The FDIC Board of Directors voted today to maintain existing
premiums for banks and savings associations. The Board also
approved a Memorandum of Understanding formalizing the FDIC's
role as collection agent for payments on Financing Corporation
Bank and Savings Association Premiums
The Board voted to retain the current assessment rate
structure for the Bank Insurance Fund (BIF) and the Savings
Association Insurance Fund (SAIF). Rates paid on BIF-assessable
deposits will continue to range from 0 to 27 cents per $100, with
the lowest-risk institutions paying only the statutory minimum of
$2,000 per year. Premiums on SAIF-assessable deposits will
continue to range from 23 cents per $100 to 31 cents per $100 per
year, depending upon the institution's risk classification.
Favorable economic conditions in the banking industry and
the growing financial strength of the BIF contributed to the
Board's decision to keep the current BIF assessment structure
intact. The BIF reserve ratio currently stands at 1.30 percent,
well above its statutorily mandated level of 1.25 percent.
The reserve ratio is expected to remain above 1.25 percent
throughout 1996 if losses and deposit growth stay within the
normal ranges. The Board gave careful consideration to the
possibility of an upward spike in BIF deposits due to deposit
migration from the SAIF, but decided such a possibility did not
warrant adjusting rates at the present time. The FDIC will
carefully monitor deposit growth in the coming months.
The annual average assessment rate for BIF-insured
institutions is expected to drop to 0.29 basis points with the
current schedule in place.
Estimated annual revenues from the current schedule have
declined from $104 million to $72 million as a result of more
institutions moving into the lowest-risk classification.
Currently, 93 percent of BIF member institutions are in that
The continued undercapitalization of the SAIF weighed
heavily in the Board's decision to maintain the current SAIF
assessment rates. On December 31, 1995, the SAIF had a balance
of just under $3.4 billion and a reserve ratio of 0.47 percent of
insured deposits, about $5.5 billion below the amount needed to
meet the designated target reserve ratio of 1.25 percent of
insured deposits. At the present pace and under reasonably
optimistic conditions, the SAIF is not expected to meet its
mandated reserve ratio until 2001.
While the thrift industry earned record profits in 1995 and
the number of problem thrifts continues to decline, the Board
concluded that the most prudent course is to maintain SAIF
premiums at current levels. Among the developments threatening
the stability of the SAIF are the disparity between BIF and SAIF
premiums of about 23 basis points and the economic incentives
this provides for SAIF-insured institutions to seek to shift
SAIF-assessable deposits to the BIF in order to lower their
premiums. Currently, 88 percent of SAIF insured institutions are
in the FDIC's lowest risk classification.
Collection of FICO Assessments
In a Memorandum of Understanding approved by the FDIC Board,
new quarterly collection procedures in effect since July 1, 1995,
for the FDIC's collection of Financing Corporation assessments
from SAIF-insured institutions were formally recognized.
The agreement formalizes the FDIC's responsibilities with
respect to FICO assessment collections and recognizes the FDIC's
role as collection agent. FICO assessments are still subject to
approval by the FDIC's Board of Directors. The FDIC acknowledges
that all FICO assessments it collects, including accrued
interest, belong to the FICO and that assessments received
quarterly by the FDIC will be transferred to the FICO, with the
approval of the FDIC Board of Directors.
Congress created the Federal Deposit Insurance Corporation in
1933 to restore public confidence in the nation's banking system.
The FDIC insures deposits at the nation's 12,000 banks and
savings associations and it promotes the safety and soundness of
these institutions by identifying, monitoring and addressing
risks to which they are exposed.
FDIC press releases and other documents are available on the
Internet via the World Wide Web at www.fdic.gov.
They may also be obtained through the FDIC's Public Information
Center, 801 17th St. NW, Room 100, Washington, DC,