U.S. banks give nod to prepaying fees, seek tweaks

By Karey Wutkowski

WASHINGTON (Reuters) - U.S. banks are lauding regulators for avoiding another emergency fee to replenish the deposit insurance fund, but are suggesting tweaks to a plan for them to prepay three years of regular assessments.

The Federal Deposit Insurance Corp is expected to meet shortly to finalize a proposal that banks pay cash upfront to replenish the depleted fund safeguarding bank deposits.

The proposal would give the agency about $45 billion in cash to deal with the rising cost of bank failures, but banks would not have to book the expense until the fees are regularly due over the three years.

Some of the largest banks are hoping the FDIC might break up the prepayments into chunks and assume that deposits will not grow, meaning the assessment base would be lower, according to comment letters posted on the FDIC's website.

Smaller banks have suggested just prepaying one or two years of assessments, and suggest switching the assessment base to assets from deposits -- a move that would push the burden of the fees onto larger institutions.

The FDIC board is expected to consider the rule in coming weeks, spokesman Andrew Gray said on Tuesday.

"We are in the process of digesting the letters from the comment period, taking into careful consideration the thoughts and issues that have been raised as we prepare the final board case," he said.

The agency proposed in September that banks prepay three years of fees as an alternative to imposing another $5.6 billion emergency fee that could crimp the industry's earnings and lending abilities, or tapping the FDIC's $500 billion line of credit with the Treasury Department.