Deposit Insurance Funds

The Federal Deposit Insurance Corporation's (FDIC) maximum obligation calculations show that as of September 30, 1993, (1) the Bank Insurance Fund's (BIF) assets and other funding sources exceeded its obligations by $44 billion and (2) the Savings Association Insurance Fund's (SAIF) assets and other funding sources exceeded its obligations by $1.2 billion. Nothing came to GAO's attention that would lead it to question the reasonableness of the amounts reported. As of September 30, 1993, neither BIF nor SAIF had borrowed funds for insurance losses from the U.S. Treasury, although changing economic conditions and other factors could affect the need for future borrowings. FDIC anticipates that BIF will not need to borrow money from Treasury to cover insurance losses through fiscal year 1999 and that BIF will achieve its designated ratio of reserves to insured deposits of 1.25 percent by 1996. Passage of the Resolution Trust Corporation (RTC) Completion Act, which provided RTC with funding to resolve troubled thrifts, should reduce the likelihood that SAIF will need to borrow from Treasury to cover insurance losses in the near future. In August 1993, FDIC repaid the $2.5 billion outstanding Federal Financing Bank balance of BIF's working capital borrowings.

GAO found that: (1) as of September 30, 1993, FDIC calculated that BIF assets and other funding sources exceeded its obligations by $44 billion and SAIF assets and other funding sources exceeded its obligations by $1.2 billion; (2) there was no evidence that the FDIC calculations were unreasonable; (3) FDIC allocated all of its borrowing authority to BIF based on its potential funding needs but, as of September 30, 1993, neither fund had borrowed funds from Treasury; (4) the need for future BIF and SAIF borrowings and each fund's ability to repay such loans depends on the impact of future economic conditions on financial institutions' failures, the cost of these failures to the funds, the impact of recent legislation, future assessment revenues, and other funding alternatives; (5) FDIC expects that BIF will not need to borrow funds until after fiscal year (FY) 1999 and will reach its designated ratio of insured deposits to assets by 1996; (6) the extension of the Resolution Trust Corporation's authority to resolve troubled thrifts should reduce the need for SAIF to borrow funds to cover insurance losses until after FY 1999; and (7) in 1993, FDIC repaid the outstanding balance of BIF borrowings from the Federal Financing Bank because of favorable financial conditions and cash flows.