The Federal Deposit Insurance Corp. had nearly $40 billion in reserves as of June 30 -- a record $4.5 billion more than required by law, the agency reported Tuesday.

The Bank Insurance Fund had $29.8 billion at midyear, or $1.40 for every $100 in insured deposits, while the Savings Association Insurance Fund had $9.1 billion, or $1.29. Roughly $950 million was stripped from the thrift insurance fund in January to create a secondary cushion. Including those reserves would hike the Savings Association Insurance Fund's ratio to 1.42.

Congress mandated a reserve ratio of 1.25% in 1989, but has never given the FDIC any means of refunding extra reserves.

"At some point, there has to be a recognition that the FDIC simply does not need billions and billions of extra dollars to meet the expenses that they are likely to incur," said James Chessen, chief economist at the American Bankers Association.

"The excess funding in the deposit insurance funds is better off in the banks' communities than it is sitting in Washington."

Though the BIF is more than triple the size of the SAIF, the thrift fund netted slightly more income than the bank fund during the first half of 1999, $226 million versus $219 million. One reason: The FDIC expects more losses from bank failures in the next 12 months than from thrift failures, $187 million versus $11 million. Another reason was that the higher-than-anticipated cost of resolving Boulder, Colo.-based BestBank, which cost the fund an estimated $232 million by midyear.

At a board meeting Tuesday, the FDIC also proposed reducing to 15 days from 30 the time a bank has to pay its insurance premium after being billed. The agency also proposed tripling to 90 days the time a bank or thrift has to request a review of its premium assessment.

The FDIC also proposed prohibiting people who contributed to the failure of a bank from purchasing assets of institutions held in receivership. It also amended its regulation regarding management interlocks.

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