Permanent FDIC Insurance

Basic FDIC Insurance Coverage Permanently Increased to $250,000 Per Depositor
Date: 7/21/2010 Source: FDIC
Author: Andrew Gray (202) 898-7192

On July 21, 2010, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which, in part, permanently raises the current standard maximum deposit insurance amount to $250,000. The standard maximum insurance amount of $100,000 had been temporarily raised to $250,000 until December 31, 2013. The FDIC insurance coverage limit applies per depositor, per insured depository institution for each account ownership category.

The temporary increase from $100,000 to $250,000 was effective from October 3, 2008, through December 31, 2010. On May 20, 2009, the temporary increase was extended through December 31, 2013.

"With this permanent increase of deposit insurance coverage to $250,000, depositors with CDs above $100,000 but below $250,000 will no longer have to worry about losing coverage on those CDs maturing beyond 2013. We strongly encourage all bank depositors who have questions about their insurance coverage to go to our Web site at www.fdic.gov and use our Electronic Deposit Insurance Estimator (EDIE) or call our toll-free number at 1-877-ASK-FDIC. Insured deposits provide the comfort and peace of mind to depositors that their money is 100 percent safe – provided they keep their deposit balances within the insurance limits," said FDIC Chairman Sheila C. Bair.

To help consumers, bankers and others understand how the new law affects deposit insurance coverage and to help consumers verify whether their deposit accounts are fully protected, the FDIC provides the following resources:

Information on deposit insurance on the FDIC Web site: Updated brochures on deposit insurance coverage (including the basic guide, Deposit Insurance Summary, and the more comprehensive guide, Your Insured Deposits) and a new version of the "Electronic Deposit Insurance Estimator" (EDIE), an interactive service that allows consumers to quickly and easily check whether their accounts are fully protected, are now available on the FDIC's Web site (www.fdic.gov).
A toll-free consumer assistance line: Help and information about deposit insurance and other matters of interest to bank customers are available at 1-877-ASK-FDIC (1-877-275-3342) Monday through Friday from 8:00 a.m. to 8:00 p.m., Eastern Time. For the hearing-impaired, the number is 1-800-925-4618.
# # #

Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's banking system. The FDIC insured deposits at the nation's 7,932 banks and savings associations and it promotes the safety and soundness of these institutions by identifying, monitoring the addressing risks to which they are exposed.

The FDIC receives no federal tax dollars – insured financial institutions fund its operations. FDIC press releases and other information are available on the Internet at www.fdic.gov, by subscription electronically (go to www.fdic.gov/about/subscriptions/index.html) and may also be obtained through the FDIC's Public Information Center (877-275-3342 or 703-562-2200). PR-161-2010

Bank Overdraft Fees - news from B of A (Charlotte Observer)

BofA Alters Policies on Overdrafts: Bank Raises No-Fee Ceiling From $5 to $10 Amid Criticism and Threat of Crackdown.

By Rick Rothacker and Christina Rexrode, The Charlotte Observer, N.C.

Sep. 23--Bank of America Corp. is making significant changes to its overdraft fee policies, as banks face increasing criticism and potential new laws around customer surcharges.

Starting Oct. 19, the Charlotte-based bank said Tuesday it will no longer charge overdraft fees if a customer's account is overdrawn by less than $10 per day. Previously, the bank charged a $10 fee if an account was overdrawn by less than $5 per day.

In addition, the bank said it will not charge overdraft fees on more than four instances per day. In the past, the cap was 10 per day. The fee stays at $35 per overdraft.

The bank also said that customers can visit a branch or call the bank to opt out of overdraft protection, meaning payments won't be made on their behalf if they don't have enough money in their accounts. The bank also plans more changes next year.

In a down economy, overdraft fees have become a particular sore point lately because customers can rack up big charges if they withdraw money at an ATM, write a check or use a debit card and don't have enough money in their account. With the proliferation of debit cards, in particular, they can rack up multiple fees in a short span of time.

The announcement comes a little more than a month after Brian Moynihan took charge of the bank's consumer banking unit, following a management shakeup. In an interview Tuesday, Moynihan said changes were already in the works but he pressed for them to be completed quickly.

"The economy kept getting tougher and tougher," Moynihan said. "Customers continued to be stretched more and more. We were watching how customers were being affected."

