Emerging Market for Pre-Paid FDIC Assessments

March 2, 2010 at 5:45 pm Leave a comment

Given the financial instability in the banking sector, the FDIC’s recent rule requiring all insured depository institutions to prepay, on December 30, 2009, their quarterly insurance premiums for all of 2010-12, has placed even greater stress on financial institutions.  In response to the required premium pre-payments, certain institutions are creating exchanges to facilitate the transfer of the pre-paid assessments from one institution to another.  The aim of such exchanges is to allow for re-allocation of the pre-payments among insured depository institutions.  The creation of these exchanges reflects the resiliency of the banking sector and an opportunity for appropriate balance sheet management. 

 It is anticipated that such exchanges would allow bankers to:

  • Gauge interest from other institutions, in buying and selling prepaid assessment credits in specified amounts at specified prices; and
  • Indicate their interest in buying or selling assessment credits by entering a desired quantity and price (% of face value).

Apparently, the transfers will not be cleared by any exchange, but will instead be made only through the FDIC (via its electronic system FDICconnect) and after notice to the FDIC, which retains the right to reject any transfer on supervisory or other grounds.

Please note that Stinson Morrison Hecker does not endorse or sponsor the use of any exchange as described herein.

Entry filed under: FDIC.

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