The FDIC’s function as an important financial mechanism consists in its ability to attract healthy FDIC-insured institutions to assume deposits and to purchase the assets of failed banks or savings associations. Based on this principle, the very efficiency of this function depends on how fast the already insured depositors gain access to their insured deposits. This aspect, especially when we deal with acute banking system crisis such as the one we are currently experiencing — is crucial, since it minimizes or cancels any possibility of disruption and guarantees an orderly liquidation for customers.
Needless to say, efficiency remains the primary focus for FDIC as an institution, which prompted on Thursday the head of the The Federal Deposit Insurance Corp, Chairman Sheila Bair, to issue new deposit rules.
The rules, according to DJ Newswires – will require 160 of the largest banks, with at least $2 billion in domestic deposits and either $20 billion in assets or 250,000 deposits accounts – to adopt new procedures in order for banking regulators to settle existing accounts if a bank failure occurs.
The FDIC said the rules for big banks, which take effect Aug. 18, will “mitigate the spillover effects of a failure, such as risks to the payments system, problems stemming from depositor iliquidity and a substantial reduction in credit availability.
The new rules for large banks will require them to standardize the information they provide to the FDIC on deposit accounts, and to put in systems to automatically post possible holds on very large deposit accounts.
The FDIC also proposed new rules for how it determines the value and nature of claims against a failed bank. The agency said it will consider whether to make automated sweep transactions at banks of all sizes ineligible for deposit insurance. Swept funds that are transferred from insured deposit accounts to non-deposit investment vehicles or accounts may not qualify for deposit insurance, the FDIC said, though the agency said it would defer implementing that change until July 1, 2009.
The new rules appear less than a week after regulators were forced to close IndyMac Bancorp Inc., (Pink Sheets : IDMC). The Pasadena thrift, with $32 billion in assets, was a prolific lender during the housing boom, specializing in so-called alt-A loans.
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