Banks Would Lose Deposit-Insurance Windfall Under FDIC Proposal

Some of the biggest U.S. banks would lose their ability to reap financial windfalls from lower deposit-insurance premiums under a set of changes proposed by the Federal Deposit Insurance Corp.

The FDIC board voted unanimously today to seek comment on revisions in the way it calculates payments required for the agency fund that protects depositors against bank failures. The proposed changes, needed to match new capital rules, would eliminate a practice that is allowing as many as six big banks to claim a “significant reduction in assessments” starting in the second quarter of this year, according to FDIC officials.

The proposal, open for 60 days of public comment, would require banks to use a standard approach -- taking away the benefit some had gained by using internal models to measure counterparty risk. Those models created an imbalance in which assessments were skewed by what calculations banks used rather than their actual risks, according to the proposal.

Moving to a standard approach would “ensure consistency” in the agency’s approach to big banks, FDIC Chairman Martin Gruenberg said at the board’s meeting in Washington.

The FDIC, Office of the Comptroller of the Currency and the Federal Reserve approved new risk-based standards last year for how much capital banks have to hold against assets. Because the premiums for FDIC deposit insurance are tied to risk, the agency is seeking to align its assessments to that system -- for example, how much it charges a bank considered “well-capitalized” under the new standards.

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