WASHINGTON -- The Federal Deposit Insurance Corp., taking advantage of the banking industry's return to health, plans to reduce spending 16% next year.

The agency's 1995 budget, which is funded by bank premiums, calls for total spending of $1.49 billion, down $292 million from the current year. In large part that reflects a projected 17% decline in staffing levels, a drop that will leave the insurer with 9,996 employees.

Comptroller of the Currency Eugene Ludwig, who sits on the FDIC board, called the budget projections "a fine step forward."

The spending decline reflects "the dramatic decline in the number of failed institutions we see," he said, adding that it also comes at a time when "the whole country [is] concerned about the size of government."

However, one industry spokesman said the FDIC still needs to do much better.

"They have to be more aggressive in getting the budget down," said Jim Chessen, chief economist for the American Bankers Association. "An effort has to be made to drive the staffing levels down to where they were before the big buildup that began in 1989."

Staff levels jumped 20% in 1989 to 9,706 employees and climbed to a peak of 15,044 in 1992.

At its board meeting on Tuesday, the FDIC also agreed to begin collecting insurance premiums from banks on a quarterly basis and by electronic debit. The rule takes effect April 1, and will affect payments made for the period beginning July 1.

Under the new rule, banks will be billed 60 days after the end of the calendar quarter. The FDIC will collect the payment 30 days later by electronic debit.

Steven Seelig, the agency's chief financial officer, said the new system will eliminate the errors that now turn up in the invoices sent to about 1,000 institutions each quarter. Under the current system of semiannual payments, he said, banks make premium payments at the same time they file call reports.

"Errors in the call reports end up being reflected in the premiums," he said.

The FDIC considered permitting institutions to pay by electronic credit, but concluded that the electronic debits generate fewer errors. Electronic credits are initiated by the paying institution, while debits are originated by the collecting agency.

In addition, the FDIC joined other agencies in dropping a proposal to include unrealized gains and losses on securities available for sale in a bank's capital calculation.

The agencies had proposed making the change to conform with Financial Accounting Standard 115, which requires banks to mark many of their assets to their market value. However, regulators had expressed concern about the impact on capital of including the paper losses.

"Incorporating FAS 115 in capital standards would have caused unnecessary volatility, especially for prompt corrective action," said FDIC Chairman Ricki R. Tigert.

Under prompt corrective action, the agencies use capital levels as the basis for applying a series of sanctions against weakening institutions.

The regulators were concerned that they might discipline institutions solely on the basis of paper losses that would never be realized.

The agency also agreed to publish for comment a proposed rule that would create an appeals process for institutions dissatisfied with supervisory actions. The rule would permit institutions to appeal the classification of a "significant" loan or group of assets.

To be significant, the value of the assets would have to exceed 10% of an institution's capital or 1% of its assets.

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