Banks Must Bolster FDIC Insurance Fund

To prepare for more bank failures, banks have to pay a special assessment into the FDIC's insurance fund by September 30th.

The fund has been hit hard by failures due to the financial meltdown. While there is still plenty of money in the fund (the FDIC could cover many more typical bank failures, and even handle a few big ones), regulators want to bolster the fund in case things get worse.

The one-time insurance fund payment will be unpleasant for all banks, but smaller banks suffer more. If they don't have the margins to cover these types of assessments, they risk failing. They can also go looking for a stronger buyer - usually a larger bank.

What does all this mean? The banks have less money to work with, and it's harder to make a profit. Interest rates on your savings account will probably stay low, and loans may get more expensive.

Further reading:

• What Happens in a Bank Failure?
• How to Find the Safest Banks
• How FDIC Insurance Works