BIF falls below 1.25%

<p>WASHINGTON-The Federal Deposit Insurance Corporation (FDIC) announced last week that the Bank Insurance Fund’s (BIF’s) reserve ratio fell to 1.24% at the end of March, according to the Quarterly Banking Profile by the agency. When the reserves fall below 1.25% for the year, the FDIC must collect premiums to restore the shortfall within a year after the higher premiums are set, or it must collect premiums of at least 23 basis points. This is the likely scenario for next year and the first time premiums could be charged since 1996. Deposit insurance premiums are only changed on June 30 and December 31, and insured institutions must be notified 45 days in advance of an assessment increase, the report said. As a result, deposit insurance premiums would not be increased until December 31, 2002. The next meeting of the FDIC Board on the issues is scheduled for November. If the BIF recovers during the second quarter then a premium increase would not be necessary. Legislation was passed in the House of Representatives to change the designated reserve ratio to a range and eliminate the mandatory 23 basis point premium assessment (H.R. 3717). The Senate has yet to take up the bill.</p>