New Mexico’s small community banks could see their Federal Deposit Insurance Corp. premiums fall by 30 percent, thanks to a federal law that shifts some of those insurance payments to banks with assets of more than $10 billion. Ultimately, that could translate into increased lending capacity.
Those premiums finance the FDIC’s insurance fund, which insures deposits and makes good on losses from failed banks.
The Dodd-Frank Wall Street Reform and Consumer Protection Act required the FDIC to shift from assessing premiums on deposits to assets, such as loans and borrowed money.
The idea was that community banks rely mostly on deposits for money to loan out to consumers and businesses, while larger banks rely less on deposits and can borrow money to loan out. Thus, large banks carry more loans that are financed by borrowed money and have been getting a break on FDIC premiums, because they didn’t need to hold as many deposits.
“This is a huge deal for community banks. It is very positive,” said Jerry Walker, president of the Independent Community Bankers Association of New Mexico. “For a number of years, community banks have paid a disproportionate share” of the FDIC insurance premiums.