As the debate over Bank Insurance Fund and Savings Association Insurance Fund premiums continues - pitting banks against their thrift cousins - one key fact seems to have been overlooked: The fate of banks and thrifts is intertwined like never before.

By recognizing this evolution in the financial services industry and responding to it, which means joining forces and seeking common ground on the BIF-SAIF battlefield, banks and thrifts can help avoid a financial crisis that could affect both - and cost everyone. Moreover, unifying in the face of nonbank competitors will go a long way toward maintaining market share and consumer good will.

This process of setting aside acrimony and instead embracing cooperation is rooted in the growing similarity between banks and thrifts' basic business, regardless of charter.

As recently as just a few years ago it would have taken even a fairly new financial analyst about 10 seconds to review the balance sheet of a financial institution and determine whether it was that of a bank or a thrift. Nowadays, even a fairly experienced financial analyst would need to spend a few minutes in making this determination.

Since banks and thrifts are now essentially marketing to and serving the same customer base with the same array of loan and deposit products, to the general public the difference between banks and thrifts is more transparent than ever.

In fact, given recent years' merger mania combined with name changes and Resolution Trust Corp. "combinations" it is fairly safe to assume that the public probably views banks and thrifts as essentially the same entity.

Although consumers' homogeneous view of banks and thrifts suggests a unified, strong and stable financial community - finally recovered from the crisis of the late 1980s and early 1990s - there's also a negative aspect to this view. Should thrifts once again be legislated into a financial black hole by paying more on premiums than banks, both stand to face a backlash in the eyes of consumers.

Peace may have returned to the Ponderosa, but not for long.

The current BIF-SAIF dilemma has the unnerving potential to create another thrift crisis as the onerous SAIF assessments burden many thrift institutions. Banks will, in all likelihood, be the first called upon to help rescue SAIF, but the taxpayers will not be far behind. Such a crisis could spur a massive loss of public confidence - particularly if taxpayers are again asked to help in a bailout.

The net result? Lack of faith in the banking and thrift industries could cause a major migration of deposits to nonbank competitors. These organizations, as we know, stand ready and willing to take consumers' deposits with their attractive branch networks, similar product features, and reasonable pricing.

One possible solution would be a merger of the BIF and SAIF into one fund, with the responsibility for maintaining the reserves of the combined fund falling equally to both banks and thrifts. The interest payments on the FICO bonds, floated in 1987 to help fund the Federal Savings and Loan Insurance Corp., would also become the responsibility of the combined fund.

At that point, deposit insurance premiums would be assessed based on an institution's Camel rating and the overall level of the combined fund. A level playing field would be created, which is always good public policy.

As previously noted, despite the similarities of banks and thrifts, we are burdened with two separate and distinct funds with two very different and distinct premium schedules. Where is the logic and economic benefit?

The answers are simple. There is no logic and the consumer/taxpayer does not benefit, but in fact may be potentially harmed.

Most importantly, to use a cliche, "United we stand, divided we fall." By everyone's estimate, an independent SAIF - left with noncompetitive insurance premiums, shrinking deposit base and onerous FICO payments - cannot survive.

The primary, if not only, argument put forth by bankers with respect to the maintenance of separate funds is that the banking community did not cause the SAIF crisis and, therefore, should not have to contribute any funds to it. But the fact of the matter is that today's remaining thrifts did not cause the problem either.

If the blame for the current SAIF situation must fall somewhere, then it should be at the feet of the failed thrifts and, particularly, Congress.

Congress recognized when it passed the Financial Institutions Reform, Recovery and Enhancement Act in 1989 that SAIF would probably need help recapitalizing. Clearly, this was demonstrated by the fact that, under the act, the Treasury was authorized to contribute up to $32 billion to SAIF.

Yet this authorization was withdrawn by Congress in 1993, contributing to the present circumstances underlying SAIF's crisis.

According to America's Community Bankers, the national trade group for thrifts, between 1989 and 1994 only 23 percent of SAIF premium income was retained in SAIF. Of the $9.3 billion in total assessments, $7.2 billion was diverted to Financing Corp., Resolution Funding Corp. and the FSLIC Resolution Fund. Had only those funds diverted to Fico been retained in SAIF, it would be reaching the required 1.25 percent reserve ratio at the end of 1995, about the same time as BIF.

The thrift group maintains that while a merger of the two deposit insurance funds is one solution to the situation, it also believes that a merger may not be necessary if the following were adopted:

*The Fico burden must be shared on a pro rata basis by SAIF and BIF

*Excess RTC funds, at a minimum, must remain available to cover potential SAIF losses through the end of 1997.

As important as the resolution of the BIF-SAIF problem is to the financial community, no one is certain that a timely solution will be forthcoming from Congress.

In any event, banks and thrifts should concentrate now on working in tandem to forge a common position in the BIF-SAIF debate. Battling with separate agendas won't, in the long run, stave off another crisis. But presenting a unified front to Congress that denounces its past treatment of banks and thrifts will help ensure the long-term stability and success of both industries.

Mr. Kaul is a managing director at the New York investment banking firm of Sandler O'Neill & Partners, where he specializes in asset-liability management, business and capital planning, and investment portfolio analysis.

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