Despite its boring title — FDIC Board of Directors Approves Notice of Proposed Rulemaking to Revise Deposit Insurance Assessments — it contains some important issues related to reforming the big banks.
The FDIC wants to:
• Create a separate tier of deposit insurance assessment for large institutions.
• The focus is on those banks “which pose unique and concentrated risks to the Deposit Insurance Fund.”
• Risk categories and long-term debt ratings would no longer be used. (supervisory ratings stay as a factor in measuring risk)
• New scorecards will use “well-defined financial measures” that are “more forward looking”
• Other risk measures — “quality of underwriting” and “risk management practices” — will be incorporated in the future.
• Two additional scorecards will be created for: 1) Large institutions and 2) Highly complex institutions.
Bottom line: If the FDIC considers your bank too big to fail, your FDIC deposit insurance assessment will be going higher.
Once again we see that while Washington DC is dithering, Sheila Bair is stepping up to the serious reform that has teeth. She remains one of the only regulators in DC whose done an exemplary job.
Hat tip Bruce Krasting
FDIC Board of Directors Approves Notice of Proposed Rulemaking to Revise Deposit Insurance Assessments
FDIC, April 13, 2010