House Passes Deposit Insurance Reform

WASHINGTON-Congress recently sent the deposit insurance reform legislation to the president to sign into law. The legislation merges the Bank Insurance Fund and the Savings Association Insurance Fund under the FDIC; requires the FDIC and NCUA to index the insurance coverage to inflation every five years, beginning in 2010; increases the deposit insurance cap on retirement accounts to $250,000 and index to inflation; allows the FDIC Board to set assessments; and establishes a reserve ratio range of 1.15% to 1.50% for a given year rather than the strict 1.25% target. “I commend the leadership of House Financial Services Committee Chairman Oxley, Ranking Member Frank and subcommittee Chairman Bachus, as well as Senate Banking Committee Chairman Shelby and Ranking Member Sarbanes, for remaining steadfast in reforming the deposit insurance system,” NCUA Chairman JoAnn Johnson said. “We look forward to making progress in the safe and sound implementation of these share insurance enhancements.” CUNA President and CEO Dan Mica added, “This legislation ensures that credit union share insurance coverage remains on par with that of banks and thrifts, our primary interest in seeing this measure pass into law.” Credit union lobbyists were not quite sure when the increased coverage on retirement savings balances would go into effect. However, CUNA Chief Economist Bill Hampel pointed out that retirement savings only accounts for 8% of all credit union savings so very little would likely be over the current $100,000 coverage. Federally insured credit unions pay in 1% of insured deposits to fund the NCUSIF.