FDIC administers two deposit insurance funds, the Bank Insurance Fund (BIF) and the
Savings Association Insurance Fund (SAIF). The agency also manages a third fund that
fulfills the obligations of the former Federal Savings and Loan Insurance Corporation
(FSLIC), called the FSLIC Resolution Fund (FRF). On January 1,1996, the FRF assumed
responsibility for the Resolution Trust Corpora- tion's (RTC) assets and obliga-
tions. An overview of the funds' performance during 1997 follows.
Bank Insurance Fund
With banks experiencing another record-breaking year of profitability and only one bank
failure, 1997 was another positive year for the BIF. The BIF has climbed steadily from a
negative balance of $7 billion in 1991 to $28.3 billion in 1997. The 1997 year-end fund
balance represents a 5.4 percent increase over the 1996 balance of $26.9 billion.
BIF-insured deposits grew by 2.4 percent in 1997. The BIF's reserve ratio increased from
1.34 to 1.38 percent of insured deposits during the year.
The law requires the FDIC to establish a risk-based assessment system. For the first
semiannual assessment period of 1997, the Board retained the rates approved in the second
assessment period of 1996: a range of 0 to 27 cents annually per $100 of assessable
deposits. Under the 1996 rate schedule, 94.8 percent of BIF-insured institutions paid no
assessments. The Board approved the same rate schedule for the second semiannual
assessment period of 1997, when 95.2 percent
of BIF-insured institutions were in the lowest-risk category and paid no assessments. The
lowest average assessment rate in the history of FDIC deposit insurance resulted, with an
average 1997 BIF rate of 0.08 cents per $100 of assessable deposits, down from 0.24 cents
per $100 in 1996.
In addition, as a direct result of the continued low assessment
rate schedule and the concentration of institutions in the lowest-risk category, interest
earned on U.S. Treasury investments ($1.5 billion) in 1997 greatly exceeded assessment
revenue ($25 million) as the source of BIF revenue.
The only BIF-insured institution to fail during the year had
assets of $25.9 million. In contrast, five BIF-insured banks with assets totaling $183
million failed in 1996. Estimated insurance losses in 1997 were $4 million, compared to
$43 million in estimated losses for 1996.
Investments in U.S. Treasury obligations
continued to be the main component of the BIF's total assets, at 93 percent, rising from
81 percent during the previous year. The BIF's financial position continued to improve:
Cash and investments at year-end were 86 times the BIF's total liabilities, up from 51
times the BIF's total liabilities in 1996.
Savings Association Insurance Fund
The SAIF ended 1997 with a balance of $9.4 billion, a 5.6 percent increase over the 1996
balance of $8.9 billion. Insured deposits increased by 1.0 percent in 1997. During the
year, the SAIF's reserve ratio grew from 1.30 of insured deposits to 1.36 percent.
For the first
semiannual assessment period of 1997, the Board approved an assessment rate schedule
ranging from 0 to 27 cents annually per $100 of assessable deposits. Under this schedule,
90.0 percent of SAIF-insured institutions paid no assessments. The Board approved the same
rate schedule for the second semi- annual assessment period of 1997, when 90.9 percent of
SAIF- insured institutions again were in the lowest-risk category and paid no assessments.
The SAIF recognized $14 million in assessment income in 1997, compared to $535 million in interest income. No
SAIF-insured institutions failed in 1997.
The FRF was established by law in 1989 to assume the remaining assets and obligations of
the former FSLIC resulting from thrift failures before January 1,1989. Congress placed
this new fund under the management of the FDIC on August 9,1989, when it abolished the
FSLIC. On January 1,1996, the FRF also assumed the RTCs residual assets and
In 1994, the Congress authorized $827 million in appropriations
to be available to the FRF until expended, of which $602 million was still available at
year-end 1997. The FRF uses appropriated funds only when other sources of funds are
insufficient. Asset collections and interest income provided sufficient funding so that no
appropriated funds were needed by the FRF in 1997. However, the U.S. Department of the
Treasury in June 1997 used $33 million of this appropriation to pay expenses incurred by
the U.S. Department of Justice relating to "regulatory goodwill" litigation.
The FRF continued selling the remaining assets and settling its
liabilities in 1997. At year-end, assets in liquidation for the former RTC totaled $2.2
billion, down from $4.4 billion at year-end 1996. The FRF also manages the reserves set
aside to support the sale of securities collateralized by RTC assets. These "credit
enhancement reserves" dropped from $5.8 billion in 1996 to $4.9 billion. Borrowings
from the Federal Financing Bank declined from $4.6 billion to $849 million at year-end
1997. For more information on the FSLIC Resolution Fund,