WASHINGTON - The chief economist at the Office of the Comptroller of the Currency on Tuesday stepped into the debate over deposit insurance reform, advocating a system that would operate much like a private mutual insurance company.

Speaking before the group Women in Housing and Finance, James A. Wilcox proposed what he called a Mutual Insurance Model with Incentive Compatibility, or Mimic.

The system would require all institutions to pay an annual risk-based premium, so the Federal Deposit Insurance Corp. could compensate the Treasury for both its line of credit and promise to back all FDIC debts with the full faith and credit of the U.S. government.

The plan would provide for rebates to banks when the deposit insurance funds' reserve ratio rises above a risk-based ceiling, and would subject banks to surcharges if the ratio falls below a certain level. Banks experiencing deposit growth would be charged a fee to cover the dilution of the fund's coverage, and receive refunds when their deposits shrink.

Mr. Wilcox said the system would require riskier banks to pay a larger share of the deposit insurance costs than they do now and that it would lighten safe and sound institutions' burden.

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