FinReg Fallout: FDIC Changes Will Cover More Depositors

The new Dodd-Frank Wall Street Reform and Consumer Protection Act includes permanent changes to FDIC insurance coverage limits and retroactive deposit coverage. Also, in a related matter, back in June, the FDIC extended the Transaction Account Guarantee (TAG) program coverage from July 1 to Dec. 31. 

The FDIC's $250,000 insurance limit began in October 2008 and was set to expire Dec. 31, 2013. With the enactment of the Dodd-Frank Act, the $250,000 limit becomes permanent. All depositors (per tax ID) who maintain an insured balance under $250,000 per institution are covered. The increased limit was retroactively applied to Jan. 1, 2008, and was intended to cover the failed institutions between Jan.1 and Oct. 3, 2008. As a result of the retroactive change, the number of uninsured depositors at the financial institutions listed below decreased to 500 from 10,000:

• Hume bank, Hume, Missouri
• ANB Financial, N.A., Bentonville, Arkansas
• IndyMac Bank, F.S.B., Pasadena, California
• First Priority Bank, Bradenton, Florida
• The Columbian Bank and Trust company, Topeka, Kansas
• Silver State Bank, Henderson, Nevada

In addition, the Board of Directors of the FDIC extended the TAG program from July 1, 2010 to Dec. 31, 2010. Under this program, customers of the institutions that opted to remain in the program receive full coverage of their balances in qualifying transaction accounts. This is the second time it has been extended. The rule requires that interest rates on NOW accounts be reduced to 25 basis points from 50. There were no changes in the assessment rates or calculation of using average daily account balances for participating institutions in the TAG program.

The program is up for extension through Dec. 31, 2011 without further rulemaking. The majority of the largest bank holding companies by asset size opted out of the TAG program at the end of last year.

The TAG program is primarily used by community banks and smaller institutions.

Thomas Hunt is director of treasury services with AFP. Contact him via thunt@afponline.org