FDIC Delays Hike in Premiums Until ’93 : Banking: Risk-based insurance charges are put off under pressure from the industry.

Under heavy pressure from bankers, the Federal Deposit Insurance Corp. board on Tuesday postponed an increase in its insurance premiums until next year, when it hopes to have a system for charging risky banks more than safe banks.

The chairman of the Senate Banking Committee, Donald W. Riegle Jr. (D-Mich.), and other lawmakers had been pressing for an increase this year to ensure repayment of the agency’s borrowings from taxpayers.

But bankers and officials of the Federal Reserve and Treasury Department have warned that raising the charges paid by banks could hurt their ability to make loans needed to stimulate the economic recovery.

Although the FDIC board took no vote on the issue, all five members said they agreed that any increase should take effect Jan. 1, rather than July 1.

Rep. Henry B. Gonzalez (D-Tex.), chairman of the House Banking Committee, charged that the delay was “a convenient way to provide a comfort zone for the banking industry through next fall’s election.”

“This may also mean that many dangerously sick banks simply will not be closed in the coming months because the FDIC’s premium income is insufficient. The Congressional Budget Office believes this is already happening,” he said.

Both banks and savings institutions this year are paying 23 cents for every $100 in deposits, nearly triple the 8.3-cent premium in 1989. The FDIC staff is recommending it be raised to between 25 and 30 cents in 1993.

FDIC Chairman William Taylor said conditions in banking have improved a bit since November and December, but enough banks remain in trouble to justify an increase.

“There is a little bit of improvement, but the message you don’t want to send is that ‘Everything is fine and not to worry’ because that’s not the case,” he said. “A rising tide lifts all boats, unless you’re strapped to that bottom. And, we’ve got quite a few strapped to the bottom, enough to require a premium increase.”

He said he expected the FDIC fund for banks to report a year-end 1991 deficit of between $7 billion and $9 billion, compared to a surplus of $4 billion at the start of last year.

That will force the agency to tap the $30-billion line of credit to taxpayers authorized by Congress in November. Taylor attributed almost all of the decline to reserves set aside for banks expected to fail this year rather than to failures in 1991.

Taylor said bankers unanimously oppose higher premiums but what grates them most is the unfairness of charging safe banks the same rate as risky banks.

He ordered FDIC staff to finish a proposed risk-adjusted premium system within 30 days, in time, he said, to put it into force by Jan. 1, a full year ahead of the deadline imposed by Congress in last November’s law.

At the same time, premiums can be raised, and an extra cent or two per $100 of deposits could be tacked on to make up for the six-month delay in the increase, he said.

Banks could be divided into three or possibly four categories, ranging from very safe to risky, he said.

At first the difference in premium rates between groups could be relatively modest, perhaps 5%, he said.

But the differential could be increased regularly, perhaps every six months, until risky banks were paying a heavy penalty for their behavior, he said.

Taylor’s system of classifying banks’ risk would give considerable weight to regulators’ judgment. Most bankers prefer more objective criteria.

Banking analyst Bert Ely of Alexandria, Va., an advocate of privatizing the deposit insurance system, said Taylor’s proposal is far too timid to curb risky investing by banks.

“He wants the facade of risk-based premiums without having anything that bites hard,” he said. “The riskiest banks ought to be paying 15 to 20 times what the safest banks are paying.”