April 02, 2009

The head of the Federal Deposit Insurance Corp on Wednesday expressed cautious optimism that the U.S. banking industry is improving but she still expects more pain, such as bank failures, to hit the industry."I see some glimmers of hope. I'm cautiously optimistic that the industry is getting on a better footing," FDIC Chairman Sheila Bair said at an American Bankers Association conference. "Many banks are making money.""But, as you know, there is still more pain to go," she said.The FDIC is bracing for a slew of bank failures. The insolvencies are expected to cost the agency about $65 billion in the next five years, Bair said, with most of the failures expected this year and next.

To meet expected shortfalls in the industry-funded reserve, the FDIC recently announced it would charge banks higher premiums for insuring their depositors' accounts up to $250,000 per depositor.Regulators are considering ways to trim down such assessments, which according to banks are taking a toll on their profits at a time when they are struggling.Bair said fees from the FDIC debt guarantee program are likely to help lower insurance premiums.To help the FDIC bolster confidence in the banking system, U.S. lawmakers have proposed several pieces of legislation to increase the agency's borrowing authority with the Treasury Department.