Moynihan said the bank was driven by customer need, not legislative pressure. A bill in the U.S. House would require banks to inform customers that an ATM withdrawal or debit payment is about to put them into the negative. Senate Banking Committee Chairman Chris Dodd, D-Conn., has also said he is drawing up legislation.
Overdraft fees have been a major source of income for banks, especially at a time when they're struggling with rising loan losses. Bank of America's deposits segment, which includes checking accounts and other services, collected $3.3 billion from all service charges in the first half of this year.
Moynihan declined to say how much income the bank might lose from the change.

"If the customer gets the benefit, that's less fees for the company," he said. "Long-term, it's in the best interest of the customer and the shareholder."

Research firm Moebs Services has estimated the industry will make $38.5 billion from overdraft fees this year, up from $18 billion in 1999, partly because the average fee has climbed.

Mike Moebs, an economist and the CEO of Moebs Services, lauded Bank of America's announcement and said he hopes the bank will introduce more consumer-friendly initiatives in the next month or two. For example, he said, the bank could drop its overdraft fee of $35 for most transactions to the industry median of $26. "I highly praise Bank of America, even if it's totally political," Moebs said. "It's a huge step in the right direction."

Bank of America, the nation's biggest bank, also said Tuesday it has more changes in the works starting in June 2010.

The bank will introduce an annual limit on the number of times customers can overdraw their accounts when they make a purchase at a store.

Customers will be contacted when they near that limit. The bank will also allow customers to opt out of overdraft capability when they open a new account.

Moynihan said the bank already warns customers of possible overdraft fees at the bank's own ATMs, but doesn't have that capacity when customers make retail purchases. In the future, though, customers will be able to opt out of different aspects of overdraft protection, he said.

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To see more of The Charlotte Observer, or to subscribe to the newspaper, go to http://www.charlotteobserver.com.

Copyright (c) 2009, The Charlotte Observer, N.C.

How Long for that Check to Clear ? (NYTimes)

September 19, 2009
Your Money
Hurry Up and Credit My Account
By RON LIEBER


What is it with these banks that are so quick to hit you with a fee for spending more than you have in your checking account but take their own sweet time in crediting deposits?

My colleague Andrew Martin and I heard that complaint repeatedly from readers after we wrote about overdraft fees earlier this month. The angry questions happened to arrive as we approach the five-year anniversary of when the federal law known as Check 21 took effect. The law allows banks to turn paper checks into digital images and settle them electronically instead of shipping bags of paper around the country on airplanes.

Once banks embraced the new procedures, money disappeared from your account much faster when you wrote a check. But the old laws on how quickly banks must credit your account when you make a deposit did not change at all. They still haven’t. In fact, they haven’t changed in more than 20 years.

In part because of that, consumers are suspicious that banks earn more money by not making the funds available until they absolutely have to. Banks, meanwhile, say that they often make deposited funds available before they know that the checks haven’t bounced.

The banks and the Federal Reserve have made some progress in speeding up many deposits. But the rules — and especially their exceptions — still trip up plenty of people.

So first, a refresher course on the rules, the ones the bank explained to you when you signed up for an account in a fine print document that you probably ignored.

Banks are supposed to allow you to withdraw the following types of deposits no later than the next business day after the bank receives them: cash, electronic payments like paychecks and other direct deposits, government checks, postal money orders and cashier’s checks. That said, if you don’t make the deposits in person (say, if it’s through an A.T.M.), there may be further delay.

For other checks, the Federal Reserve rule that governs deposits makes a distinction between local checks and nonlocal checks. Once you deposit your check in your own bank, it may go to a Federal Reserve check processing center before it heads to the bank of the person or company who wrote it. If the same center services both banks, then the check is local. If not, it’s nonlocal.

Banks must make your deposits of local checks available no later than two business days after you hand them over. But they get a full five days on nonlocal accounts. In either case, they must make $100 available to you the next business day after the deposit as a sort of good-faith advance. That number, too, has not changed in two decades.
One piece of good news here is that because of the rapid adoption of electronic check imaging, the Federal Reserve is a year or so away from completing the consolidation of all its processing centers. As a result, many more checks are already local. So when you deposit them, they hit your account more quickly.

