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Risk - Based Assessment System
Current Status of the Funds
At the
present time, both the Bank Insurance Fund (BIF) and Savings Association
Insurance Fund (SAIF) reserve ratios are above the Designated Reserve Ratio
(DRR) of 1.25 percent.
The BIF reserve ratio was 1.29 percent as
of June 30, 2003, the latest date for which complete data
are available. In the quarter ending September 30, 2003, preliminary results indicate that the
fund balance, which is the numerator of the reserve ratio, rose by $662 million
to $33.462 billion (unaudited), up from $32.800 billion (unaudited) on June 30, 2003
A significant portion of the BIF’s increase is due to a reduction of $369 million
in the contingent liability for anticipated failures. Approximately $170
million of this reduction resulted from a reduction in the expected failure
rates used to calculate this contingent liability. The remainder of the
reduction in the contingent liability for anticipated failures is due to lower
estimated losses for some problem institutions.
Another factor in the fund’s third quarter increase was a reduction in estimated losses
on past failures of $143 million.
Final data on insured deposits, the denominator for the reserve ratio, are not available at this time because not all September 30, 2003, Call Reports have been filed. Staff
conducted a telephone survey on October 31st to determine the amount
of insured deposits at some of the largest financial institutions. The survey
results combined with preliminary information from Call Reports and Thrift Financial
Reports provide a reasonable and timely estimate of third quarter insured
deposit growth. Staff estimates that BIF insured deposits shrank in the
quarter ending September 30 by 0.29 percent, resulting in estimated insured
deposits of $2.533 trillion. This indicates a projected BIF reserve ratio as
of September 30, 2003 of 1.32 percent.
The SAIF reserve ratio was 1.38 percent
as of June 30, 2003. During the third quarter, the fund
balance rose by $103 million to $12.186 billion (unaudited), up from $12.083
billion (unaudited) on June 30, 2003. For the period,
interest income exceeded operating expenses by $91 million, and the SAIF
contingent liability for future losses fell by $24 million. Approximately $14
million of the reduction in the contingent liability resulted from a reduction
in the expected failure rates, while the remainder was due to lower estimated
loss rates and improvements in problem institutions’ financial conditions.
Survey results and preliminary data from
Call Reports and Thrift Financial Reports also were used to estimate SAIF
insured deposit growth. Staff estimates that SAIF insured deposit growth for
the quarter ending September 30 was 0.16 percent, resulting in insured deposits
of $877 billion. This indicates a SAIF reserve ratio as of September 30, 2003 of 1.39 percent.
As in
prior periods, interest income and assessment income more than covered
operating expenses for both funds.
In the
assessment rate cases presented to the Board in May 2003, staff indicated that
both the BIF and SAIF reserve ratios would likely shrink by December 31, 2003. To date, preliminary numbers indicate
that both reserve ratios have increased. In preparing the May assessment rate
cases, staff assumed that in 2003 there would be no additional provisions for
losses from institution failures. Instead, both BIF and SAIF have benefited
from substantial reversals of provisions for losses in the first nine months of
2003. In addition, interest rates, while quite volatile in the very short run,
have remained relatively stable over the entire period. As a result,
unrealized gains on available-for-sale securities have not significantly
dissipated due to changes in interest rates. Finally, the BIF reserve ratio
was positively impacted by significantly lower than expected insured deposit
growth through the first half of 2003.
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