WASHINGTON - The U.S. Federal Deposit Insurance Corp. on Tuesday proposed changes to the way it determines how much it charges big banks to insure their deposits, with the aim of having large, higher-risk institutions pay bigger premiums.
Large financial institutions "pose unique and concentrated risks" to the deposit insurance fund, something that came to the fore during the U.S. financial crisis, the agency said in a news release.
"Events during the past two years have made clear the need for improvement in how well and how quickly we recognize and charge for risk," FDIC chairwoman Sheila Bair said in a statement. "This proposal is a significant improvement to how we do that."
Under the proposed changes, ratings of banks' long-term debt would no longer be used to measure risk and calculate insurance fees. Ratings of financial strength assigned to banks by government examiners still would be used, however. Other criteria such as the quality of a bank's risk management practices, could eventually also be used.
Two new risk "scorecards" for banks would be established: one for large institutions, with between US$10 billion and $50 billion in assets, and the other for "highly complex" institutions - defined as insured banks with more than $50 billion in assets that are owned by a parent company with assets exceeding $500 billion.
The FDIC's board voted at a public meeting to solicit public comment on the proposal for 60 days. It could be formally adopted sometime after that, possibly with revisions.
The board also voted Tuesday to extend through year's end an unlimited government guarantee for special deposit accounts used by businesses. It was scheduled to expire on June 30.
The guarantee for non-interest-bearing "transaction" accounts is part of a program backing hundreds of billions of dollars in U.S. banks' debt that was put in by the FDIC at the height of the financial crisis in October 2008. The unlimited guarantee for the accounts supplanted the traditional $250,000 insurance limit.
Businesses often use the accounts for processing their payrolls and other transactions.
There were 140 U.S. bank failures last year, the highest annual tally since 1992 at the height of the savings and loan crisis, and they sapped billions of dollars out of the deposit insurance fund. It fell into the red last year, hitting a $20.9 billion deficit as of Dec. 31.
The FDIC expects the cost of resolving failed banks to grow to about $100 billion over the next four years.
The agency mandated last year that banks prepay about $45 billion in premiums, for 2010 through 2012, to replenish the insurance fund.