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Tuesday, October 9, 2012

ABA: Deposit Insurance Fund Growing Faster than Expected

ABA’s Chief Economist James Chessen made a statement this afternoon regarding the FDIC’s Deposit Insurance Fund (DIF) Forecast.
The rapid recapitalization of the Deposit Insurance Fund reflects an industry that is stronger today than at any point in the last four years. The banking industry is returning to profitability and failures continue to decline sharply. As a result, the Deposit Insurance Fund is growing faster than expected and will have the resources to weather any contingency that could arise.

The economy faces many challenges over the coming year, but the industry’s improved health and near-record capital levels leaves us well prepared. A strong and profitable banking system is an essential ingredient for a sustained economic recovery.

The industry is committed to rebuilding the FDIC fund. A strong FDIC is important both for banks and our depositors. Banks are solely responsible for all of the FDIC’s expenses, with the FDIC forecasting about $12.4 billion in premiums this year. This means that premium revenue for one year more than covers losses expected over the next five years. This report makes it clear that the fund is recapitalizing much faster than the FDIC had expected.

ABA continues to support a temporary two-year extension of the Transaction Account Guarantee (TAG) program. An extension would have no material impact on the pace of recapitalization and would provide businesses with a bit of certainty in a very uncertain economy.

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