FDIC wants banks to pay more into insurance fund

WASHINGTON -- The Federal Deposit Insurance Corp. Tuesday proposed doubling the fees it charges banks to protect consumer deposits, predicting its reserve fund could take a $40 billion hit through 2013 as more troubled lenders fail.

The FDIC insures bank deposits, including personal savings accounts and certificates of deposit. A sweeping financial rescue law enacted last week temporarily raises the limit on FDIC-covered accounts to $250,000 from $100,000. The increase is in effect until the end of 2009.

Tuesday's proposal would cut banks' pretax income by about 5.6%, according to the FDIC. Still, the agency didn't use its full legal authority to build up an even more robust trust fund balance.

"The U.S. banking industry has the willingness and capacity to provide the necessary backing to the insurance fund," said FDIC Chairman Sheila Bair. "The public can be sure that we will always have enough money to protect their insured deposits."

Separately, the FDIC proposed easing capital requirements for banks that hold Fannie Mae and Freddie Mac debt. The FDIC said that debt is less risky since the government took over the mortgage giants last month.

Since the beginning of the year, the FDIC has closed 13 failing banks, including the high-profile meltdown of IndyMac, a California-based mortgage lender. The agency's estimate of $40 billion in losses, which aides acknowledged is highly uncertain, includes the $11 billion in losses it has already incurred, including the $8.9 billion IndyMac shutdown.

Banks today pay an average assessment of 6.3 basis points to FDIC to cover deposits. A basis point is the equivalent of one penny for every $100 in a savings account. Under the proposal, which is open for a 30-day comment period, the average bank assessment would rise to 13.5 basis points from April 2009 through the end of the year, and 12.6 basis points from 2010 on.

The FDIC would require banks that rely heavily on secured debt to pay bigger fees. The FDIC's rationale: Because those banks may rely more on borrowing than on deposits, they would otherwise pay less into the insurance fund, yet would be potentially riskier.