deposit insurance premiums for the second time in four months. What's more, a deal struck in Congress this week would force the Federal Deposit Insurance Corp. to return $440 million in premiums paid by banks in the second half. How low the FDIC will drop rates was uncertain Thursday, although the American Bankers Association is pushing the agency to eliminate the premium. "We believe if no premium income is needed, none should be charged," ABA president James M. Culberson Jr. wrote in a Nov. 3 letter to the FDIC. No matter what rate the agency settles on Tuesday, the board is likely to face the question again in January. That's when Congress is expected to require banks to kick in a 2.4% premium toward the annual payment of the Financing Corp., or Fico, bonds sold in an early effort to rescue the thrift insurance fund. FDIC officials acknowledge the pressure to lower rates, but are reluctant to give deposit insurance away for next to nothing, industry sources say. "I'm expecting a penny for A-1 banks and even that is going to give the FDIC too much money," said Diane M. Casey, national director of regulatory issues at Grant Thornton here. So-called A-1 banks are institutions with solid management and strong capital. Right now, 92% of all banks fall into this category. "It's a pretty safe bet" FDIC will reduce premiums, agreed Karen Thomas, director of regulatory affairs at the Independent Bankers Association of America. "Just how low they will go, I don't know, but I hear they are trying to justify one cent." By law, all banks must pay at least $2,000 a year for deposit insurance. Independent Bankers president Richard L. Mount asked FDIC Chairman Ricki Helfer in a Nov. 8 letter to waive the premium for the healthiest banks. "There is already a cushion in excess of close to $1 billion to cover future expenses and losses," Mr. Mount asserted. The Bank Insurance Fund reached its legally mandated reserve ratio of 1.25% in May. Recognizing that milestone, the FDIC in August slashed bank premiums 83% to an average of 4.4 cents and agreed to refund $1.5 billion in overpayments. The bank fund's reserves were $25.1 billion at Sept. 30 for a reserve ratio of 1.30%. By yearend, reserves will climb to $1.32 for every $100 of insured deposits, according to James Chessen, ABA's chief economist. That's about $1.3 billion more than the 1.25% reserve ratio required by law. "If they charged everyone zero for all of 1996 the fund would still be at 1.30%," Mr. Chessen said. The bank fund has extra cash, in part, because the FDIC has spent just $77 million closing six small banks this year. No surge in bank failures is expected. Still, FDIC officials have been arguing that they must manage the fund for the long-term future. In addition, Ms. Helfer has insisted that she is required by law to price deposit insurance according to the amount of risk an institution poses to the fund. The FDIC began charging these risk-based premiums in 1993 and would be essentially dumping the program if more than 90% of the industry got deposit insurance for just $2,000 a year. While the FDIC still has the power to set rates, that may not be the case next year. The deal struck in Congress this week, although not yet enacted, would bar the agency from charging the healthiest banks for insurance as long as the fund is at 1.25% or higher. When the FDIC board votes Tuesday, "we certainly expect they will recognize the direction Congress is going," said Edward L. Yingling, ABA's executive director of government relations. But Leslie Woolley, Ms. Helfer's deputy for policy matters, said the FDIC must set its rates in line with current law. "They can't take into account what might be," she said. The pending legislation would require the FDIC to rebate insurance premiums to the best-rated banks. Mr. Yingling said $440 million in premiums paid by these banks since June 30 would have to be refunded.

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