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Insurance Corporation

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Financial Institution Letters

FOR IMMEDIATE RELEASE                         PR-54-95     (9-5-95)


	The FDIC has determined that the Bank Insurance Fund (BIF) was
fully recapitalized at the end of May 1995 and that the fund
balance reached $24.7 billion at mid-year.  As a result, the agency
will begin making refunds to banks in amounts equal to insurance
overpayments for the months June through September.  The FDIC
expects the aggregate BIF assessment refund to total $1.49 billion,
plus $19.9 million in interest.
	FDIC Chairman Ricki Helfer said today: "After an unprecedented
number of bank failures depleted the Bank Insurance Fund in the
early 1990s, the banking industry's return to health has resulted
in recapitalization of the fund.  For this reason, a significant
reduction in deposit insurance premiums for the best-managed and
best-capitalized banks is justified."
	The FDIC determines the financial position of the agency's
insurance funds at the end of each month.  The confirmation that
the BIF recapitalized May 31st requires the FDIC to refund the
premium overpayments that were made since June 1.  Refunds will
include interest on overpayments at the same rate earned by the
	On August 8, the FDIC Board of Directors voted to
significantly reduce the deposit insurance premiums paid by most
BIF-insured institutions to an average of approximately 4.4 cents

per $100 of domestic deposits once the FDIC has confirmed that the
BIF met a reserve ratio of 1.25 percent.
	Based on data in the quarterly reports of condition provided
by BIF-member institutions for the period ended June 30, 1995, the
FDIC now has determined that the BIF was recapitalized at May 31. 
The FDIC calculates that the fund had a balance of $24.2 billion at
May 31, which was 1.267 percent of the $1,909.9 billion insured
deposit base as of that date.  
 	Given the May 31 date of recapitalization, the FDIC is making
refunds reflecting the reduced insurance premiums adopted by the
Board retroactive to June 1.  The refunds will cover payments
already received for the four months ending in September of 1995.
	The FDIC intends to pay the refunds electronically by means of
a credit to each BIF-insured institution through the automated
clearinghouse (ACH) network.  The settlement date is expected to be
September 15, 1995.  The FDIC's refund will use the same ACH
account information provided by each institution for paying
insurance premiums by means of direct debit.  In those few cases
where an institution's refund cannot be accomplished through the
ACH network or is rejected for technical reasons, the FDIC will
mail a check to the institution. 
	Each institution also will be provided with an explanation of
how its refund was calculated for both the second and third
quarters of 1995.  The documentation for each institution will be
mailed as soon as possible but no later than the September 15th ACH
credit payment.

	The invoices for the assessment due on September 29, which
normally would have been mailed to institutions on August 30, were
delayed to permit the FDIC to incorporate the correct premium rate. 
The invoices for the fourth quarter will be mailed promptly.  The
date of collection remains September 29 as scheduled.
	In a related development, the FDIC today also released mid-
year financial data for the BIF and the two other funds
administered by the agency.
	The BIF ended the first six months of 1995 with a balance of
$24.7 billion, surpassing the previous record balance of $21.8
billion at year-end 1995.  The June 30 balance represents 1.288
percent of the insured deposit base of $1,915.3 billion at that
	The main reason for the BIF's improvement is the continued low
level of bank failures, which allows insurance premiums and
interest income to be retained by the fund.  In addition, after the
FDIC's quarterly analysis of the BIF's estimated liabilities, the
agency in June reduced the fund's second-quarter reserves for
anticipated and past bank failures by $183 million and $133
million, respectively.  These adjustments are based on factors that
include changes in the marketplace and in the condition of the
banking industry.  Only four BIF-member banks with $526 million in
assets were closed during the first six months of 1995, and just 13
banks with $1.4 billion in assets were closed during 1994.  
	The Savings Association Insurance Fund (SAIF), which the FDIC
administers   primarily   to    protect   depositors   of   savings


institutions, ended  the first six months of 1995 with a balance of
$2.6 billion or 0.365 percent of the insured deposit base. 
Although the SAIF's mid-year balance is above the year-end 1994
amount of $1.9 billion, the fund's recovery has been slowed because
approximately $790 million in assessments are diverted each year to
pay interest on Financing Corporation (FICO) bonds.   As the SAIF
reserve ratio is well below 1.25 percent level mandated by law, the
FDIC Board on August 8 voted to retain the existing assessment rate
schedule for SAIF-members.  These rates range from 23 cents to 31
cents per $100 of assessable deposits.
	The FSLIC Resolution Fund (FRF) continued to wind down the
financial transactions inherited from the former Federal Savings
and Loan Insurance Corporation.  The FRF terminated 11 assistance
agreements during the first six months of the year.  It continued
to administer 43 agreements as of June 30th.  The FRF has not
required any appropriated funds in 1995. 
	The FDIC postponed the release of the mid-year financial
results one month beyond the customary date in order to comply with
generally accepted accounting principles (GAAP).  This is a one-
time delay that was necessary in order to factor in the refund to
BIF members, which now has been determined based on the completion
of the analysis of banking industry's June 30 reports of condition. 
Without that information, it was impossible to reasonably calculate
the June 30 balance in the BIF. 
	Copies of mid-year financial statements are available from the
FDIC's Office of Corporate Communications. 
# # # 
Last Updated 07/17/1999

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