Federal Deposit Insurance Corp staff recommended on Tuesday that the agency get banks to prepay three years of fees to help cover the cost of bank failures, expecting a $100-billion cleanup bill through 2013.

The board of the FDIC was meeting Tuesday and is expected to vote shortly on whether to formally propose that banks prepay $45 billion of regular quarterly assessments, but not recognize the hit to their earnings until the fees are normally due.

Regulators have recently been exploring options on how to replenish the FDIC insurance fund that safeguards bank deposits.

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 approved, 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.

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 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. This is really about the mechanics of funding.

A sharp rise in bank failures -- triggered by deteriorating loans and the recent recession -- has been draining the fund, forcing the FDIC in May to authorize a $5.6-billion emergency fee on the industry and warning 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.

The FDIC staff explicitly recommended no more special assessments in 2009.

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.

For graphic about FDIC and bank failures, click here:

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(Reporting by Karey Wutkowski; Editing by Tim Dobbyn)