August 28, 2009
Authored by: Robert Klingler
Update: On April 13, 2010, the FDIC granted a further extension until December 31, 2010.
On August 26, 2009, the FDIC extended the Transaction Account Guarantee (TAG) portion of the Temporary Liquidity Guarantee Program for six months, through June 30, 2010. In addition to extending the expiration date of the TAG program, the FDIC’s final rule (1) increases the assessment fee for participation; and (2) provides an opportunity for participating institutions to opt out of the program as of January 1, 2010 (and thereby avoid the additional assessments).
All currently participating institutions have until November 2, 2009 to determine whether to continue in the program (at increased cost) or opt out of the program. Attorneys in Bryan Cave’s financial institutions practice can discuss the advantages and disadvantages of opting out for particular financial institutions.
Funds held in non-interest bearing demand deposit accounts (as well as NOW accounts that are obligated to pay less than 50 basis points and IOLTA accounts) will be fully guaranteed by the FDIC for participating entities through June 30, 2010.
The FDIC received comments supporting no extension, as well as supporting extensions for up to three years. The FDIC determined a six-month extension of the TAG program “will provide the optimum balance between continuing to provide support to those institutions most affected by the recent financial and economic turmoil and phasing out the program in an orderly manner.”
Beginning January 1, 2010, participants in the TAG program will be subject to increased quarterly fees. The amount of the assessment will depend on the institution’s Risk Category rating assigned with respect to regular FDIC assessments. The fee will continue to be assessed only on the amount of deposits that exceed the existing deposit insurance limits.
Institutions in Risk Category I (generally well-capitalized institutions with composite CAMELS 1 or 2 ratings) will pay an annualized assessment rate of 15 basis points. Institutions in Risk Category II (generally adequately capitalized institutions with composite CAMELS 3 or better) will pay an annualized assessment rate of 20 basis points. Institutions in Risk Category III or IV (generally under capitalized or composite CAMELS 4 or 5) will pay an annualized assessment rate of 25 basis points. (Through December 31, 2009, the fee will remain an annualized 10 basis point assessment for all participating institutions.)