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 June 12, 2002 #02-29
E-mail: [email protected]

ACB URGES CONGRESS TO ADDRESS FREE RIDER ISSUE

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Statement by Diane M. Casey, president and CEO, America’s Community Bankers, on the FDIC announcement today that the Bank Insurance Fund has fallen below the 1.25 percent designated reserve ratio to 1.24 percent:

Today’s announcement by the FDIC underscores the urgent need for deposit insurance reform, specifically the need to address the free-rider problem and to merge the funds. While there were several reasons for the BIF ratio falling, the fact remains that the huge influx of tens of billions of dollars from a handful of large securities firms over the past two years has reduced the BIF reserve ratio by four basis points, thus contributing significantly to the decline of the reserve ratio below 1.25 percent.

As a result, all BIF-insured banks, regardless of their financial health, will likely be subject to premiums beginning in the first half of 2003. It makes absolutely no sense that well-capitalized, well- managed institutions should have to pay millions of dollars in premiums because a few took advantage of a loophole in the system. Funds that could have been used for lending and community support will now be siphoned off to pay premiums.

Congress must take action to address the free-rider issue now. Further delay will only exacerbate the problem. Today it’s the BIF; tomorrow it may be the SAIF. ACB urges all bankers to contact their senators and urge them to take up and pass deposit insurance reform this year to address the free-rider issue and merge the insurance funds.

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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