By W. Bernard Mason
Today the FDIC Board authorized staff to seek comment on two alternatives for phasing out the FDIC's Transaction Account Guarantee (TAG) Program. This program, along with the FDIC's Temporary Liquidity Guarantee Program, was initiated on November 21, 2008 under the Agency's systemic risk authority as a means to assist insured institutions during the current financial crisis. The TAG Program provides a full guarantee for certain noninterest-bearing transaction accounts at a cost of 10 basis points for account balances above the current $250,000 deposit insurance limit. The TAG Program currently will terminate on December 31, 2009.
The first alternative is to retain the original termination date, with no modification to the program. The second alternative will be to extend the termination date to June 30, 2010, with an increase in the assessment to 25 basis points for balances beyond the regular deposit coverage. Under this proposal, institutions would have one opportunity to opt out of the extended program.The FDIC will be publishing the proposal for a 30-day comment period.
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W. Bernard Mason is the Regulatory Relations Liaison for The Risk Management Association. He may be contacted at bmason@rmahq.org.
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