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HIGHER PREMIUM OF GRAVE CONCERN, BROADER ASSESSMENT BASE NEEDED, SAYS IBAA

 HIGHER PREMIUM OF GRAVE CONCERN,
 BROADER ASSESSMENT BASE NEEDED, SAYS IBAA
 WASHINGTON, Aug. 13 /PRNewswire/ -- The FDIC's premium increase to 28 cents per $100 of banks' domestic deposits "is of grave concern to the nation's community banks," the Independent Bankers Association of America said today.
 In IBAA's comment letter on the agency's proposed 28-cent premium per $100 of domestic deposits, IBAA President Bob Hawkins noted the unfairness of a higher premium that was proposed based on numerous assumptions. "The broad range of options presented to the Board is conclusive evidence that no one, including the FDIC, knows what the right number is for the BIF to meet its target ratio in 15 years," said Hawkins, chairman of Southern Commercial Bank of St. Louis.
 The new 28-cent premium "will hurt the profitability of many banks and decrease their ability to lend," Hawkins said. "A premium at 28 basis points may unfairly strain an industry that is just beginning to participate in the economic recovery."
 Hawkins noted that a key omission in this proposal is any discussion of the assessment base. "The current assessment base of domestic deposits is totally unacceptable to the nation's community banks," Hawkins wrote.
 According to Hawkins, the FDIC Improvement Act continues to protect large banks by allowing regulators to invoke "systemic risk," which means that a too-big-to-fail institution will be afforded coverage not available to small banks. The inequities inherent in systemic risk versus least-cost resolution must be corrected, Hawkins noted.
 "A change in the assessment base is an integral step towards correcting this unfairness," he said. "Reviewing bank failures over the past five years reveals that the present deposit insurance system provides less coverage to small banks than large banks," he added.
 Hawkins added that studies show that the failure costs associated with small banks are relatively stable in contrast to wide variability in the costs of large bank failures, which also points to the need for a broadened assessment base. "For community banks to face higher and higher premiums because of loss projections based on possible large bank failures is unfair," he said.
 Hawkins, noting the target revenue needed by the FDIC (a proposed $7.4 billion based on .28 percent of domestic deposits), urged the agency to change the assessment base from domestic deposits to a base of assets less capital. "This would be a fairer and more equitable base for all insured depository institutions," he said.
 IBAA is the only national trade association that exclusively represents the interests of the nation's community banks.
 -0- 8/13/92
 /CONTACT: Diane Casey of the Independent Bankers Association of America, 202-659-8111/ CO: Independent Bankers Association of America; FDIC ST: District of Columbia IN: FIN SU:


DC -- DC014 -- 9670 08/13/92 13:16 EDT
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Publication:PR Newswire
Date:Aug 13, 1992
Words:458
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