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 August 17, 2006 #06-46
E-mail: [email protected]

ACB GENERALLY SUPPORTS FDIC DEPOSIT INSURANCE PROPOSALS ON ASSESSMENT CREDITS, ASSESSMENT TIMING, DIVIDENDS

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WASHINGTON, D.C. — America’s Community Bankers generally supports the FDIC proposals to implement deposit insurance reform legislation in the areas of the assessment credit, the timing and method of collecting the assessments and the payment of dividends.

In its comment letters, ACB said it “appreciates the swift, thoughtful and transparent process the FDIC has used to implement the changes mandated” by the legislation. ACB provided several suggestions for improvement of the proposed rules.

Assessment Credit. ACB said it generally supports the FDIC’s proposed definition of the term “successor” for purposes of determining whether an institution is eligible for the credit. However, ACB said purchase and assumption transactions that are the functional equivalent of traditional mergers and consolidations should be treated the same for purposes of eligibility for the assessment credit allocation. The law provides that the credit is available to each eligible institution based on its assessment base as of Dec. 31, 1996.

ACB also recommended that the FDIC allow institutions the flexibility to decide whether to use their credit during the first assessment period or over a reasonable time frame. Because the credits will not cushion future payment shock once the credits are exhausted, ACB urged the FDIC to use the flexibility in the new law to assess premiums in an “even and balanced way and to build up the Deposit Insurance Fund over an appropriate period of time.”

Assessments. ACB agreed with the proposed change in the timing of assessment collections from the semiannual basis to quarterly collection 90 days after the quarter ends. This will “eliminate many of the concerns voiced by depository institutions regarding inaccurate premium assessments,” ACB said.

“We also support the proposal to make changes to supervisory and capital group ratings effective when the change occurs” to “help reflect the most accurate assessment of a depository institution’s risk at any particular point.”

ACB urged the FDIC to raise the proposed $300 million threshold for use of the average daily deposit requirement to $1 billion so that an unnecessary paperwork burden will not be placed on smaller institutions and to be consistent with other FDIC regulations using the same threshold. ACB also urged the FDIC to maintain the standardized float deduction for institutions that do not use the average daily deposit method, but revise the calculation to reflect current industry data.

“ACB cautions the FDIC against pressing forward too quickly with alterations that could force depository institutions to encounter more financial burden than they might be able to tolerate without adverse effects.”

Dividends. ACB said it supports the FDIC’s proposed implementation of the new law’s dividend provisions by adopting a temporary, two-year framework to fully consider the various options for allocating dividends.

ACB supported the FDIC’s proposed definition of “predecessor” for purposes of allocating dividends since it is “logical and consistent with the general expectations of the banking industry.”

The law requires the FDIC to declare dividends if the insurance fund’s reserve ratio equals or exceeds 1.35 percent of the estimated insured deposits at the end of a calendar year. The current reserve ratio is 1.23 percent and is not expected to reach 1.35 percent by Dec. 31, 2008, when the proposed rule sunsets.

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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