Deposit Insurance Funds:

Analysis of Insurance Premium Disparity Between Banks and Thrifts

T-AIMD-95-206: Published: Jul 28, 1995. Publicly Released: Jul 28, 1995.

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GAO discussed issues relating to the potential premium rate disparity between banks and thrifts. GAO noted that: (1) if the Federal Deposit Insurance Corporation (FDIC) reduces bank deposit insurance premiums when the Bank Insurance Fund (BIF) is recapitalized, a premium rate disparity of 19.5 basis points will develop between banks and thrifts in the latter part of 1995; (2) the Savings Association Insurance Fund (SAIF) is expected to remain undercapitalized for a number of years; (3) using SAIF premiums to help resolve the thrift crisis has delayed SAIF capitalization; (4) the shrinking deposit base that SAIF uses to pay interest on bonds used to refinance the cost of failed thrifts could result in a significant premium disparity between banks and thrifts after SAIF is recapitalized; (5) the premium differential will increase thrift costs, and the duration of the differential will be significant in determining the differential's impact; and (6) thrifts may replace deposits with other nondeposit sources of funding in order to reduce their costs relative to banks.

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