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Buffalo's banks will have to shell out millions of extra dollars to the Federal Deposit Insurance Corp. beginning in January. Their customers eventually will share part of the cost.

That is the consensus among Buffalo's biggest banks, which like other banks across the nation, will be hit with a 63 percent increase in their deposit insurance assessments.

Marine Midland will pay an additional $10 million in premiums; Goldome an additional $3.5 million. Norstar expects to pay an additional $3.1 million, while M&T expects to ante up another $1.5 million.

And banking regulators and Congress already are talking about additional special assessments to beef up the FDIC fund, which is rapidly being depleted by the cost of bank failures.

Depositors should not worry: Congress has said it will not let any insured depositor suffer a loss.

Depositors at savings and loans were not hurt when the federal fund that insured them became insolvent and Congress has said depositors protected by the FDIC will continue to be protected as well.

Banking regulators and bankers agree that the FDIC fund will need a bigger infusion than it will reap under the scheduled assessment increase in January: Any further recapitalization will cost local banks -- and their customers -- more money.

Although the bankers aren't happy about giving more money to the FDIC, they say they support a recapitalization financed by banks.

"We feel we are willing to pay it because it will give the consumer more confidence in the system," said Patrick F. Reilly, executive in charge of Marine Midland's retail bank in Western New York.

"We are never happy paying more money to anyone," said Dennis W. Wagner, vice president of corporate accounting at Goldome. "But we have to keep the fund solvent if any of us is to survive in this business."

Bankers say taxpayers should not have to bear the cost of funding the FDIC. "We think it's very important for our member banks to step up and assume responsibility," said Alan J. Volkenant, a senior vice president at KeyCorp, parent of Key Bank of Western New York. "It ought not to be borne by the taxpayers."

Customers, however, are a different story: Some of the costs associated with the increased FDIC assessment eventually will filter down to bank customers in the form of fees, lower deposit rates or higher interest rates on loans, local bankers say.

"What will happen is that most of the banks will swallow a piece of the increase," said Gary S. Paul, a senior vice president at M&T Bank. "Eventually, a portion will be passed through in the form of interest rates, not only on deposits, but on loans as well."

Although it would seem logical that depositors should bear all the cost since the FDIC insurance premium helps to protect them, Paul said it is bad loans that have caused commercial banks to fail and have cost the FDIC money.

Because of that relationship, he expects borrowers to end up sharing some of the cost.

No banker expects that customers will absorb all of the increased FDIC premium cost.

"A lot of what happens will depend on what happens in the market," said Charles Pendleton, a senior vice president at Norstar Bank in Buffalo.

Bankers will not begin assessing their customers for the cost on Jan. 1, he said. They will have to wait and see what other banks do, and the process of adjustment will be gradual.

Banks will have to handle part of the increased costs themselves, either by reducing their profits or cutting expenses in other areas, he said.

What happens after January is not clear, but local bankers agree that something further will be done to shore up the FDIC fund.

Several proposals have been floated in Washington, D.C.: One would have banks that take more risks pay higher premiums; another would make banks pay a one-time 1 percent premium to the FDIC; a third would have banks buy preferred stock in the FDIC.

Some M&T executives like the idea of basing premiums on a bank's level of risk, Paul said.

"That's only fair because banks with big risky loans are the ones driving the problem," he said.

Other M&T executives favor the purchase of preferred stock, which at least would pay dividends, rather than giving an outright 1 percent assessment to the fund, he added.

The 1 percent assessment would be a big hit to most banks. Marine would pay a total of about $150 million under this proposal, Reilly said.

Other methods of reforming the deposit insurance system also should be considered, bankers say.

Providers of financial services such as Sears and American Express -- which sell services similar to those offered by banks -- should be brought into the system and made to contribute, said Charles M. Mitschow, western region president of Marine Midland.

Money could be saved by reorganizing and cutting expenses in the overlapping, and in some areas redundant, bank regulatory system, said Goldome's Wagner.

Bankers say the FDIC's problems are serious but will not develop into a crisis similar to that of the taxpayer bailout of the thrift industry.

"During the thrift crisis, the thrifts worked with the politicians to hide the problem," said Paul of M&T. "The big difference here is that the banking industry is not attempting to hide the problem. The industry is fully behind efforts to recapitalize and fully expects that will be done by the banks and not the taxpayer."

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