The banking industry is so healthy that most banks will only have to contribute a token sum to the fund that insures depositors.
The Federal Deposit Insurance Corp. lowered bank insurance premiums to near zero beginning Jan. 1, saving the industry nearly $1 billion.The FDIC's board of directors approved the lower premiums Tuesday, meaning that more than 90 percent of the 11,000 banks that contribute to the fund will pay a minimum annual fee of $2,000.
The remaining banks, rated as riskier, will pay 3 cents to 27 cents per $100 in deposits instead of the 4 cents to 31 cents they now pay. Most banks have been paying 4 cents per $100 in deposits under a premium reduction that took effect earlier this year.
"The FDIC has adopted the lowest average assessment rate in the more than 60-year history of federal deposit insurance for banks," said FDIC Chairwoman Ricki Helfer. "We estimate this change alone will save the banking industry about $946 million."
She said the strength of the economy and the health of the banking industry dictated the reduction.
American banks "have achieved an enviable position never before achieved by any industry - a pre-funded insurance fund," said House Banking Committee Chairman Jim Leach, R-Iowa.
By law, the ratio of reserves in the insurance fund to deposits must be 1.25 percent. That means the fund must have $1.25 for each $100 in deposits.
As of June 30, the ratio was 1.29 percent and was expected to climb - perhaps up to 1.40 percent by the end of the year - if premiums remained where they were.
Savings and loan institutions insured by the Saving Association Insurance Fund will continue paying premiums ranging from 23 cents to 31 cents per $100 of deposits, depending on risk factors. The average rate is expected to be 23.7 cents.
That fund remains seriously undercapitalized, the FDIC said. Its reserve ratio is not expected to reach 1.25 percent of deposits before 2002. The fund was depleted by hundreds of S&L failures in the 1980s.