Senate Backs FDIC Changes

The U.S. Senate on Wednesday approved sweeping changes to deposit insurance, allowing a federal regulator to index coverage levels to inflation and merging the bank and savings association insurance funds.

The provisions were included in legislation the Senate approved to cut nearly $40 billion from federal spending over five years.

Although the House had already approved the measure, Democrats during Senate floor debate forced a minor change to the bill that would require the House to act again.

But that may not happen this year. An aide to the acting House majority leader said the House did not have plans to reconsider the spending-cut bill before late January. The spokeswoman did not rule out a change in plans, however.

The deposit insurance reform provisions would merge the bank and savings association deposit funds, increase to $250,000 from $100,000 the size of a retirement fund the Federal Deposit Insurance Corp. may insure and create a process for indexing deposit insurance coverage to inflation.

The provisions, among other things, also would give banks credit for past payments to the fund.

Bankers have pushed for deposit insurance reform for more than five years. The aim has been to give the FDIC flexibility while ensuring that premium payments are fair.

“Banks -- which completely fund the FDIC, from its pencils to premiums -- will be pleased to see their money better spent,” said Edward Yingling, president and chief executive of the American Bankers Assn. “And customers should appreciate enhanced coverage levels.”