The Federal Deposit Insurance Corp.'s proposal to slash average premiums from 23 cents per $100 of deposits to 4.5 cents is the right thing to do. The Bank Insurance Fund approximates $25 billion, and banks paid $6 billion in assessments during 1994.

Now that the fund is replenished, banks' annual premiums could be reduced to virtually nothing, as income from the reserve balance could pay its operating expenses. In hindsight, Congress and the General Accounting Office were flat out wrong about the fund's solvency, and banks have paid for it.

Meanwhile, the Savings Association Insurance Fund plods along at a fraction of the $1.25-per-$100 mandate. It reached about $2 billion at yearend 1994. Its gross annual assessment revenue is $2 billion, but $779 million of this is used to pay interest on the Financing Corp., or Fico, bonds issued to begin the thrift bailout.

As a result, about $1 billion a year is actually added to the reserve balance. At this rate, the fund ought to reach the $1.25 mandate in seven to 10 years. The recent actions of some of the nation's larger thrifts to charter new banks and transfer deposits from their savings association fund affiliate to their new bank fund subsidiary, if approved by regulators, would, at best, extend this timetable considerably, and, at worst, break the thrift fund.

The present disparity in the fund balances means that banks and thrifts could pay significantly different assessment rates over the next decade. This differential could approach 20 basis points, and would place thrifts at a competitive disadvantage.

Unlike the politicians and thrift industry advocates, however, this is not the reason I support a merger of the funds now.

I look at it this way: economics and reality. The reality is that in the future there will not be separate bank and thrift industries. I don't know when this will happen, but it will. The merger of the industries and the insurance funds is inevitable. Rather than fight the merger, community banks should be proactive regarding their future. The economics of this approach favors the banks.

My outline for a solution involves:

Merge the funds under the FDIC. Based on present levels of both funds, the merged insurance fund would equal approximately $1 per $100 of insured deposits.

Maintain a target insurance fund level at $1.25 per $100 of insured deposits, but reduce assessment rates to 4.5 cents for banks and 9.5 cents for thrifts once the fund reaches the $1 level. The insurance fund should provide for a rebate of excess reserves over $1.25.

Merge the Office of Thrift Supervision into the Office of the Comptroller of the Currency.

Abolish the thrift charter. Require all thrifts to convert to commercial banks over the next three years.

The historical distinction between banks and thrifts in our financial system has long passed. Many banks look like thrifts and many thrifts act like (and call themselves) banks. There is no need or benefit from separate industries.

Legitimize the National Credit Union Share Insurance Fund by transferring the funds and administrative responsibility to the FDIC. Further, the identical risk-based premium schedule, capital and accounting standards utilized by the banks should apply to credit unions (this approach has recently been advocated by the Florida Bankers Association).

Revoke the tax-exempt status of credit unions. Credit unions must participate in the solution by carrying their share of the financial burden.

This is a fundamental issue of fairness. Banks presently operate at a significant competitive disadvantage to credit unions, based on tax status. This disadvantage far exceeds the possible 20 basis point deposit insurance premium differential for banks and thrifts (for example, a bank earning 1.00% return on assets pays 50 basis points on assets in tax that the credit union doesn't pay).

The politicians don't even yawn for the banks, but the possible effect of an insurance premium differential that adversely impacts thrifts is cause for an uproar.

The cost of the Fico bonds should be shared by banks, thrifts, credit unions, and excess Resolution Trust Corp. funds. The beneficiaries of an insurance fund merger as outlined in this article include the U.S. taxpayers and the Washington politicians. It seems appropriate that the total burden be shared.

Mr. Mancinotti is executive vice president and principal of Austin Associates Inc., Toledo, a bank consulting firm.

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