FDIC Federal Register Citations

From: Carl Dodson
Sent: Saturday, November 08, 2008 11:33 AM
To: Comments
Subject: Assessments - RIN-3064-AD35 

I am writing in response to the Federal Deposit Insurance Corporation’s (the “FDIC”) request for comments on a proposal to increase deposit insurance premiums.  If adopted, the proposal would increase the annual assessment rate for Risk Category I institutions from its current level of 5 to 7 basis points to an assessment rate of 10 to 14 basis points, plus certain adjustments.  Assessments for Risk Category II institutions would increase from 10 basis points to 20 basis points, plus adjustments.  Among the adjustments is a “brokered deposit adjustment.”

Our bank uses brokered deposits and finds them to be a useful and important source of liquidity, particularly in this economic environment.  Deposits obtained through registered broker-dealers are a cost-effective funding source that is frequently less expensive than other funding options available to us, and should not be needlessly discouraged. 

There is no evidence that the 10% brokered deposit threshold and the 20% growth threshold are closely related to the risk of losses to the deposit insurance fund.  The 20% growth threshold over four years allows only 5% growth per year, which cannot be viewed as “aggressive.” 

Furthermore, the 10% brokered deposit threshold will discourage reasonable brokered deposit use above that amount because banks and their examiners will view it as a cap.  Banks reporting more than 10% brokered deposits will be viewed with suspicion by rating agencies and the financial press.  To avoid this stigma, banks will look to other, more expensive, sources of funds.

We believe that the FDIC should not impose premiums on brokered deposits except as individual bank use warrants an increase. 

Carl Dodson
EVP - Chief Operating Officer