WASHINGTON - Dissatisfied with a scheduled 83% cut in deposit insurance rates, the nation's largest banks are pressuring the government to scrap the premium altogether for the second half of 1995.

"The proper assessment rate for the second half of 1995 should be zero on all banks," said Michael Kadish, Citicorp's assistant secretary.

"Even with a zero assessment rate on the highest-rated banks, the Bank Insurance Fund's total income will be more than sufficient to maintain reserves," agreed Peter J. Tobin, Chemical Bank's executive vice president and chief financial officer. "We believe any higher premium under these circumstances would not conform to the requirements of the statute."

In comment letters filed recently with the Federal Deposit Insurance Corp., big banks also:

*Argued that building the bank fund's reserves beyond $1.25 for every $100 is illegal as well as unnecessary.

*Criticized the FDIC's plan to unilaterally raise or lower rates by 5 basis points.

*Urged a wider range of rates for deposit insurance.

The FDIC is expected to vote next month on its Jan. 31 proposal to slash bank premiums to an average of 4.5 cents for every $100 of domestic deposits. The controversial proposal attracted a whopping 3,200 comment letters.

Thrifts oppose the reduction because it would force them to pay a price five times higher than banks for the same government guarantee. However, the FDIC is required by law to set rates for the two funds independently.

In their letters, big banks generally ignored the thrift industry's complaints, focusing instead on persuading the FDIC to push bank premiums even lower.

The rebuilding of the bank fund will be complete by midyear, and the FDIC expects interest on the fund's reserves to generate roughly $500 million during the second half. That revenue, bankers noted, will more than cover the $390 million the FDIC has predicted it will spend on administrative expenses and losses from failed banks.

In fact, the FDIC has acknowledged that the fund's income will exceed its expenses - which means the reserve ratio will exceed 1.25% - through 2001.

Bankers were vehement that the FDIC has no authority to push the fund above its congressionally mandated size of 1.25%.

"The board is without power to set premiums at amounts which exceed the designated reserve ratio of 1.25%," wrote Joseph H. Kott, executive vice president and general counsel at Midlantic Corp., Edison, N.J.

"Amounts in excess of the statutory requirement will be better employed by banks supporting the needs of their communities than sitting in government coffers," he added.

Bankers insisted the insurance fund needs less money - not more - now that legal and regulatory changes have reduced the FDIC's risk of loss.

Banc One's senior vice president, William C. Leiter, noted failed-bank losses will be less now that regulators have the power to seize banks with 2% capital. In addition, he noted, the government gets repaid before other creditors when a bank fails. Finally, holding companies must shore up ailing subsidiaries.

"Consequently, the number of bank failures and the magnitude of those failures, should not be as great as in the recent past," Mr. Leiter noted.

Bankers also told the FDIC to forget about plans to raise or lower premiums by 5 cents - as often as twice a year - without going through the formal rule-making process.

"This new authority would lead to hasty decisions and a micromanaged process based on reaction to blips rather than the analysis of trends," wrote Stanley S. Stroup, executive vice president and general counsel of Norwest Corp., Minneapolis. "We do not believe public involvement should be reduced and a less deliberate decision-making process adopted."

If the FDIC raised premiums twice in a year for a 10-cent shift, Banc One's Leiter said it would drain $56 million from the Columbus-based bank's annual earnings.

The Bankers Roundtable said a 5-cent increase would cost the industry up to $1.4 billion a year.

Finally, bankers encouraged the FDIC to expand the range of rates it charges for insurance.

The agency's proposal suggests more than tripling the current 8-cent spread for a range of 4 cents to 31 cents. Still, the vast majority of banks will pay the lowest price.

"The current risk classification system makes insufficient distinction between the riskiness of banks," wrote Rodney L. Jacobs, vice chairman of Wells Fargo Bank. "Ninety percent of banks should not be include in the lowest risk category."

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