U.S. bank regulators extended a crisis-era guarantee while also moving to change the deposit insurance fee system for large banks with the aim of making them pay more for engaging in risky activities.

The Federal Deposit Insurance Corp extended on Tuesday the so-called Transaction Account Guarantee (TAG) program by six months to ensure that community banks still relying on the government backing do not lose business accounts to larger banks that could be perceived as more stable.

The extension -- to the end of this year -- reflects the still-fragile state of smaller banks.

The FDIC board also proposed changing the factors used to determine how much large banks pay for deposit insurance.

The fee proposal would try to capture long-term risks by creating a new scorecard that factors in higher-risk concentrations, credit quality measures and levels of underperforming assets.

The FDIC proposal, which will be out for public comment for 60 days, is designed to discourage excessive risk-taking in good times and prevent a repeat of the massive leveraging that occurred before the recent financial crisis.

The proposal also explores whether to include other factors such as stress testing, underwriting standards, and risk management.

If we had used the proposed system during pre-crisis periods, it would have predicted the current rank ordering of large institutions much better than the system used now, FDIC Chairman Sheila Bair said.

The FDIC said it is still considering a proposal to also add the riskiness of compensation schemes as a factor in fee levels. The agency would not say when it will formally propose such a measure.


The changes would apply to large banks with more than $10 billion in assets. That currently includes a little more than 100 banks.

There would be a separate category for highly complex institutions that have a depository bank with $50 billion in assets, and a holding company with $500 billion in assets. That includes about nine banks, the FDIC said.

Those institutions would face four other measures that would factor in fee levels, including senior bond spreads and the parent company's tangible common equity.

Comptroller of the Currency John Dugan supported putting the proposal out for comment but expressed reservations about the fee system's complexity and possible subjective nature.

The fee changes could go into effect as early as the first quarter of next year, the FDIC said.

The revenue collected under the new system would be about the same as the current system; it would simply shift the fee burden to institutions that take on more risk.

For the TAG program, the FDIC also gave itself the option to extend the guarantee for an additional 12 months, to December 31, 2011, without additional rulemaking.

The TAG program, which provides federal backing for accounts that businesses typically use to meet payroll and pay vendors, was put in place in October 2008 when businesses were pulling their money out of smaller banks.

As of the end of last year, about 6,400 banks out of about 8,000 were participating in the program.

(Reporting by Karey Wutkowski; Editing by Tim Dobbyn)