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America’s Community Bankers commends the FDIC for a thoughtful and comprehensive options paper on the complicated issue of deposit insurance reform. In particular, ACB applauds the FDIC’s recommendation to merge the deposit insurance funds which we believe is the paramount deposit insurance reform issue that can be addressed immediately.

A merger would strengthen the fund by providing a broader and more diverse industry deposit base, and yet would not change institutions’ assessment rates. A fund merger is good public policy that benefits community banks, consumers and the American taxpayer.

An increase in deposit insurance coverage would be welcomed by most in the banking industry, however, it is clear from the options paper that any increase will come with an increase in cost. A majority of ACB members participating in our recent survey told us they supported an increase in deposit insurance but were reluctant to pay any premiums, and 39 percent said they were willing to pay only 1-2 basis points more.

Either separately or as part of a merger package, ACB also favors capping the reserves in a merged insurance fund at 1.50 percent of insured deposits and rebating excess reserves to insured banks and thrifts, which would provide community banks with a very modest return and improve their ability to serve their customers and communities.

The options paper merits serious review as an important catalyst for a discussion on pricing risk, funding losses and determining insurance coverage levels. As complicated issues as “too big to fail” and making use of market information to determine risk and set premiums are addressed, we would urge that a strong, healthy and diversified insurance fund be the number one goal.