Losses Spur FDIC to Raise Bank Premium : Economy: The fund insuring bank deposits is at its lowest point in history and could be wiped out by a recession.

From Associated Press

The Federal Deposit Insurance Corp. today raised the insurance premium for commercial banks by more than 60% in a move aimed at bolstering its deteriorating insurance fund.

Starting next year, the rate will be 19.5 cents per $100 of deposits, up from 12 cents this year. It is the maximum increase allowed by law.

The action came after the five-member board heard a financial report showing that losses to the fund from bank failures were even heavier than anticipated in the first half of this year.

The fund decreased from $13.2 billion at the end of 1989 to $11.4 billion at the end of June--a 14% drop.


FDIC Chairman L. William Seidman said he anticipated losses for the year would be closer to $3 billion rather than the $2 billion he expected only one month earlier.

The $1.84-billion loss in the first half of the year has reduced the level of reserves in the fund to only 60 cents for $100 insured deposits. The minimum level considered safe is $1.25 per $100.

The level of reserves is at the lowest point in the fund’s history. The congressional General Accounting Office has warned that if the economy dips into a recession, the fund could be wiped out and require a taxpayer bailout.