U.S. banking regulators proposed on Tuesday that banks prepay three years of fees to help cover the rising cost of bank failures, facing a $100-billion cleanup bill through 2013.

Banks would prepay $45 billion of regular quarterly assessments under the plan, but not have to recognize the hit to their earnings until the fees are normally due.

The five-member board of the Federal Deposit Insurance Corp voted unanimously to put the proposal out for 30 days of public comment.

Regulators have been exploring ways to replenish the fund that safeguards bank deposits without putting a huge burden on healthy banks.

FDIC staff raised their expectations for bank failure costs from 2009 through 2013 to $100 billion, up from a previous estimate of $70 billion.

If finalized, the proposal would require banks to prepay on December 30, 2009 their regular assessments for the fourth quarter of 2009 and for all of 2010, 2011 and 2012.

The FDIC said the insurance fund's balance is expected to become negative this quarter and will remain negative through 2012, but said the agency will still have plenty of cash to operate and handle bank failures.

We have tons of money to protect insured depositors, FDIC Chairman Sheila Bair said before the vote. This is really about the mechanics of funding.

So far this year 95 U.S. banks have failed, compared to 25 last year, and only 3 in 2007.

Those failures have whittled the balance of the insurance fund down to $10.4 billion at the end of the second quarter, from $45 billion a year earlier.

FDIC officials said they expect bank failures to peak in 2009 and 2010, and that industry earnings will have recovered enough in 2011 to absorb a proposal to raise regular assessment rates by three basis points that year.

The FDIC in May authorized a $5.6-billion emergency fee on the banking industry and warned of similar special fees.

But banks have argued that more fees would be a significant hit to their balance sheets just as they are starting to recover.

FDIC staff explicitly recommended no more special assessments in 2009.

For graphic about FDIC and bank failures, click here:


(Reporting by Karey Wutkowski; Editing by Tim Dobbyn)