FDIC Prepares Premium Hikes to Brace for More Bank Failures
Banks will soon start receiving more funds from the government after regulators conduct new stress tests, but they’ll also have to pay higher insurance premiums to the FDIC so it can be ready for future bank failures.
Speaking at a Foreign Policy Association dinner last night in New York, FDIC chairman Sheila Bair said that the FDIC is going to increase premiums banks pay to build up reserves — most likely tomorrow. Raising premiums to prepare for hard times and future bank failures was one of Bair’s priorities when she first joined the FDIC as chairman in mid-2006.
“The idea was to start raising money during good times,” she said. “We didn’t have enough time to get it where I wanted it to be. So on Friday, we’re going to have to raise them again.”
The increase doesn’t come as a huge surprise considering the anticipation of more bank failures. Twenty-five banks collapsed last year; this year, 14 more have already followed them. And back in October, the Washington Post reported that the FDIC could double insurance premiums to raise about $10 billion a year in additional revenue.
Here’s the video of Bair’s presentation:
Marine Cole is a New York-based journalist who's written for Dow Jones Newswires and Crain Communications's Financial Week and has been published in the Wall Street Journal.
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