Home > Money News > FDIC Interest Rate Cap for Weak Banks in 2010

FDIC Interest Rate Cap for Weak Banks in 2010

June 3rd, 2009
Goto comments

Last week complaints were made by the ABA (American Bankers Association) about Ally Bank offering high yields on their CD and savings products after its parent company, GMAC, received government aide due to its financial troubles. In what seems to be a response, the FDIC set an interest rate cap on under-capitalized banks that’s set to take effect in 2010.

If a bank is deemed to be under-capitalized, it may not offer rates that are 0.75% above the national average which means a cap of 2% for a 1 year CD right now. This is compared to the robust 2.80% 1 year CD that Ally Bank is currently offering.

I personally think this is a dumb idea. The reason these banks got in trouble in the first place wasn’t because of high interest rates, it was the horrible loans they were giving out to anyone and everyone. I think the ABA members just want to continue to offer low interest rates and want to cap their competitors to make their crappy rates more competitive.

Ally Bank’s CEO Al de Molina just released a statement saying that Ally Bank is definitely well capitalized and would not even be affected by this new FDIC ruling.

Related posts:

  1. FDIC Problem Bank List Increases to 305 Banks
  2. Obama Banks | Who Will Step Up Their Game?
  3. Founders Bank in Worth IL and 6 Others Closed by FDIC
  4. Fractional-Reserve Banking
  5. Bromoney Rate Table Updates
  6. Ally Bank is the New GMAC
  7. New Frontier Bank and Cape Fear Bank Fail in Wilmington NC and Greeley CO

Money News

  • Gayle

    How do you know who is an under-capitalized bank? Is there a list published somewhere?

  • http://www.bromoney.com/ Brandon Rowe

    They don’t release which ones are under-capitalized, but they said that 3% of FDIC insured banks are under-capitalized.

  • http://jumbocdinvestments.com/cd_rates_blog ChrisCD – CD Rates Blog

    Actually, you can determine which banks are under-capitalized. The FDIC doesn’t publish the list of banks on their watch-list. The banks on their watch-list are not the same as those that are under-capitalized. You can run a report from the FDIC website. I actually went to the site and ran the report. You can also check banks individually.

    However, I’m not sure actually publishing the names of those banks would be helpful. Many of them are working with the FDIC and their investors to raise the necessary capital. Publishing information that would jeopardize that, probably not a good idea. After all, the more banks that fail, the more it costs the FDIC. As the FDICs costs go up, the assessments the banks pay go up and ultimately the consumer gets lower rates or higher fees.

    Just my two cents.

blog comments powered by Disqus