May 29 (Bloomberg) -- The Federal Deposit Insurance Corp. barred weaker banks from competing for funds by paying interest rates out of line with local markets as the regulator moves to boost liquidity and keep lenders from taking on excessive risk.

The 3 percent of banks the FDIC deems less than “well- capitalized” will be prohibited from matching offers made by a small number of high-rate competitors, according to a rule the agency’s board approved today in Washington. The change, which takes effect Jan. 1, lets these banks offer the national rate plus 75 basis points.

The rule “ends some of the competition we’re seeing from weaker banks that perhaps are paying more than they should,” FDIC Chairman Sheila Bair said before the vote.

Regulators have closed 36 banks so far this year compared with 25 in all last year, speeding the pace of failures amid the worst financial crisis since the 1930s. The FDIC classified 305 banks as “problem” in the first quarter, the highest total in 15 years and a 21 percent increase from the 252 in the preceding three-month period, according to a May 27 report.

“Well capitalized” banks, those deemed by regulators to have adequate equity to withstand losses, must have a Tier 1 ratio of at least 6 percent. In the May 27 report, the FDIC said 97 percent of banks met the standard.

The agency’s deposit insurance fund, supported by fees paid by banks, fell to $13 billion in the first quarter from $17.3 billion in the preceding three-month period. The FDIC has imposed an emergency fee to raise $5.6 billion to rebuild the fund, with more assessments possible this year. The agency forecasts failures will cost $70 billion through 2013.

To contact the reporter on this story: Alison Vekshin in Washington at avekshin@bloomberg.net.

Last Updated: May 29, 2009 12:13 EDT