(Sacramento Business Journal) – Federal Deposit Insurance Corp.’s board of directors on Tuesday approved an increase in deposit insurance by 7 cents for every $100 in deposits. The increase will be charged annually.

The increase of 7 basis points will take effect Jan. 1. Banks now pay between 5 and 43 basis points for FDIC insurance, depending on the strength of the bank.

Under the new rules, insurance rates would be risk-based between 12 and 50 basis points. Most banks will fall in the range of paying between 12 and 14 basis points for insurance, according to an FDIC release.

Failures of banks have cost the FDIC’s insurance fund millions of dollars, and the insurance fund has fallen below its reserve ratio target of 1.15 percent. The changes made today will get the reserve ratio to its required level by 2013.

“With higher levels of bank failures, the FDIC’s resolution costs have increased significantly. This assessment increase creates a path for the fund to return to its statutorily mandated level,” said Sheila Bair, FDIC chairwoman. “The banking system is the bedrock of our economy and deposit insurance has played a vital role in providing stability to the system. Maintaining a strong fund positions the FDIC well to handle future challenges.”