Alert March 18, 2008

FDIC Board Votes to Retain Current Assessment Rates for 2008

The FDIC Board of Directors voted not to change the assessment rates for 2008 that are charged to banks and thrifts for the FDIC’s Deposit Insurance Fund (the “DIF”).  The existing assessment rate is 5 to 43 basis points per year for every $100 of insured deposits.  Assessment rates increase with perceived increased risk that a bank or thrift poses to the DIF.  Most banks and thrifts fall within the lowest risk category and are charged a rate between 5 and 7 basis points.  The FDIC said that the FDIC Board’s decision to leave the assessment rates unchanged was consistent with the FDIC Board’s objective of increasing the DIF’s level of reserves reflected by the Designated Reserve Ratio (the “DRR”) to 1.25% of estimated insured deposits before the end of 2009.  The DRR was 1.22% as of December 31, 2007.  The FDIC said that its desire to increase the DRR reflected the FDIC’s concern that banks and thrifts may face challenging economic conditions in 2008 and that there may be further bank failures.  The FDIC also noted that there is uncertainty surrounding deposit growth in 2008.  The FDIC further stated that it will revisit the issue of assessment rates later in 2008 if the economy makes dramatic shifts in either direction.