The newly enacted thrift fund rescue ensures that most banks will not have to pay for deposit insurance in the foreseeable future.

But the legislation also removed the possibility of banks' getting a $440 million rebate for the excess premiums they paid in the second half of 1995.

Bankers had lobbied hard for the rebate. They claimed it was justified because the Federal Deposit Insurance Corp. had continued to collect premiums from well-capitalized institutions after the Bank Insurance Fund reached its legally required reserve level - 1.25% of insured deposits - in May 1995.

Last year's congressional proposal would have returned the $440 million, but the rebate was not included in the new law.

"It's a disappointment," said Karen M. Thomas, director of regulatory affairs and senior regulatory counsel for the Independent Bankers Association of America. The rebate was axed because Congress needed $3.1 billion of additional revenue to pay for extra program spending, she said.

"The retroactive rebate just fell victim to budget concerns," said a spokesman for House Banking Committee Chairman Jim Leach, R-Iowa.

On the other hand, the law repealed the requirement that the FDIC collect a minimum of $2,000 a year from each bank for deposit insurance, the spokesman said. About 94% of banks are currently considered well- capitalized and pay that minimum.

The new law also protects banks from a repeat of 1995. The FDIC now must peg its semiannual assessment rate to the 1.25% level, the spokesman said. "They can't target (premiums) for a higher reserve level." If the reserve climbs higher, the agency now has authority to refund any excess premiums.

"It makes the 1.25% a much firmer standard," Ms. Thomas said. "They have to do that look-back every six months."

FDIC Chairman Ricki Helfer said the new legislation still gives her agency the right to exceed 1.25% if it believes bad times are ahead. "We have the authority to change the designated reserve ratio," she said after a speech to the American Bankers Association's annual convention in Honolulu.

But James H. Chessen, the ABA's chief economist, said prospects would have to be dire for the FDIC to need to replenish either the bank fund or a merged thrift and bank fund.

The Bank Insurance Fund is earning about $1.25 billion in annual interest, he said. The FDIC will continue to take in about $70 million a year in premiums from higher-risk banks. The $1.3 billion in revenues is offset by about $500 million in FDIC expenses, leaving about $800 million a year to cover losses from bank failures.

Assuming each bank failure costs the FDIC about 15% of the institution's assets, banks with more than $5 billion of assets could fail per year without draining the fund below its mandated level.

"You could have very, very large bank failures every year and still not raise a dime (in premiums) from top-rated banks," Mr. Chessen said. After thrifts recapitalize their insurance fund and it is merged with the bank fund, the combined reserve will be even stronger, he added.

Five banks and two thrifts with assets totaling $255.4 million have failed this year, costing the insurance funds $33.2 million.

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