Customers may wind up paying the cost of higher deposit insurance premiums as banks, already struggling to stay profitable, pass along the added costs, industry analysts said.
But banks won't be able to raise fees or lower interest rates too much without losing customers, one analyst said.The board of directors of the Federal Deposit Insurance Corp. voted Thursday to boost the premium banks pay by more than 60 percent starting next year to shore up the deposit insurance system.
The FDIC took the action after learning that the government fund protecting bank accounts dropped from $13.2 billion at the end of last year to $11.4 billion at the end of June. FDIC Chairman L. William Seidman said he expects the fund will have lost nearly $3 billion by year's end.
Under the premium increase, banks will pay the FDIC 19.5 cents in insurance for each $100 in deposits. Currently, they pay 12 cents per $100 in deposits.
The insurance increase could reduce profits in an already-troubled industry, analysts said Thursday. But they added that the higher premiums were necessary to ensure the health of the banking system.