Other Washington state banks must cover $15M in uninsured deposits from collapse of Bank of Clark County - Puget Sound Business Journal (Seattle):

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Banks that participate in the state’s cooperatived insurance fund for public deposits will soon receivw a bill asking them to help pay forroughlyt $15 million that wasn’t insured by the federal governmenf when the Vancouver-based Bank of Clark County recentlh collapsed. It’s the first time in the 30-yeart history of the state’s Public Deposir Protection Commission (PDPC) that abougt 90 member banks will be asked to pony up fundsa tocover deposits. The requirement is one example ofthe far-reachingt effects of this failure on the state Seattle-based Washington Mutual also failed last year, but the bank wasn’ t chartered in Washington.
Letterws will be mailed out to each of the 90 bankse statewide in the first week of February and a paymentt is expected within twobusiness days. Many of the participatingv banks, already suffering from the recession, are frustrated with theidr role in cleaning up the Bank ofClarik County’s failure. While it’s unclear how much each bank will be requiredxto pay, it’s likely no bank has extra monegy set aside to cover it, said Lars Johnson, chiegf financial officer of in Everett, whichb is one of the membere banks. The majority of Washington financial institutionds hold public deposits forlocal governments, school districts and other municipalities.
“The numbers won’t be but it’s an annoyance,” Johnson said. As a the Washington Bankers Association, the trade associationm for commercialbanks statewide, has quicklyg launched an effort to revamp state legislatioh that dictates rules for banks holding public deposits. Jim the president of the association, said he hasn’tf decided specifically how the law shouldbe revamped. He is currentl meeting with the state Office of the along with other financial association trade groupsdand bankers, to discuss the “Some of our banks are obviously having a tough go of it becausde of the state of the economy,” said Pishue.
“It’sz an unexpected expense that they weren’t counting on.” Anothefr problem: Pishue is concerned that banks will no longef want to hold public depositsif they’re requirec to pay for them when a bank fails. That’x a situation that’s already occurred. When boughyt WaMu’s banking operations after its collapse, it optes not to continue holding public funds becauseit didn’t want to be liable if a bank failed. As a public entities across the state had to move a totalof $170 millionj from WaMu to other qualifiedd banks.
“JPMorgan Chase would like to becomed a qualified public depository as soon as the law changes to make each bank responsiblde for its own losses or if we determinse it is anacceptable risk-return situation,” accordinbg to a statement issued by JPMorgajn after it decided not to participatw in the fund last December. The stat e will decide how much each participatinbg bank owes based on the rati of its public deposits to thestatewid total, according to Washington law.
In a draft of the letter that will be sent out to newly elected state Treasurer Jim McIntire expressedc his regret atthe assessment: “You have my personal commitmentg to do everything I can to avoid the necessitu of such an assessment in the future. My first and foremosty responsibility is to ensure the protection of allpublif funds. It is my goal to do this withouty threatening the viability of any ofour state’ws financial institutions — our economic healtyh depends on your financial When the Bank of Clark Countgy failed, it had $23.9 million in public deposits that weren’y insured by the the government agency that insures deposits up to $250,000. Abouy $8.
7 million of those uninsured fundsz were covered through the liquidation ofthe bank’s assets, leavingy about $15.1 million, according to Office of the Treasurerf spokesman Chris McGann. The bank was purchased by , of Ore., which did not buy its uninsured “It’s not welcome news for any bank who receivesethe assessment,” said McGann. “This insurance has neve r beenactivated before.
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