WASHINGTON -- Soon banks may no longer be able to say the check is in the mail for their deposit insurance bill.
The Federal Deposit Insurance Corp. board on Tuesday voted to take up a proposal that would require banks to pay the tab for their deposit insurance assessments electronically.
Banks worry that this could take away the float they now enjoy by mailing the FDIC a check twice a year to pay the bill.
"The idea of filing electronically obviously appeals to us because it would save paperwork and reduce costs," an American Bankers Association spokesman said. "The float is an issue that we are going to be looking at and demanding some serious consideration on."
'Really Neutral'
The FDIC said the proposed rule will be good for the banks as well as the agency.
"The cost to the bank should not be any greater," said acting FDIC Chairman Andrew C. Hove Jr. "It is really neutral to them, but the burden is less in terms of calculating the payment."
The FDIC also reported that for the first time since 1978, a quarter went by without a bank failure.
At the end of the first quarter, the Bank Insurance Fund's balance was $15.2 billion - or 0.8% of deposits - up from $13.1 billion at yearend. "We are well on our way to the 1.25% target," said Steven Seelig, the FDIC's chief financial officer.
The Savings Association Insurance Fund, which insures S&L deposits, had a reserve ratio of just 0.2%. Its balance stands at $1.4 billion after $262 million in net income last quarter.
"It is a little bit further off than the bank fund" from Congress' goal of 1.25%, Mr. Seelig said.
The FDIC spent $24 million less in the first quarter than the $498 million it had budgeted for expenses, he reported.
In a separate measure that notched a defeat for the insurance industry, the agency declined to further limit banks' insurance underwriting activities.
The board voted today to keep its current rules, which allow well-capitalized, state-chartered banks and their subsidiaries to continue providing insurance if they were doing so on Nov. 21, 1991.
The agency had been considering limiting those banks' insurance underwriting to the states in which they are chartered and where their subsidiaries are incorporated.
Banks and thrifts that sell a fixed-rate investment product known as bank investment contracts will also see their insurance assessments fall.
The FDIC board voted to exclude bank investment contracts from institutions' assessment base now that the contracts are no longer covered by deposit insurance. Before last Dec. 19, bank investment contracts were insured up to $100,000 by the federal government, as are deposits.
Forfeited Revenue
The FDIC estimates the move will cost the deposit insurance funds $1.5 million annually in lost revenue. Bank investment contracts are issued to corporate investors - usually companysponsored 401(k) or profit-sharing plans - that guarantee a fixed rate of return on the investment over the life of the contract. They are similar to the guaranteed investment contracts sold by insurance companies.
Under the notice of proposed rulemaking on assessments, the FDIC would calculate an institution's tab for deposit insurance four times a year, based on information from its quarterly financial report.
The agency would then use the Automated Clearing House network to debit the institution's account by that amount.
Now, institutions figure their assessments twice a year - sometimes under tight deadlines and mail a check for the amount to the FDIC.
Praise from Small Banks
The Independent Bankers Association of America praised the move..
"It should make it a little easier for the banks," said Karen M. Thomas, the trade group's regulatory counsel. "They won't have to calculate their own assessments."
Because the proposal would have banks pay half of their deposit insurance bill earlier and half later than they now do, "It is supposed to be a wash for the banks," she said.
