FDIC Releases Plan to Regain Solvency : Banking: The proposal calls for rebuilding the insolvent insurance fund over 15 years without taxpayer help.

The Federal Deposit Insurance Corp. on Tuesday released a plan for rebuilding its insolvent bank deposit insurance fund over the next 15 years without taxpayer help.

The timetable, required by legislation that authorized up to $70 billion in federal loans to the fund, incorporates new estimates reflecting the improving health of the banking industry, which could mean fewer failures.

Under the proposal, the insurance premium that banks pay on deposits would rise as expected next year to an average 28 cents for each $100 in deposits from a current 23 cents per $100.

But by 1998, as the bank industry recovers, the premium would be cut to 26 cents per $100. By 2001, when the insurance fund is expected to be making money again, the premium would fall to 24 cents per $100.

According to the timetable, by 2006 the bank insurance fund would rise to 1.25% of assets covered, as required by the 1991 law.

But agency staff members conceded that the timetable is based largely on guesses.

“Anyone who says they can project beyond the next six months cannot be trusted,” one FDIC staff member said.

The agency plans to update the timetable every six months.

Among the short-term projections in the proposal, the FDIC assumes that banks with a total of $72 billion in assets will fail this year, and banks with $76 billion in assets will fail in 1993.

That is down from earlier projections for $86 billion worth of failures in 1992 and $84 billion for next year.

FDIC officials said lower interest rates are helping many banks fatten their bottom lines despite continuing problems with bad real estate loans.

“We have factored in the favorable interest rate environment, which reduces failures,” one official said.

The bank insurance fund, created in the Depression to protect depositors, went into deficit last year for the first time and is about $7 billion in the hole.

The fund is expected to lose $9.9 billion this year. Stanley Poling, FDIC director of accounting, said the agency may begin borrowing from the Treasury by the end of the year to cover its losses.

He projected borrowing of between $2 billion and $5 billion this year.

The FDIC’s proposal, open to public comment for the next 45 days, also includes draft regulations on internal management controls, executive compensation, asset quality and earnings.

The regulations do not have to be in place for 14 months, but they have caused so much concern in the banking industry that the agency decided to begin work on them now, officials said.