the second quarter to $10.4 billion. The drop in the fund was chiefly due to the $11.6 billion the FDIC set aside for expected bank failures.
The FDIC said problem U.S. banks and thrifts rose more than a third to 416 in the second quarter. Regulators have closed 81 banks so far this year, compared with 25 last year, and three in 2007.

FDIC Chairman Sheila Bair said on Thursday the FDIC had not yet decided whether to charge banks another special assessment to replenish the fund, but that the agency’s board would meet toward the end of the third quarter to discuss the issue.

In May, the FDIC voted to impose a $5.6 billion special fee the industry has to pay in the third quarter. It also gave itself the right to charge two more special fees in coming quarters.
“With several sizeable banks in trouble and likely to need to be resolved soon, the fund will get further depleted, which indicates another likely special assessment in the fourth quarter of 2009,” J.P. Morgan Securities’ analyst Vivek Juneja wrote in a note dated Aug 10.

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