ACB: Press Releases

Contact:	Robert Schmermund (202) 857-3104 Jim Eberle (202) 857-3145	Jim Eberle (202) 857-3145 (work) (703) 893-2593 (home) [email protected]	For Immediate Release March 1, 2002 #02-13
E-mail: [email protected]

AMERICA’S COMMUNITY BANKERS BLAMES “FREE-RIDERS” FOR CAUSING POSSIBLE INCREASE IN INSURANCE PREMIUMS

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WASHINGTON, D.C. — America’s Community Bankers today blamed the "free-riders" ─ those securities firms that shifted billions of dollars from outside the banking system into insured deposits at affiliated banks ─ for diluting the Bank Insurance Fund and presenting the possibility that all BIF-insured banks may be required to pay premiums.

ACB applauded the request of Comptroller of the Currency John D. Hawke, a member of the FDIC board, for a more refined analysis of what factors have contributed to significant deposit growth in BIF. ACB is particularly concerned about the negative role "free riders" have played in pushing the designated reserve ratio closer to the 1.25 percent minimum.

Hawke made his remarks as the FDIC board voted not to take immediate action to increase deposit insurance premiums for the second semi-annual assessment period of 2002. While currently 92 percent of the banking industry pays no premiums, the continued dilution of the fund means that all BIF members now face a potential increase in deposit insurance premiums.

Without the ‘free-riders,’ BIF’s reserve ratio would be safely above the required 1.25 percent and the likelihood of increased premiums would be diminished," said Robert R. Davis, ACB’s managing director of government relations.

Davis cited FDIC data showing that $73 billion in "free-rider" deposits have been shifted from March 31, 2000, to September 30, 2001, causing the reserve ratio of BIF to fall by 4 basis points. If the reserve ratio falls below 1.25 percent, the FDIC is forced by law to impose premiums on all BIF deposits to recapitalize the fund.

America’s Community Bankers is the national trade association committed to shaping the future of banking by being the innovative industry leader strengthening the competitive position of community banks. To learn more about ACB, visit www.AmericasCommunityBankers.com.

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