The bad news, however, is that there are still a number of exceptions that allow banks to put a hold on part or all of the deposit, often for at least five business days. Any deposit over $5,000 is automatically suspect. If your account has been overdrawn at least six days in the last six months, then the bank can delay all deposits to your account. If your account is less than 30 days old, then your bank gets the extra time there, too (plenty of fraud happens in new accounts).

The large deposit exception ensnares plenty of people, according to Gail Hillebrand, senior attorney for Consumers Union. They include those who are paid on commission or quarterly and those earning royalties, and a large number of others moving money around from, say, a brokerage account to their checking account to pay big medical or tuition bills or buy a car or house.

She suggested taking an active approach with the bank when big money is involved, deposit by deposit. “Ask the bank if there will be a hold and how soon you can have the money. Don’t assume it’s going to be there because the teller smiled at you and accepted it,” she said. “If you’re moving money for a big payment, do it well in advance.”

Banks can and do move faster than the regulations require. And some have pushed their daily deadlines for depositors later by a few hours. Credit unions, in particular, tend to clear deposits more quickly, according to a 2007 Federal Reserve study of the effect of Check 21.

But you can’t count on that happening. So if you can’t keep a cushion in your checking account to protect yourself from running out of money while waiting for deposits, there are a few other available tactics.

Use direct deposit for everything you possibly can, from government benefit checks to tax refunds to reimbursement from your health insurer or flexible spending account administrator. Freelancers who do regular work for large companies can often receive payment via direct deposit, too.

If you’re sending money to a child in school or supporting a relative in some other way, you’ll spare yourself a lot of desperate phone calls if you can find a way to transfer money electronically into their account from your own linked account, say by listing yourself on the account with them.

There’s one big win for consumers arising from Check 21 that should have happened by now but mostly hasn’t. It’s something bankers like to call remote deposit capture. In plain English, that means you scan the check using your home computer and send it to the bank without having to bother with envelopes and mailboxes or remembering to stop at the branch in person.

Banks were fairly quick to make this available for their biggest customers — businesses. But only a couple of hundred banks or credit unions have given it to consumers so far, according to Bob Meara, a senior analyst with Celent, a financial services consulting firm.

The early adopters tend to be institutions like USAA Federal Savings Bank, which has only one branch but has lots of customers serving in the United States military who don’t want to send money in from an Army base. In fact, the bank has gone a step further and created an iPhone application that allows many of its customers to take pictures of their checks and deposit them that way. One in four of the bank’s check deposits now arrive remotely.

Customers of bigger banks could get their deposits into their bank accounts a lot faster if only the institutions were willing to let them move money this way. So why don’t they?

According to Mr. Meara, 90 percent of all transactions with bank tellers involve checks. If everyone had an iPhone deposit app, people wouldn’t come into the branch as often. That would be fine had banks not invested so much time and energy in training branch workers to persuade checking account customers to move into more profitable products.
“One the one hand, fewer deposit transactions could mean a headcount reduction,” he said. “But it invites the erosion of store profitability. The banks are struggling with the enormity of what it means.”

It can’t hurt to ask your bank for this sort of deposit-at-home service. But Mr. Meara thinks it will be many years before everyone gets to use it. That’s too bad. Until the Federal Reserve acts to tighten the deposit crediting rules further, having more ways to make deposits is one of the best benefits that can still come out of Check 21. If only your bank were in a bigger hurry to give you the tools.


Copyright 2009 The New York Times Company

FDIC Deposit Insurance Extended through 2013

FDIC Deposit Insurance Coverage
Final Rule FIL-53-2009
September 9, 2009


Summary: On September 9, 2009, the FDIC Board of Directors approved a rule to finalize: (1) the deposit insurance coverage regulations to reflect the extension of the temporary increase in the standard maximum deposit insurance amount (SMDIA) to $250,000 through December 31, 2013, and (2) the 2008 interim rules regarding revocable trust accounts and mortgage servicing accounts.

Contact:
FDIC Call Center at 1-877-275-3342

The Bailout Banks - How are They Doing (Barrons)

Home > News & Commentary > This Week's Magazine > Features
MONDAY, MAY 11, 2009
FEATURE



After All That Stress, a Hugh Sigh of Relief
By ANDREW BARY

Now that the leading financial companies have passed their stress tests, investors are eager to buy bank stocks again. But which ones?

