FDIC Federal Register Citations

From: Ed Hanson
Sent: Wednesday, November 05, 2008 4:37 PM
To: Comments
Subject: RIN 3064-AD35 

November 5, 2008 

To: FDIC
From:  Ed Hanson, Crown Bank- Edina, Minnesota
RE:  RIN 3064-AD35

Comments on proposed FDIC Premium Increase for Brokered Deposits 

I appreciate the opportunity to comment on the proposed changes to the FDIC insurance premium schedule, including the proposed adjustment for brokered deposits. 

Please consider the following in adopting the final rule: 

• A 20% asset growth rate over a four year period is arbitrarily low.  This would especially low for a relatively new bank that has experienced growth over that time frame and where the bank has a relatively low asset base level going back four years..  Some combination of dollar growth and a higher level than 20% in growth rate should be given consideration. 
• Brokered deposits are an effective means for some banks to support their ability to fund loans in their markets.  With the current tightness in liquidity and the weakness in the national economy, this would be the wrong time to implement a surcharge for using brokered deposits.  The impact may cause banks to cut back on their lending in order to reduce the use of brokered deposits due to the premium adjustment.
• Applying the assessment to only “brokered deposits” is somewhat arbitrary and could be viewed as discriminatory.  If a surcharge is ultimately adopted, the final regulation should also apply the surcharge to other sources of non core funding such as funds obtained through internet listing services or the CDARs program.  These types of non core funds are similar to brokered deposits even though they may not be classified as such. By doing so, the surcharge could be spread among a greater deposit base.
• Premium schedule should be adjusted to exclude a premium on a bank’s uninsured deposits.  The current premium assessment methodology discriminates against those banks that are able to attract a higher level of deposits in excess of the FDIC insurance limits.
• With many banks currently experiencing credit issues and other factors impacting profit levels, raising premiums so drastically at this time will only put additional pressures on the banking industry when the bank are working to improve profitability and build investor and customer confidence. 
• The use of a 10% threshold for brokered deposits may unintentionally create a cap or benchmark for examiners when evaluating a bank’s funding source and may cause them to negatively view those banks that exceed this limit even though the bank may have effective controls and management processes over brokered deposit activity.