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FDIC Likely To Impose Special Fee To Enhance Reserve

To boost reserves by $5.6 billion, as Colonial BancGroup has collapsed and the chances of mounting failures among regional lenders is expected to continue

The Federal Deposit Insurance Corporation (FDIC) is likely to impose special fees by next month to boost reserves by $5.6 billion, as Colonial BancGroup has collapsed and the chances of mounting failures among regional lenders is expected to continue – reported Bloomberg.

The FDIC board may act soon as the failure of Alabama-based Colonial cost the agency’s insurance fund $2.8 billion, and as banks such as Corus Bankshares report dwindling capital and Guaranty Financial Group says it may fail. The fund fell to the lowest level since 1992 in the first quarter.

The failure of 77 banks this year is draining the fund, prompting the agency in May to set an emergency fee of 5 cents for every $100 of assets, excluding Tier 1 capital, to raise $5.6 billion in the second quarter. The agency has authority to set fees in the third and fourth quarters, if needed, to prevent a decline in the fund from undermining public confidence.

The FDIC board has time until September 30 to adopt a fee that banks would set aside in the third quarter. The agency has already signalled another special fee this year, as quoted in Bloomberg.