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US Regulators To Meet On Rebuilding Insurance Fund

In May, FDIC highlighted a loss of $70 billion for the insurance fund over the next five years, up from a prior forecast of $65 billion

According to the Federal Deposit Insurance Corporation (FDIC), the US regulators are going to meet on 29 September to figure out ways to rebuild the deposit insurance fund, that has been depleted by a sharp increase in bank failures – reported Reuters.

The FDIC’s board is likely to put out for public comment a number of options to replenish the fund, including tapping the agency’s $500 billion line of credit with the Treasury, levying additional emergency fees on banks, encouraging banks to prepay their regular assessments, and possibly borrowing from healthier banks.

Sheila Bair, chairman of FDIC, has stated that all the options are available and that the agency will ask for feedbacks from the industry before making a final decision.

Barney Frank, chairman of the House Financial Services Committee, stated that he prefers the FDIC tap its Treasury line of credit instead of borrowing from banks, many of which received government money under the Troubled Asset Relief Program.

The board meeting next week is expected to provide a status of the expectations of the agency for the volume of bank failures that may still be looming. In May, FDIC highlighted a loss of $70 billion for the insurance fund over the next five years, up from a prior forecast of $65 billion.

Those failures tilted the balance of the insurance fund down to $10.4 billion at the end of the Q2, from $45 billion a year earlier, quoted the news agency.