WALL STREET CHEERED THE GOVERNMENT'S EAGERLY awaited release last week of stress tests on 19 leading financial companies. Bank stocks gained 36%, extending a furious rally that has produced a 135% gain in the widely followed KBW Bank Index from its March lows.

Investors viewed the stress tests as showing that the major public financial companies can handle potential loan losses even in a draconian economic scenario with a manageable amount of new equity capital -- or no new capital at all. The big fear had been that banks would have to resort to capital raising that would massively dilute existing common shareholders.

Now institutional investors are eager to buy financial stocks. Morgan Stanley and Wells Fargo took advantage of growing institutional demand for new stock issues immediately after the stress-test results were released Thursday.

"A lot of money managers were underweighted in bank stocks relative to their benchmarks, and they've been panicked buyers because of what they see as an inflection point," says John McDonald, banking analyst at Sanford Bernstein.

There were broad gains through the sector. Fifth Third soared 120% to $8.49; PNC Financial rose 40% to $53.08; Bank of America gained 63% to $14.17, and Wells Fargo gained 44% to $28.18, helped by a plug from Warren Buffett, whose Berkshire Hathaway is Wells' largest holder.
Credit-card specialists American Express and Capital One were strong; AmEx shares rose 17% in the five sessions to $28.40, and Capital One gained 81% to $31.34. Because the stress tests took a rosier-than-anticipated view of potential credit-card losses, AmEx and Capital One weren't deemed to be capital-deficient. Many on Wall Street had expected that Capital One would be forced to boost capital.

Analysts saw room for further gains in the sector, but investors need to recognize that profits for this year are likely to be weak, and that 2010 earnings may continue to be depressed by elevated losses on commercial-real-estate mortgages and on home-equity and credit-card loans.
Investors are starting to look at what analysts call "normalized" earnings, or what banks can earn in a more benign economic and credit environment, which may not come until 2011. Banks are generally trading for four to nine times those normalized earnings.

Those potential profits, however, are subject to a host of variables, including the economy, interest rates, bank capital requirements and asset returns. McDonald favors some of the stronger banks, including JPMorgan Chase and PNC. JPMorgan, which rose 20% to $38.94 last week, now is valued at around seven times normalized earnings of more than $5 a share.

UNTIL RECENTLY, INVESTORS FEARFUL about earnings power tended to value banks on tangible book value, a conservative measure of shareholder equity. "Two weeks ago, the only thing people cared about was price to tangible book," says Barclays Capital analyst Jason Goldberg. "Now it's price to normalized earnings. Two weeks from now, who knows what it will be?"

Goldberg favors Bank of America, whose shares were up sharply despite needing to raise an industry-leading $33.9 billion. The stock trades for less than five times Goldberg's estimate of normalized earnings of $3.47 a share. Wall Street believes BofA can raise required capital without much dilution. The bank said it plans to sell 1.25 billion of common shares and convert some of its preferred stock to common -- and to sell some non-core assets, including the Columbia investment-management business.

Bank of America's $33 billion of preferred stock offers a high-yielding play on the bank's revival. The Series J 7.25% preferred trades around $15 (60% of face value of $25) for a yield of 12%. A former Merrill Lynch preferred issue, now called Series 5, trades for just $9, a fraction of its face value of $25. It has a yield of 11%. The BofA preferred dividends now look more secure, and the common yields next to nothing.
One of best plays for fans of beleaguered Citigroup is its $15 billion of preferred stock, which is due to be converted into common shares in an exchange offer to get under way soon. Citi's Series P preferred traded Friday around $22.50, enabling investors to buy Citi common at around $3 a share, considerably below Citi's close of $4.02. Each preferred share is likely to get 7.3 common shares. The opportunity exists because arbitrageurs can't close the currently wide spread between the preferred and common, with Citi shares virtually impossible to short.

Citi's trust preferred, which is senior to the regular preferred, also could be appealing. Some probably will be converted to common to meet the need for $5.5 billion of additional capital called for in the government stress tests. Citi's Series W trust preferred trades around 15, for a yield of 10%.

