Tuesday - after four years of paying record prices for deposit insurance - banks will probably win a reduction in rates.

It was 1991 when the government nearly doubled bank insurance rates to 23 cents for every $100 of domestic deposits. But the Bank Insurance Fund is now recapitalized and the Federal Deposit Insurance Corp. is expected to cut premiums to an average of 4.5 cents.

Annual savings are expected to top $4.6 billion. The new rate will kick in with the fourth-quarter bills, which are collected on Sept. 30.

That's not all. Banks are expected to receive refunds totalling almost $2 billion, plus interest. That's because the bank fund hit its target of $1.25 for every $100 of insured deposits in April.

While this long-awaited news is great for banks, it could be even better.

Experts say that a 4.5 cent average premium is still too high. The FDIC could charge banks nothing and still keep the fund at the 1.25% level, because the fund is raking in interest income on its investments and the number of failures on the horizon is next to nil.

Dropping the premium to zero would add $1 billion to the industry's annual savings. But that's not in the cards; problems in the thrift insurance fund are blunting the bank fund's good fortune.

The FDIC has proposed diverting 2.5 cents of bank premiums to help thrifts pay off the interest due on the bonds floated in 1987 to begin the first S&L rescue. That annual tab will run about $600 million for 24 years. The present-value cost to banks is about $7 billion, according to Bert Ely, an industry analyst.

Banks that own thrift deposits will pay even more.

The FDIC has proposed assessing all thrift deposits on the books of banks at March 31 with a one-time fee in the range of 85 basis points to 90 basis points.

With $160 billion in thrift deposits, these so-called Oakar banks could end up paying more than $1.4 billion to shore up the thrift fund.

The Savings Association Insurance Fund is nowhere near the 1.25% reserve target, so the FDIC will not be lowering thrift premiums at Tuesday's meeting.

With banks paying less than thrifts for the government's backing, pressure will grow to fix the thrift fund.

While there are proposals aplenty, the leading plan focuses on stabilizing SAIF's financial health. It would merge the deposit insurance funds after thrifts pay more than $6 billion to capitalize their fund. To reduce thrifts' pain, banks would help with the Fico bonds.

This is the plan backed by the Clinton administration, the FDIC, the Office of Thrift Supervision, the Federal Reserve, and - probably most importantly - Sen. Alfonse M. D'Amato.

The powerful Senate Banking Committee chairman has made clear he wants to roll a narrow financial fix for the thrift fund into a budget bill that must be passed this year.

Lawmakers in the House said last week they prefer broader legislation encompassing such issues as fusing the bank and thrift charters.

The American Bankers Association is on record as supporting this sort of comprehensive cure. While it could net banks the wider powers included in the thrift charter, it also could put the industry on the hook for the Fico payments, hit Oakars with the one-time fee, and merge the insurance funds.

Bankers may wonder whether they're getting a raw deal.

Aware of that, the Independent Bankers Association of America has avoided staking out a position other than to insist that leftover Resolution Trust Corp. funds be used.

It's too early to tell how things will shake out, but it is obvious that the trade groups are going to have a tough time explaining how what's going on in Washington is good for banks.

As Mr. Ely, who has built a career on accurate forecasts, summed it up: "Banks are getting screwed six ways to Sunday."

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