CQ Politics: Senate Votes to Increase Deposit Insurance Premiums for Big Banks

Large banks would be forced to pay higher premiums for federal deposit insurance under an amendment the Senate added Thursday to the financial regulatory overhaul bill.

Adopted 98-0, the amendment by Jon Tester , D-Mont., and Kay Bailey Hutchison , R-Texas, would require the Federal Deposit Insurance Corporation (FDIC) to calculate the premiums banks pay for insurance using total assets rather than deposits alone, as is currently the case.

Senators will debate other amendments Thursday, and consideration of the bill is expected to continue into next week.

The FDIC currently insures bank deposits of up to $250,000. If premiums are based on total assets instead of domestic deposits only, large banks, which have huge asset holdings, would pay a greater share of deposit insurance premiums.

The underlying overhaul measure would allow the FDIC to make the formula change, but the Tester-Hutchison language would require it to do so.

“Small community banks make rural America run,” Tester said. “They don’t deserve to be left holding the bag for the risky behavior of big banks.”

According to Tester, community banks pay 30 percent of FDIC premiums but only hold 20 percent of the nation’s deposits.

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