Community Banker Alert

As you may be aware, a long-time PACB policy priority was achieved last week when Congress passed FDIC deposit insurance reform by incorporating the reform measures into a high priority budget reconciliation bill.

For many years, PACB has been advocating for important changes to the deposit insurance system and we are delighted that another victory has been achieved for community banking. Recognition should be extended to all our members who made this a priority in their conversations and communications with their Congressional representatives. Special thanks to our Legislative Chairman and Vice Chairman, Ron Frey and Ed Molnar, who worked tirelessly in advocating for reform and merger of the BIF and SAIF funds including trips to our nation’s capital to make sure our voices were heard.

How do these key reforms affect your community bank? Here are a few examples:

• You will not have to worry about inflation eating away the value of deposit insurance coverage. The bill sets up a permanent system of inflation adjustments beginning in 2010, and at five-year intervals thereafter, authorizing the FDIC to adjust maximum coverage levels for all accounts in $10,000 increments;
• Our customers will have greater security in their retirement savings through an increase in coverage levels for certain retirement accounts to $250,000;
• Community banks will no longer need worry about being hit with huge premium jumps because the 23 bp premium “cliff” has been eliminated, and premium volatility will be smoothed out;
• Premiums will now be based on additional risk factors, meaning healthy, well-run banks will pay less than other banks;
• BIF-insured banks will no longer have to worry about paying premiums when SAIF-insured banks do not and vice versa, because the BIF and SAIF will be merged into a single fund (the merger takes effect by July 1, 2006).

For more details on deposit insurance reform, please do not hesitate to contact Dave Transue, PACB’s Government Affairs Consultant. He may be reached in the office or via email at dave@pacb.org.

Again, congratulations to all for a super victory!