Jan. 27 (Bloomberg) -- The Federal Deposit Insurance Corp., which is selling failed U.S. banks at the fastest pace in 17 years, today proposed limits on interest rates paid by lenders with less than adequate capital to aid banks’ liquidity.

The FDIC recommended banks be limited in tapping higher- cost sources of funds, such as brokered deposits, and be barred from paying rates that exceed a national average plus 75 basis points. The agency also said premiums paid to insure deposits should be based on risks faced by the banks that fail to meet regulatory requirements.

“The idea is to prevent these banks from acting in a way to compound losses to the FDIC,” Chairman Sheila Bair said at a board meeting in Washington. “Our expectation and intent is that the additional concreteness of this proposed rule would result in lower deposit rates being paid by a number of weak banks.”

Regulators have closed three banks this year, the most in January since shutting four institutions at the start of 1992. The pace of failures picked up last year, with 21 of 25 banks closed in the last half of the year as mortgage losses mounted. Banks are under pressure from lawmakers to maintain sufficient capital and step up lending, especially institutions tapping the $700 billion U.S. Troubled Asset Relief Program.

The FDIC is proposing to use a national interest rate on deposits, abandoning Treasury yields as the benchmark. Bair said the rule would apply to a “small minority of banks,” about 2 percent, that fail to meet the “well capitalized” requirement.

National Standard

The proposed national rate cap for banks that have adequate capital and acquire brokered deposits would be set by using rates offered at more than 80,000 U.S. bank branches, and a bank could add as much as three quarters of a percentage point. Banks considered well-capitalized are exempt, the FDIC said.

The American Bankers Association said if the FDIC adopts the proposal it would minimize the risks associated with troubled banks offering high rates on deposits.

“All the banks agree that you shouldn’t have unhealthy institutions able to offer very high interest rates that will roil local markets,” Robert Strand, a senior economist at the ABA, said in a telephone interview. “It’s very important.”

The Financial Services Roundtable, representing 100 banking, insurance and investment companies, said the proposal expands government’s role with banks.

‘Nationalization’

“It is one step closer to nationalization,” said Scott Talbott, senior vice president of government affairs at the group. The FDIC should explore other measures to achieve safety and soundness because the proposal “amounts to a return to the ‘80’s with government involvement in decisions,” Talbott said.

The agency will release the proposal for 60 days of public comment. The FDIC board plans to issue the final rule late this quarter or earlier in the second.

Regulators consider banks “well capitalized” if they maintain adequate equity to withstand losses. Banks are required to have a Tier 1 ratio of at least 6 percent to be deemed “well capitalized.”

In a separate action, the FDIC passed a rule that requires banks to immediately evaluate deposit balances when regulators seize the institution. The rule, effective July 1, bars banks from including in their insured deposits any funds transferred into higher-earning accounts after being shut.

The deposit insurance fund, which covers as much as $250,000 per depositor per bank, had $34.6 billion as of Sept. 30. The FDIC insures deposits at 8,384 institutions with $13.6 trillion in assets, according to third-quarter data.

The agency is preparing to replenish its reserves by doubling premiums charged to banks amid agency forecasts that bank failures through 2013 will cost almost $40 billion.

To contact the reporter on this story: Margaret Chadbourn in Washington at mchadbourn@bloomberg.net.

Last Updated: January 27, 2009 14:33 EST