Wednesday, May 25, 2011

Banks' recovery made more difficult by increase in deposit insurance - Jacksonville Business Journal:

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Bankers said they will pay what they must to keep deposits insured, but many are writing off large sums of money for the assessment, and those additionao costs take them a step back from recovery. “Itr impacts us all dramatically becausee no one has really budgeted for saidDamon Olinto, president and chief operatinyg officer of . “But it’s the cost of doing business.” “It takes the enthusiasm out of how we can recoverr and where wecan go,” said Jay Fant, chairmann and CEO of . The bank set aside $800,000 for the speciall assessment in thefirst quarter.
In a good those earnings would go to Another way for banks to compensate for furthere losses would be to pass on the assessment in the form of lowert interest rates or chargeson deposits, or highetr fees on loans. Though no bankera locally said they have donethat yet, thosd banks with greater financial woes may have no othert choice but to pass it on. Ther may be a way to pass it down but then that createes a competitive issue with the saidCharles Hughes, CEO and director of , the holdingv company for “If there is enough pressure then clearly, the banks will have to do Florida Capital will have to pay about $750,000 for the The ’s board of directors announced earlier this year a one-tims special assessment of 20 basis or 0.
2 percent, of the bank’s total domestic deposits as of June 30. The comment periods for banks ended April 2 andthe FDIC’s boarde is analyzing those comments to see if changesd are necessary, said David Barr, spokesman for the Bankers said they are hopeful that the board will reduc e the assessment to 10 basis points from 20 basis point if Congress approves an increase in the FDIC’xs permanent borrowing limit. Barr said the FDIC has only indicateed that if Congress approvees the increasein borrowing, it will have a “meaningfuol reduction” in the assessment, but it has not specifiecd by how much.
The FDIC “told banks to plan for and be prepared for the 20 basidspoints assessment,” he said.

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