Deposit Insurance Funds:

Compliance With Obligation and Repayment Requirements as of 3/31/93 and 6/30/93

AIMD-94-62: Published: Feb 4, 1994. Publicly Released: Feb 4, 1994.

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Pursuant to a legislative requirement, GAO reviewed the Federal Deposit Insurance Corporation's (FDIC) compliance with obligation and repayment requirements, focusing on: (1) Bank Insurance Fund (BIF) and Savings Association Insurance Fund (SAIF) compliance with the statutory maximum obligation limitation specified in the Federal Deposit Insurance Corporation Improvement Act of 1991; (2) BIF and SAIF ability to repay amounts borrowed from the U.S. Treasury for insurance losses; and (3) whether BIF will generate sufficient proceeds from the management and disposition of failed bank assets to repay working capital borrowings.

GAO found that: (1) as of March 31, 1993, BIF assets and other funding sources exceeded BIF obligations by $41 billion; (2) as of June 30, 1993, SAIF assets and other funding sources exceeded SAIF obligations by $664 million and $636 million, respectively; (3) the amounts reported as of March 31, 1993, and June 30, 1993, were reasonable; (4) in 1993, FDIC allocated the entire amount of Treasury borrowing authority to BIF based on BIF projected funding needs; (5) neither BIF nor SAIF have borrowed funds for insurance losses from the U.S. Treasury; (6) the need for future borrowings for insurance losses and each fund's ability to repay such borrowings depends on the impact of future economic conditions on bank failures, the cost of these failures to the insurance funds, future assessment revenues, and other funding alternatives; (7) FDIC has estimated that BIF will not need to borrow funds from Treasury to cover insurance losses through 1998 and BIF will achieve its designated ratio of reserves to insured deposits by 1998; (8) the Resolution Trust Corporation Completion Act should reduce the likelihood that SAIF will need to borrow funds from Treasury to cover insurance losses in the future; (9) FDIC has borrowed approximately $10.2 billion from the Federal Financing Bank (FFB) for BIF working capital needs, which is to be repaid primarily with proceeds from the management and disposition of failed bank assets; and (10) on August 6, 1993, FDIC repaid the outstanding FFB balance of BIF working capital borrowings.

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