Deposit insurance agreement is reached Over 90% of banks could escape premiums


WASHINGTON -- More than 90 percent of the nation's commercial banks could pay no federal deposit insurance premiums in 1996 under an agreement reached last night by U.S. lawmakers.

The agreement reached by members of the House and Senate Banking Committees would prevent the Federal Deposit Insurance Corp. from holding reserves equal to more than 1.25 percent of the $1.9 trillion in deposits it backs. The banking package, which now goes to the respective budget committees for inclusion in the overall budget-reconciliation bill, includes $4.8 billion in savings over seven years. President Clinton has said he plans to veto the whole measure when it reaches his desk.

The FDIC's bank deposit insurance fund held about $25.1 billion at the end of the third quarter, equal to 1.30 percent of insured deposits. As a result, banks that the FDIC considers to be well-capitalized and well-managed -- about 92 percent of those in the nation -- could be exempt from paying deposit insurance premiums in 1996 and likely will receive a refund of premiums made in the last half of this year, lawmakers and industry lobbyists said.

Banks in the FDIC's lowest premium category now pay 4 cents per $100 of deposits for federal deposit insurance. Because these banks hold about 95 percent of the $1.9 trillion in insured deposits, they could save about $730 million were their premiums to go to zero.

"We believe that banks should pay up to the designated reserve ratio of 1.25 percent," said Edward Yingling, chief lobbyist for the American Bankers Association. "Having us pay beyond that is just taking money out of communities."

The Treasury Department is opposed to forcing the FDIC to refund premiums after the fund reaches a 1.25 percent reserve ratio. Treasury says that would leave the fund with too little breathing room should the industry's condition deteriorate.

Separately, the House and Senate lawmakers approved provisions that would bolster the thinly capitalized thrift deposit insurance fund. Their plan would raise about $5.7 billion by imposing a one-time fee of about 0.78 percent of insured deposits. The amount needed to fully capitalize the thrift fund previously was estimated to be $6.2 billion, but that was lowered after the fund showed stronger-than-expected growth in the third quarter.

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