Monday, April 23, 2012

FDIC Fund Recapitalization Showcases Industry Strength

“The rapid recapitalization of the Deposit Insurance Fund reflects a noticeable slowdown in bank failures as the banking industry continues to gain strength. The FDIC has been overly conservative in setting aside reserves for possible failures that did not occur. These excessive reserves mean the fund is even healthier than expected.

“Banks are solely responsible for all of the FDIC’s expenses, paying about $13.5 billion in premiums every year. This means banks will provide more than $65 billion in revenue over the next five years, more than five times what the FDIC expects in failure costs. As a result, the fund will recapitalize much faster than the FDIC anticipates.

“Banks have been aggressive in putting losses behind them and building up capital reserves. The industry’s strong capital-to-assets ratio means banks have ample liquidity and are well prepared for any challenging economic circumstances that could arise.”

James Chessen, ABA Executive Vice President and Chief Economist

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