FDIC sets new rule to identify who is insured at failed banks

The Federal Deposit Insurance Corp. set a rule for banks to improve its ability to determine whether a customer's deposits are insured and speed up payouts in a bank failure. The U.S. banking industry said the rule is a burden.

The FDIC is requiring that 159 banks with at least $2 billion in U.S. deposits, and either $20 billion in assets or 250,000 account holders, keep records that will give quick access to customer information, the Washington-based regulator said in a notice to banks published Thursday on its Web site.

''Given that few banks will fail, this rule will impose a lot of burden on a lot of banks for no reason,'' said Mark Tenhundfeld, senior vice president of regulatory policy at the American Bankers Association, a Washington-based industry group.

The FDIC took over IndyMac Bancorp Inc., with $19 billion of deposits, July 11 after the bank failed to raise cash amid the worst housing crisis since the Great Depression. The collapse of the Pasadena, Calif.-based bank threatens to spur withdrawals from banks ranging from First BanCorp in Puerto Rico to Los Angeles-based Nara Bancorp Inc. as customers trim accounts to below the $100,000 limit on deposit insurance, according to Sandler O'Neill & Partners.

The action will help pay off insured deposits as soon as possible and help ''maintain public confidence in the banking industry,'' the regulator said. It will also ''mitigate the spillover effects of a failure, such as risks to the payments system, problems stemming from depositor illiquidity and a substantial reduction in credit availability.''

The FDIC hasn't signaled that it will increase the insurance coverage. The policy covers checking, savings and money market accounts as well as certificates of deposit.

- Bloomberg News