Wednesday, May 5, 2010

Altered Banking Landscape: ICBA View on Key Amendment that Ensures Megabanks Pay Their Fair Share

Washington, D.C. (May 3, 2010)—Independent Community Bankers of America (ICBA) Chairman Jim MacPhee, CEO of Kalamazoo County State Bank in Schoolcraft, Mich., issued this statement regarding Sens. Jon Tester’s (D-Mont.) and Kay Bailey Hutchison’s (R-Texas) intent to introduce a bipartisan amendment to the Senate’s Wall Street reform bill to ensure Main Street community banks are not forced to pay more than their fair share for FDIC deposit insurance.

“ICBA thanks Sens. Tester and Hutchison for introducing this ICBA-supported amendment that recognizes the difference between Main Street and Wall Street by ensuring megabanks pay their fair share for the risk they pose to the FDIC’s Deposit Insurance Fund (DIF), and ultimately our entire financial system. Under the current system, our nation’s nearly 8,000 community banks, which never participated in the risky practices that led to this economic crisis, currently pay 30 percent of all FDIC premiums even though they hold only 20 percent of the nation’s banking assets. Sen. Tester’s amendment would broaden the assessment base used by the FDIC to determine bank premiums by basing it on total assets (minus tangible equity), not just domestic deposits. This would ensure that riskier too-big-to-fail banks are forced to pay assessments proportional to the risks they pose. As this financial crisis has shown us, the risk to our financial system and economy posed by the failure of too-big-to-fail institutions is too great. They should have to account for the added risk their size and activities pose by contributing their fair share to the DIF.

“The amendment would also reduce the assessments of 98 percent of the banks with less than $10 billion in assets, keeping nearly $4.5 billion in community banks and their communities over the next three years—something that is critical to aiding America’s economic recovery.

“ICBA has been a leading advocate for creating parity between large and small banks since the financial regulatory reform debate began nearly two years ago and looks forward to working with the Senate to ensure that deposit insurance fairness is a priority so that Main Street community banks can continue to serve their customers in local communities throughout the nation and serve a vital segment of the marketplace that is crucial to the stability and well-being of our economy.”