Donald E. Powell
Chairman
Federal Deposit Insurance Corporation
550 17th Street NW
Washington, DC 20429-9990

Dear Chairman Powell:

The Association for Financial Professionals (AFP) urges the Federal Deposit Insurance Corporation (FDIC) to modify its premium pricing methodology by adopting a system based on collected balances. This approach would eliminate the use of ledger balances and an obsolete float adjustment factor.

The Association for Financial Professionals (AFP) represents approximately 14,000 financial professionals who on behalf of over 5,000 corporations and other organizations are significant participants in the nation's payment system, and manage their organization's banking relationships. In these roles, our members negotiate, monitor and approve payment charges passed through by banks for deposit insurance assessments paid to the Bank Insurance Fund (BIF). Organizations represented by our members are drawn generally from the Fortune 1000 and the largest of the middle market companies, and they have an active interest and a sizable stake in proposed changes to the deposit insurance assessment system. In fact, our members believe that their organizations are the dominant funders of the BIF because banks pass through the deposit insurance costs to corporate customers on the basis of balance size. Importantly, our members pay these assessments based on full balances which customarily are well in excess of the insured $100,000 limit.

The current methodology for premium pricing is in part based on reporting ledger balances and arbitrarily assigning a 16 2/3 percent allowance for uncollected balances (checks in the course of collection). Not only does the FDIC use this methodology when assessing banks; the banks use the same methodology when passing that premium assessment on to their corporate customers. The FDIC allowance is based on outdated estimates of check float that do not take into account today's technology that can readily compute and report collected balances.

Using any form of ledger balances is unfair because it means "double counting" deposits when assessing premiums. Nationally, the double counting is equal to the total of all checks in the course of collection. On a practical basis, if a corporation is moving money by check from its account in Bank A to its account in Bank B, that corporation would have to pay an assessment in both banks on the amount of such checks outstanding. In addition, having an assessment for any amount of uncollected balance is unfair because there is no FDIC coverage for checks in the course of collection.

We urge the Corporation to initiate swift action to correct an outdated and unfair pricing methodology through an accelerated rulemaking process.

We appreciate this opportunity to call your attention to a matter of significant concern to many bank customers and the members of AFP. If you have any questions or need further information, please contact Judy Schub of the AFP staff at 301.907.2862.