On Tuesday, the board of the Federal Deposit Insurance Corp. (FDIC) advised the member banks to pay three year's worth of deposit-insurance premiums in advance, so as to help the agency avert a liquidity crunch by the New Year. The board was also in favor of raising the annual premiums for member firms by three basis points or
3/100ths of a percentage point by the beginning of 2011. The Washington-based FDIC's Deposit Insurance Fund will have to face a liquidity crunch early next year, and it will be operating in the red by the end of this month, without the prepaid premiums, which are estimated to be $45 billion. Deposit Insurance Fund repays customers with deposits of as much as $250,000 when a bank fails.

Via a statement, the FDIC said: "The banking industry has substantial liquidity to prepay assessments. As of June 30, FDIC-insured institutions held more than $1.3 trillion in liquid balances, or 22% more than they did a year ago."

"The proposal for prepaid assessments announced by the FDIC today reinforces the fact that it is the banking industry that is fully responsible for the financial security of the agency," expressed the American Bankers Association, which somewhat promoted FDIC chief Sheila Bair's take on the matter.

The ABA continued that in order to make sure that depositors remain fully protected; a notable amount of cash would be given to FDIC via assessments paid ahead of time.

Depositors were ensured about the security of their money by Bair, in spite of the financial strains on the agency.

Bair said: "First and foremost, bank customers should know that their insured deposits have and always will be 100% safe, no matter what. This commitment to depositors is absolute."

By 2013, the total bank failure losses might touch $100 billion, explained the FDIC board.