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FDIC likely will require banks to prepay $36 billion fees to replenish deposit insurance fund

WASHINGTON (AP) -- Looking to shore up the diminishing fund that insures bank deposits, the FDIC may take the unprecedented step of requiring banks to prepay three years' worth of premiums: about $36 billion.
The insurance fund has been sapped by billions from a rash of bank failures that began in mid-2008. The board of the Federal Deposit Insurance Corp. likely will call for "prepaid" bank insurance premiums at its public meeting Tuesday to discuss the issue, three industry executives and a government official said. The banking industry prefers that option over a special emergency fee -- which would be the second this year.
The executives and the official spoke on condition of anonymity Monday because the decision had yet to be made public.
It would be the first time the FDIC has required prepaid insurance fees. Under the plan, banks would have to pay in advance their insurance premiums for 2010-2012, bringing in about $12 billion for each of the three years, two of the executives said. That is the normal amount of insurance fees, though it could vary somewhat according to growth in total insured deposits -- the basis for determining the fees.
Off the table, at least for now, are the options of tapping the agency's $500 billion credit line with the Treasury Department and the agency borrowing billions of dollars from healthy banks by issuing its own debt, the industry executives and the government official said.
A spokesman for the FDIC declined to comment Monday afternoon.
FDIC Chairman Sheila Bair said earlier this month that she was "considering all options, including borrowing from Treasury," to replenish the insurance fund. Yet she is generally perceived as considering that the most unpalatable approach.