Deposit Insurance Funds

This is the first of GAO's required reports on the Federal Deposit Insurance Corporation's (FDIC) compliance with the maximum obligation limitation set by the Federal Deposit Insurance Corporation Improvement Act of 1991. This obligation limitation applies separately to both the Bank Insurance Fund--insurer of commercial bank deposits--and the Savings Association Insurance Fund--insurer of thrift deposits--and is designed to ensure that each fund's assets and other funding sources are enough to pay its obligations. GAO also assesses whether the Fund's total collections from the management and disposition of assets acquired from failed banks would be enough to repay the Fund's existing working capital borrowings.

GAO found that: (1) as of March 31, 1992, the funds had not exceeded their maximum obligation limit; (2) there was no evidence that FDIC did not accurately report the funds' remaining obligation authority; (3) FDIC had no formal policy for allocating Treasury borrowing authority between the two funds, and allocated the entire authority to BIF; (4) the Savings Association Insurance Fund (SAIF) needed part of the borrowing authority due to its impending thrift resolution responsibilities; (5) the FDIC allocation policy should consider each fund's cash flows and alternative funding sources while considering the constraints placed upon funding sources; (6) neither BIF or SAIF have borrowed funds from the Treasury to cover insurance losses; (7) factors that could affect future borrowings include the effect of future economic conditions on financial institution failures, the failures' costs to the insurance funds, and future revenues and funding alternatives; (8) FDIC does not anticipate borrowing for BIF until some time in 1993, but unforseen events could change the timing; and (9) BIF should be able to repay its outstanding working capital borrowings from the management and disposition of failed bank assets, although future uncertainties could change the fund's collections.