Utah financial institution officials and regulators don't like the idea of seeing deposit insurance premiums increased, saying it is unfair and could plunge some institutions into a troubled condition.
Meanwhile, federal regulators said the administration's reported proposed plan to bail out the nation's savings and loan industry won't affect efforts to sell Utah-based American Savings and Loan, Deseret Federal Savings and Loan and Mountain West Savings.President Bush was to announce the plan Monday, calling for increases in deposit insurance premiums - now 83 cents for banks and $2.08 for savings and loans. The proposed increases have been reported as $1.80 per $1,000 on deposits in banks and for savings and loans it would increase to $2.50 per $1,000.
Asked if an increased premium would hurt savings institutions struggling to stay profitable, Paul Neuenschwander, president of the Utah League of Insured Savings Associations, said: "I don't need to even comment on that, anybody knows that."
He explained that the savings and loan industry has already paid an extra $5 billion over the normally assessed premium since 1985 and can't afford much more.
Utah Commissioner of Financial Institutions George Sutton said savings and loans would either have to lower their rates or charge customers fees to cover a premium increase for deposit insurance. Either choice would cause a flight of deposit funds that savings institutions, already operating on weak profit margins, can't afford.
Bankers don't like the idea either. "It's debatable whether that is a fair approach. We are very concerned that we don't carry too much of the load for the S&Ls," said Lawrence Alder, executive vice president of the Utah Bankers Association.
Alder said deposit insurance premium increases could be passed on to the consumer. The Associated Press reported bank officials saying that they would not be able to pass on the increase to customers without driving them to mutual funds. Also, big institutional customers could be driven overseas, where they could make dollar deposits in the European branches of large U.S. banks.