Citi's common is a dicier bet because the company's plan to convert more than $50 billion of preferred stock to common to boost key capital ratios could balloon its share count to 23 billion from the current five billion, permanently capping its earnings power. Moreover, the government likely will emerge as a major shareholder, leading to further potential meddling in Citi's business. With Citi's business mix shifting, it's tough to peg normalized earnings power, which could be anywhere from 50 cents to $1 a share.

--------------------------------------------------------------------------------

from ZeroHedge.com: When Government Intervenes in the Banks

Nationalization. What happens to owners of bonds and preferred shares when government bails out a bank? It depends (see the table in ZeroHedge.com). For Government Sponsored Enterprises, Fannie Mae and Freddie Mac, preferred dividend deferral. For Lehman and Wamu, bond default.

"As one can see from the maze of policy reactions in the above 8 cases (which are not exhaustive, there have been many more failures), the only things that have been consistent is that absent an outright (semi) liquidation as was the case in Lehman and WaMu, the debtholders were never impaired. ..However, while this may be true for senior debt instruments, the fate of junior debt as well as Hybrid/Preferred layers is not so certain. All nationalization would really do, would be to eliminate certain junior capital tranches. Indicatively, Citi and BofA have about $100 billion in junior instruments (preferreds and hybrids), while the other too-big-to-fail banks have roughly $160 billion among them (Wells, JPM, Morgan Stanley and Goldman), implying there is a U.S. tranche of over $360 billion of non-debt securities that could potentially be eliminated before debt impairments would have to occur."

America's Banks (Financial Times)

America’s banks need to hold a yard sale

By Meredith Whitney

Published: January 21 2009 19:33 | Last updated: January 21 2009 19:33

A clear lesson learnt from this credit crisis has been to sell and sell early. However, it appears as if US banks are setting out to make some of the same mistakes of the past 18 months all over again. In many instances, those mistakes determined who survived and who did not.

Throughout 2007 and 2008, when I asked managements why they were not more aggressive in disposing of assets, the common answer I received was that they believed current prices were too distressed and did not reflect the true underlying value. Unfor­tunately, the longer they waited, the less these assets were in fact worth. Such a strategy cost Merrill Lynch and Citigroup more than half of their per share capital. In the case of Lehman Brothers and Bear Stearns, capital all but vaporised. These are just some examples but in reality this applies to too many financial institutions.

Throughout 2008, hundreds of billions of dollars were raised to recapitalise US financial institutions, but this money simply went to plug holes created by holding on to assets with declining values. Until the fourth quarter, monies were raised from willing investors. However, beginning in the fourth quarter with troubled asset relief programme capital created to recapitalise these institutions, US taxpayers became the default investors.

Now, when the average taxpayer finds him or herself overextended, he or she is forced to backtrack and, in situations of duress, sell stuff (otherwise known as a yard sale). In these cases, selling a set of snow skis for $15 or a prized record collection for $10 is not desirable but is necessary. Why should the US taxpayer be forced to fund behaviour that he or she would never have the luxury of indulging in?

Citigroup provides a prime illustration to support this argument. Last Friday, Vikram Pandit, Citigroup’s chief executive, stated: “We are not in a rush to sell assets.” This comes from a company that has incurred more than $51bn (€39bn, £36bn) in writedowns and has called upon more than $45bn in Tarp money from the taxpayer. At a minimum, this seems like a company currently operating under a different rule book from that used by taxpayers.

What is more, taxpayer dollars will have increasing demands on them. Thirty eight states are underfunded: already California and Arizona have begged for more than $10bn in federal dollars, while at least 36 more states have shortfalls in their 2009 budgets totalling more than $30bn. I believe they will be forced to sell assets such as toll roads and airports. It is worth noting that the US is well behind the rest of the world in terms of private ownership of such assets.

The fact is that there is money on the sidelines looking for opportunities to invest. One constant question I get from investors, who need somewhere to put their money, is: if I had to own something, what would it be? I am not very helpful to them at the moment as my answer is that I would own nothing. I do tell them that I believe that later in the year there will be fabulous opportunities to invest in new combinations of businesses that are currently “off the menu” to individuals. What I mean by this is that the system will eventually force disposals of assets: here I am just arguing that we need to get to it sooner rather than later.

