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Re-activateThe cost to the Federal Deposit Insurance Corp.'s insurance fund for last week's failed banks alone is estimated to exceed $985 million, according to the banking industry publication BankInfoSecurity.
Earlier this year, FDIC officials said they expected bank failures to peak this year. The agency has placed 702 financial institutions on its list of troubled banks, and though not all of them are likely to fail, FDIC officials warned that the insurance fund still may have to cover $20 billion more in losses through 2013. Last fall, banks had to ante up $45 billion in a special assessment to replenish the insurance fund that protects depositors when banks go under.
The regulatory agency this month proposed new rules that put more emphasis on "risk management practices" in determining how much banks must contribute to the fund that insures bank customers' deposits. "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. This proposal is a significant improvement to how we do that," said FDIC Chairwoman Sheila Bair.
Under the new rules, major banks frequently described as "too big to fail" are likely to be required to pay higher assessments to the deposit insurance fund if the FDIC views them as "posing unique concentrated risks."
As Barry Ritholz of The Big Picture.com puts it, while others in Washington are "dithering" over financial reform, the proposed new rules demonstrate that FDIC Chairwoman Sheila Bair "is stepping up to the serious reform that has teeth."Meanwhile, as we have reported, scammers have been taking advantage of consumers' fears prompted by news of bank failures by sending fraudulent emails purporting to be from the FDIC asking for sensitive bank account information as part of a phony warning that your bank is about to go under. Don't fall for these phishing scams. Legitimate information from the FDIC about failed banks can be found on the FDIC Web site.—Andrea Rock
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