U.S. banks and thrifts are launching an offensive against a proposed federal rule that would boost costs on one of their last reliable sources of funding for loans.
Financial institutions have sent more than 100 letters to the Federal Deposit Insurance Corp over the past month protesting a proposal that the government agency says would help restore its deposit insurance fund.
The FDIC charges U.S. banks to insure their deposits. The agency is considering boosting fees on banks that fund loans in significant amounts through secured borrowing from institutions such as the Federal Home Loan Banks rather than through deposits.
The rule is meant to ensure that banks pay insurance fees that are proportional to the risk they pose to the insurance fund. Under current rules, a bank that borrows from a Federal Home Loan Banks pays smaller insurance fees than one that relies on deposits, even though risks of failure and costs to the FDIC may be the same, the agency said.
Bankers say loan advances from the Federal Home Loan Banks are now one of their few reliable sources of funds. The proposed increase of up to 50 percent over current assessments could stifle lending at a time when credit is already at its tightest in years, and economists say a long U.S. recession appears inevitable. read more
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