Magazine article American Banker

Bank Fund Hit All-Time High of $19B in 3d Quarter

Magazine article American Banker

Bank Fund Hit All-Time High of $19B in 3d Quarter

Article excerpt

WASHINGTON - The Federal Deposit Insurance Corp. is expected to announce Tuesday that the Bank Insurance Fund grew nearly $2 billion in the third quarter to hit an all-time high of $19.4 billion.

The fund's previous high was $18.3 billion at yearend 1987.

The impressive growth bodes well for banks hoping to see a huge cut in insurance premiums next year.

Less than two years ago, the bank fund was insolvent. The FDIC boosted its rates to rebuild the fund, and recapitalization has been occurring faster than anyone predicted. The fund increased 48% in the first nine months of 1994.

At an open meeting on Tuesday, the FDIC board will be given the good news as the agency's chief financial office, Steve Seelig, delivers his third-quarter financial report.

The fund is now just $5.6 billion shy of the critical 1.25% target. Once that goal is attained, deposit insurance premiums are expected to fall as low as a nickel per $100 of domestic deposits from the current range of 23 cents to 31 cents.

At a nickel, the industry's annual savings would total $4.5 billion. BankAmerica with its huge domestic deposit base, would be the big winner as its annual BIF tab dropped to $50 million from $230 million.

In 1989 Congress prohibited the FDIC from lowering premiums until the bank fund had $1.25 for every $100 of insured deposits. With $19.4 billion, the bank fund has $1.03 for every $100 insured.

Deposit insurance experts expect the 1.25% target will be met in the first quarter of 1995. "They are building right on track," said Bert Ely, a consultant in Alexandria, Va. …

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