WASHINGTON -- The Federal Deposit Insurance Corp. plans to widen the range of deposit insurance rates next year so that the best banks will see their premiums plummet, agency Chairman Ricki R. Tigert said Tuesday.
In her first meeting with reporters since taking control of the FDIC in October, Ms. Tigert also said she does not support a merger of the Bank Insurance Fund with the Savings Association Insurance Fund.
"I don't see a need to address the BIF/SAIF fund merger at the moment," she said. "I am not near recommending a merger of the two funds."
Ms. Tigert is pushing the FDIC staff to finish a proposal by January that would spell out the agency's plans for reducing deposit insurance premiums when the bank fund reaches its 1.25% target.
The proposal would detail a new, wider range of fees than the current 23 cents to 31 cents per $100 of domestic deposits. Congress has barred the FDIC from reducing its rates until the fund has $1.25 for every $100 of insured deposits.
Rather than a gradual premium reduction, Ms. Tigert said, "I would envisage currently that, for the well capitalized, well managed institutions, it's very likely to be a significant cut up front."
Ms. Tigert reiterated the agency's expectation that the bank fund will be recapitalized late in the second quarter of 1995 or early in the third. She noted, too, that a small "cushion" above the 1.25% target ratio may be necessary.
But the FDIC chairman made clear, for the first time, that she backs a swift reduction in rates for the best banks.
"For the other institutions, there's likely to be this continued risk-adjusted range," Ms. Tigert said, adding: "It is also possible that the number of basis points between individual elements of the range could be greater."
That is likely to mean fewer banks will fall into the best, or lowest paying, category. Currently, nearly 90% of all banks pay 23 cents per $100.
Exactly when a rate cut will occur remains unclear, Ms. Tigert said. But she said the board could adopt a rule by May, and it could take effect as early as July 1, or Oct. 1 at the latest.
The FDIC also is likely to adopt a final rule in January that will require banks to pay premiums quarterly, rather than the current twice-a-year payments.
That more frequent schedule would give the FDIC flexibility to reduce premiums nearer the day that the fund hits 1.25%. Ms. Tigert noted that the FDIC board could approve a decrease in premiums before the bank fund reaches 1.25%, "if we're close enough" to the target.
The SAIF will take years to recapitalize, so banks and thrifts will be paying separate rates for insurance next year. This rate disparity has many in the thrift industry worried. While she said she is studying the issue, Ms. Tigert was not concerned by near-term affects on the thrift industry.
Aside from deposit insurance, Ms. Tigert announced Tuesday that the FDIC has hired Market Trends Inc. to investigate whether banks are making proper disclosures to mutual fund customers.
Employees of the Bellevue, Wash., company will survey in person and by phone several thousand bank locations nationwide. The FDIC wants Market Trends to discover whether banks are telling customers that their mutual fund investments are not insured by the government.
Ms. Tigert said work done by Market Trends may lead to enforcement actions or new rules on investment product sales. A final report is due in June.
Ms. Tigert also announced plans to survey examiners periodically to identify lax underwriting before it leads to bad loans.