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Tuesday, April 24, 2012

FDIC: DIF Ratio to Reach 1.15% by 2018

The Deposit Insurance Fund’s (DIF) balance has risen for eight consecutive quarters and stood at $11.8 billion at the end of 2011, leaving its reserve ratio at 0.17%, according to an FDIC staff memo released at the agency board meeting.

The Dodd-Frank Act requires the FDIC to increase the target ratio to 1.35% -- a level it must reach by Sept. 30, 2020. FDIC projects under the current assessment rates, The DIF reserve ratio will reach 1.15% by the second half of 2018.

The FDIC also projects that it will spend $12 billion to cover bank failures through 2016, $7 billion less than the agency’s last five-year projection in October. The FDIC also anticipates that this year’s assessments on banks will remain at about the same $13.5 billion level as the previous two years.

ABA Chief Economist Jim Chessen stated:
The [DIF’s] rapid recapitalization … reflects a noticeable slowdown in bank failures as the banking industry continues to gain strength. The FDIC has been overly conservative in setting aside reserves for possible failures that did not occur. These excessive reserves mean the fund is even healthier than expected.
Chessen also noted that banks’ $13.5 billion in annual premiums means they will provide more than $65 billion in revenue over the next five years -- more than five times what the FDIC expects in failure costs.

Read the FDIC’s memo.
Read Chessen’s statement.

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