Although the Bank Insurance Fund is expected to hit its targeted reserve ratio any day, the Federal Deposit Insurance Corp. wants bankers to pay the current, record-high rates through the third quarter.

The agency has proposed a tortured process to refund overpayments with interest.

The problem, according to the FDIC, is that bank premiums cannot be lowered until BIF has $1.25 for every $100 of insured deposits. While the agency admits this target will be reached before the third quarter even starts, the FDIC claims it cannot verify that the ratio was met until September.

Bert Ely, the industry consultant who has made a career of accurately predicting the size of the bank and thrift insurance funds, predicts that BIF will reach its target in late April.

Waiting four months for verification is a waste of effort, according to Mr. Ely, president of Ely & Co. in Alexandria, Va.

"If the FDIC collects premiums for the third quarter under its present premium rate schedule of 23 to 31 basis points, the FDIC will have to refund at least 80% of the premiums it collected for the quarter," he wrote in a comment letter to the agency.

Simply making the 19-cent rate effective June 30, he added, "will eliminate the need for the FDIC to make an unnecessary, cumbersome, and expensive refund of a premium overpayment."

The American Bankers Association agreed.

"We believe that an easier, soft-landing approach to reducing the bank premium rate . . . would avoid a complicated scheme of large overpayments and refunds," ABA president Howard L. McMillan Jr. wrote the FDIC.

Mr. McMillan said the agency ought to determine whether the 1.25% was met - through solid estimates of insured deposits and the fund's reserves - by the time rates for the second half of the year are set.

"If the weight of evidence shows that the BIF will have reached the designated reserve ratio before June 30, the FDIC should not delay in reducing assessments," Mr. McMillan noted.

Like many large banks that wrote in, the ABA insisted that the FDIC should cut rates further than the proposed average of 4.5 cents.

"If no assessment income is needed - as is clearly demonstrated in data provided in the proposal - no assessments should be made," according to Mr. McMillan's letter.

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