Funding is the critical challenge to outsiders’ ability to bid more aggressively for assets. Many of these potential investors have clean balance sheets and, if provided with the appropriate funding concession (guarantees of long-term, low-cost capital from the government), could also more ably lubricate the financial system by making actual loans. These investors could be private-equity firms or existing public companies. The key here is government providing a funding concession and the banks being forced to sell assets that could raise capital and provide some tax relief to taxpayers.

No one doubts that losses will go higher, so asset sales are certain to be heavily discounted just as initial bids for collateralised debt obligations and retail mortgage-backed securities were. However, in retrospect, those “discounts” were far less than the write­downs companies took just months later. While it is never pleasant to sell one’s “crown jewels”, the strain of this credit crisis and the overextension of many bank balance sheets will require that they sell what they can and perhaps not what they would like. After all, that is what the average taxpayer would be forced to do.

The writer is managing director of Oppenheimer & Co

Copyright The Financial Times Limited 2009

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Marketwatch: Aflac Slumps on Preferred Impairment

Aflac slumps on concern about investments
Insurer may be exposed to hybrid securities issued by troubled financial firms

By Alistair Barr, MarketWatch
Last update: 6:44 p.m. EST Jan. 22, 2009

SAN FRANCISCO (MarketWatch) -- Shares of Aflac Inc. lost more than a third of their value Thursday on concern about exposures within the insurer's investment portfolio.
Aflac said it's "comfortable" with its current capital position and will provide more details about its investments when the company reports fourth-quarter results on Feb. 2.
The insurer may be exposed to investment losses stemming from a recent slump in the value of hybrid securities issued by European financial institutions such as Royal Bank of Scotland PLC, according to Morgan Stanley analyst Nigel Dally.
Aflac (AFL) has $7.9 billion of exposure to hybrid securities, Dally wrote to investors Thursday. He estimated, using the statutory filings, that roughly 80% of this exposure is to European financial-services firms, with U.K. banks including RBS , Barclays PLC , and HBOS among the holdings.

"The hybrid-security prices related to these institutions were already under pressure at the end of last year," Dally said. "However, those price declines pale in comparison to the sharp fall-offs we have seen in the past week, where the investor concerns over the possibility of nationalization of some institutions has led many of these securities to decline 30% or more."
If institutions are nationalized, holders of their hybrid and preferred securities could be wiped out, according to John Nadel, an analyst at Sterne, Agee & Leach.
When Fannie Mae (FNM ) and Freddie Mac (FRE) were seized by the U.S. government last year, the preferred securities of the mortgage giants became essentially worthless, he noted.
The PowerShares Financial Preferred Portfolio (PGF) , an exchange-traded fund that tracks preferred and hybrid securities issued by financial firms, has slumped 27% in the past week on concern about the potential nationalization of RBS and other banks. The ETF fell 7.2% on Thursday.
If even a small portion of the losses on Aflac's hybrid holdings are realized, the hit to the insurer's capital ratios could be "substantial," and its overall capital adequacy could be significantly less than most investors believe, Dally warned.
Aflac shares slumped 37% to close at $22.90 on Thursday. That's the lowest level for the stock since early 2000.
"We're comfortable with our current capital position and are constantly monitoring our investment portfolio," said Laura Kane, a spokeswoman at Aflac. "We will be issuing our earnings release on Feb. 2 and specific details will be available then."

Too big to fail

Aflac has long been considered among the most conservative insurers based on its investment portfolio and the amount of capital it keeps on hand to pay claims. The company avoided big investment losses from the subprime mortgage meltdown and has always bought investment-grade securities, Dally noted.
However, the credit crisis has hit so many parts of the financial sector that even companies like Aflac may now be affected.
Indeed, State Street Corp. (STT) , known as a steady, custodial bank where investors store their securities, lost almost 60% of its market value on Tuesday after disclosing $3 billion of mark-to-market investment losses from the fourth quarter. See full story on State Street.
Aflac invested roughly 80% of its $7.9 billion hybrid preferred securities portfolio in large European financial institutions because the insurer thought governments in the region would step in to prevent the companies failing, Morgan Stanley's Dally said on Thursday.
"This indeed has proved to be accurate," he wrote. "However, there is a question of what components of the capital structure the government will backstop."
"If some financial institutions are nationalized, there is the possibility that both the common stock, regular preferred stock, and callable preferred could be essentially wiped out," Dally added.
New capital?
If Aflac suffers a 10% loss on its overall hybrid securities exposure, the insurer would still have a relatively strong risk-based capital ratio of roughly 370%, Dally estimated.
The risk-based capital ratio, or RBC, measures the amount of capital an insurer has to support its operations and the risks it has taken on.
If Aflac suffers a 15% loss on its hybrid exposures, its RBC ratio could fall to about 339%, a level that could put the insurer's credit ratings at risk and force it to raise new capital, Dally said. End of Story
Alistair Barr is a reporter for MarketWatch in San Francisco.

