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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.

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