Financial Markets and Institutions:

Reserve Ratio

AIMD-95-154R: Published: May 31, 1995. Publicly Released: May 31, 1995.

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Pursuant to a congressional request, GAO provided information on the designated reserve ratio established for the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF). GAO noted that: (1) there is a minimum ratio of reserves to insured deposits of 1.25 percent or higher for BIF and SAIF; (2) the Federal Deposit Insurance Corporation may increase the designated ratio for any year to protect against future losses to either BIF or SAIF; (3) it did not analyze the adequacy of the designated reserve ratio, since there was no scientific method of determining the appropriate level of budgetary reserves; and (4) regulatory reforms should minimize the risk that losses will deplete the insurance funds' reserves if such reserves are maintained at the designated reserve ratio.

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