The Program guarantees newly issued senior unsecured debt of banks, thrifts, and certain holding companies, and provides full coverage of non-interest bearing deposit transaction accounts, regardless of dollar amount.
The US Federal Deposit Insurance Corporation announced a Temporary Liquidity Guarantee Program to guarantee newly issued senior unsecured debt of banks, thrifts, and certain holding companies, and providing full coverage of non-interest bearing deposit transaction accounts, regardless of dollar amount.
Under the plan, certain newly issued senior unsecured debt issued on or before 30 June 2009, would be fully protected in the event the issuing institution subsequently fails, or its holding company files for bankruptcy. This includes promissory notes, commercial paper, inter-bank funding, and any unsecured portion of secured debt. Coverage would be limited to 30 June 2012, even if the maturity exceeds that date.
In addition, any participating depository institution will be able to provide full deposit insurance coverage for non-interest bearing deposit transaction accounts, regardless of dollar amount. This new, temporary guarantee expires at the end of 2009.
"The program will be funded through special fees and does not rely on taxpayer funding," FDIC Chairman Sheila Bair said. Participants will be charged a 75-basis point fee to protect their new debt issues, and a 10-basis point surcharge will be added to a participating institution's current insurance assessment in order to fully cover the non-interest bearing deposit transaction accounts.
Press release
Financial Institution Letter
Statement Sheila Bair
Fact Sheet – Temporary Liquidity Guarantee Program
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