WSJ - Ratings Lowered on 11 banks

BUSINESS DECEMBER 20, 2008
S&P Lowers Ratings of 11 Banks

Citigroup, Goldman Among Banks Affected; Agency Gives HSBC Negative Outlook

By LIZ RAPPAPORT
Credit-quality watchman Standard & Poor's slashed the credit ratings of 11 global banks Friday, but the moves were largely ignored by the bond market, which has begun to look positively on the governments' efforts to save these institutions.
The agency reduced the debt ratings on Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., Morgan Stanley, Wells Fargo & Co., J.P. Morgan Chase & Co., and on European banks Barclays PLC, UBS AG, Credit Suisse Group, Royal Bank of Scotland Group PLC and Deutsche Bank AG.

RBS was among 11 global banks whose credit ratings were cut Friday by S&P.
S&P left HSBC Holdings PLC's rating pat, but gave the bank a negative outlook. The agency also warned that investors in the hybrid debt offerings sold by several banks may find their payouts cut if the economy and the financial markets remain tumultuous.
The actions "reflect our view of the significant pressure on large complex financial institutions' future performance due to increasing bank industry risk and the deepening global economic slowdown," says S&P in its report. The ratings agency now offers its analysis on the banks with and without the filter of current and expected government support, which it notes will eventually disappear.
Banks continue to feel the pinch from high levels of illiquid and hard-to-value assets stuck on their balance sheets, big appetites for risk, relatively weaker risk-management practices and pressure from regulatory bodies to deleverage, says the agency.
"The market has been viewing the ratings as too high and the ratings agencies wanted to bring them in line with that reality," said David Havens, a credit desk analyst at UBS Securities. "No one is surprised by this."
So some of the corporate bonds of the downgraded banks, including J.P. Morgan and Goldman Sachs, even rallied modestly Friday as investors continue to dip back into this market seeking some safe -- and higher yielding -- investments than U.S. Treasury bonds, whose yields have hit record lows.
The stock market was less positive, as shares of Citigroup fell 5.5% and Bank of America fell 1.2% Friday.
In more normal times, the lower credit ratings would mean that these institutions would pay higher rates to borrow money in the debt markets. But this negative is overshadowed by the government's many programs to give banks access to liquidity and to cheap funding. This means banks are able to issue debt at exceptionally low rates despite their deteriorating credit quality.
That won't last forever, and certainly lower credit ratings are damaging for a bank when dealing with counterparties in contracts and for funding in short- and long-term debt markets once the government programs go away.

For now, several firms, including Citigroup, J.P. Morgan, Morgan Stanley, Bank of America and others have issued tens of billions of debt backed with the "full faith and credit" of the U.S. Treasury through the Federal Deposit Insurance Corp.'s temporary program, which expires in spring 2009.
The FDIC's effort, combined with Federal Reserve liquidity programs and capital injections from the Treasury, is intended to help banks restore their balance sheets to health by stimulating their fundamental business model of borrowing at low rates and lending at higher rates. The market expects eligible issuers to borrow more than $400 billion of these bonds -- money they are required to use to lend to borrowers throughout the economy.
The S&P cuts also come a day after Moody's Investors Service slashed Citigroup's rating two notches Thursday night to A2, from Aa3.

Write to Liz Rappaport at liz.rappaport@wsj.com

FDIC info on the new higher deposit insurance coverage

Multiple Certificates of Deposit (CDs), each with a different bank, can be held within your brokerage account. Each CD is covered by its own separate FDIC guarantee ($250,000 for each).