WASHINGTON (3/2/08)--To address the ongoing problems in the banking system, the Federal Deposit Insurance Corp. (FDIC) took dramatic action Friday. The agency approved a final rule on risk-based assessments, as well as amendments to its plan to restore its insurance fund. It also issued an interim rule on an emergency special assessment of 20 basis points on FDIC-insured depository institutions, a premium that will total approximately $15 billion. The emergency special assessment combined with a longer-term fee increase, also approved by the FDIC board at the Friday meeting, means that FDIC-insured banks and thrifts will have to pay approximately $27 billion in total insurance premiums in 2009. The FDIC took these measures to repair its already weakened insurance fund, which absorbed $18 billion in losses last year. The FDIC estimates that the fund could experience approximately $65 billion in losses over the next five years. As of December 2008, the FDIC's fund had a balance of approximately $19 billion. Friday’s actions increased the quarterly insurance fees required of FDIC-insured institutions; these fees vary depending on the risk category of the institution and its investments. Included in the board’s actions was an “emergency special assessment” of 20 basis points. All FDIC-insured institutions must pay the “emergency special assessment” of 20 basis points, which will be imposed June 30 and collected on Sept. 30. FDIC staff noted that emergency action was required because, without immediate intervention, the reserve ratio of the fund would drop close to zero or become negative in 2009. The FDIC also approved a rule that gives it the authority to assess future emergency assessments if warranted. As noted, the FDIC also adopted changes to the fund’s restoration plan, increasing from to seven years from five years the period over which it must restore the fund’s reserve ratio to 1.15%. The agency’s staff noted that many member institutions urged FDIC to take advantage of its authority to extend the restoration period beyond five years. Such an extension is permitted for the FDIC under “extraordinary circumstances.” The FDIC did not issue guidance or otherwise indicate how insured institutions must account for the fund’s restoration. The agency last imposed a special assessment in 1996, but that assessment did not apply to most FDIC-insured banks and thrifts.