9270 Federal Register / Vol. 60, No. 32 / Thursday, February 16, 1995 / Proposed Rules
that the Board retain the existing
assessment rate schedule for the second
semiannual assessment period of 1995
so that recapitalization is accomplished
as soon as possible. The SAIF had an
estimated balance of $1.8 billion
(unaudited) at year-end 1994, and SAIF
assumes resolution responsibility from
the RTC on July 1, 1995. Although
estimated failed-institution assets
appear manageable for 1995 and 1996,
the SAIF remains vulnerable in the
short run to a single large-institution
failure and to any significant increase in
anticipated loss rates.
VI. Request for Public Comment
Based upon the results of its
semiannual review of the
recapitalization of the SAIF and of the
SAIF assessment rates, the FDIC is
inclined to retain the existing
assessment rate schedule applicable to
SAIF-member institutions. The FDIC
wishes to have the benefit of public
comment before ending its review for
this period, however. The FDIC
therefore requests comment as to
whether it is appropriate for the FDIC to
retain the existing assessment rate
schedule applicable to SAIF-members,
or whether the rates should be lowered
to the statutory minimum of 18 basis
points or some point in between. The
FDIC is interested in receiving analyses
exploring the impact a differential
between BIF and SAIF premiums might
have on SAIF members, and the FDIC
invites comment as to whether the
current spread of 8 basis points from the
lowest to the highest assessment rates
should be retained for SAIF members.
The FDIC solicits comment as to how
lower SAIF rates would impact current
efforts to recapitalize the SAIF. The
FDIC further invites comments as to
whether current rates are sufficient to
recapitalize the SAIF in an expeditious
manner.
VII. Paperwork Reduction Act
No collection of information pursuant
to section 3504(h) of the Paperwork
Reduction Act of 1980 (44 U.S.C. 3501
et seq.) are contained in this proposed
rule. Consequently, no information has
been submitted to the Office of
Management and Budget (OMB) for
review.
VIII. Regulatory Flexibility Analysis
The Board hereby certifies that the
proposed rule would not have a
significant economic impact on a
substantial number of small entities
within the meaning of the Regulatory
Flexibility Act (5 U.S.C. 601, et seq.).
This proposed rule will not necessitate
the development of sophisticated
recordkeeping or reporting systems by
small institutions nor will small
institutions need to seek out the
expertise of specialized accountants,
lawyers, or managers to comply with
this proposed rule. Therefore, the
provisions of that Act regarding an
initial and final regulatory flexibility
analysis (Id. at 603 and 604) do not
apply here.
List of Subjects in 12 CFR Part 327
Assessments, Bank deposit insurance,
Banks, Banking, Financing Corporation,
Savings associations.
For the reasons set forth in the
preamble, the Board of Directors of the
Federal Deposit Insurance Corporation
proposes to amend part 327 of title 12
of the Code of Federal Regulations as
follows:
PART 327—ASSESSMENTS
1. The authority citation for part 327
continues to read as follows:
Authority: 12 U.S.C. 1441, 1441b, 1817–
1819.
2. Paragraph (c)(1) of § 327.9 as added
at 59 FR 67165, effective April 1, 1995,
will be retained without change. The
text of paragraph (c)(1) is republished
for the convenience of the reader to read
as follows:
§ 327.9 Assessment rate schedules.
* * * * *
(c) SAIF members. (1) Subject to
§ 327.4(c), the annual assessment rate
for each SAIF member shall be the rate
designated in the following schedule
applicable to the assessment risk
classification assigned by the
Corporation under § 327.4(a) to that
SAIF member (the schedule utilizes the
group and subgroup designations
specified in § 327.4(a)):
SCHEDULE
Capital group
Supervisory
subgroup
A B C
1 .................................... 23 26 29
2 .................................... 26 29 30
3 .................................... 29 30 31
* * * * *
By the order of the Board of Directors.
Dated at Washington, D.C., this 31 day of
January, 1995.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Acting Executive Secretary.
[FR Doc. 95–3669 Filed 2–15–95; 8:45 am]
BILLING CODE 6714–01–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 327
RIN 3064–AB58
Assessments; New Assessment Rate
Schedule for BIF Member Institutions
AGENCY: Federal Deposit Insurance
Corporation.
ACTION: Proposed Rule.
SUMMARY: The Board of Directors
(Board) of the Federal Deposit Insurance
Corporation (FDIC) is proposing to
amend its regulation on assessments to
establish a new assessment rate
schedule of 4–31 basis points for
members of the Bank Insurance Fund
(BIF) to apply to the semiannual period
in which the reserve ratio of the BIF
reaches the designated reserve ratio
(DRR) of 1.25% of total estimated
insured deposits and to semiannual
periods thereafter. The Board is further
proposing to amend the assessment risk
classification framework to widen the
existing assessment rate spread from 8
basis points to 27 basis points.
When the DRR is achieved, the Board
is required to set rates to maintain the
reserve ratio at the DRR. Based on
current projections, the reserve ratio is
expected to reach the DRR between May
1 and July 31, 1995. Therefore, the
Board is proposing to lower assessment
rates to maintain the reserve ratio at the
DRR and to maintain a risk-based
assessment system. The Board is further
proposing to amend the assessments
regulation to establish a procedure for
adjusting the proposed rate schedule
semiannually as necessary to maintain
the DRR at 1.25%.
DATES: Written comments must be
received by the FDIC on or before April
17, 1995.
ADDRESSES: Written comments shall be
addressed to the Office of the Executive
Secretary, Federal Deposit Insurance
Corporation, 550 17th Street NW.,
Washington, DC 20429. Comments may
be hand-delivered to room F–400, 1776
F Street NW., Washington, DC 20429, on
business days between 8:30 a.m. and 5
p.m. (FAX number: (202) 898–3838).
Comments will be available for
inspection in room 7118, 550 17th
Street, NW., Washington, DC, between 9
a.m. and 4:30 p.m. on business days.
FOR FURTHER INFORMATION CONTACT:
Christine Blair, Financial Economist,
Division of Research (202) 898–3936; or
Connie Brindle, Chief, Assessment
Operations Section, Division of Finance,
(703) 516–5553; or Lisa Stanley, Senior
Counsel, Legal Division (202) 898–7494;
that the Board retain the existing
assessment rate schedule for the second
semiannual assessment period of 1995
so that recapitalization is accomplished
as soon as possible. The SAIF had an
estimated balance of $1.8 billion
(unaudited) at year-end 1994, and SAIF
assumes resolution responsibility from
the RTC on July 1, 1995. Although
estimated failed-institution assets
appear manageable for 1995 and 1996,
the SAIF remains vulnerable in the
short run to a single large-institution
failure and to any significant increase in
anticipated loss rates.
VI. Request for Public Comment
Based upon the results of its
semiannual review of the
recapitalization of the SAIF and of the
SAIF assessment rates, the FDIC is
inclined to retain the existing
assessment rate schedule applicable to
SAIF-member institutions. The FDIC
wishes to have the benefit of public
comment before ending its review for
this period, however. The FDIC
therefore requests comment as to
whether it is appropriate for the FDIC to
retain the existing assessment rate
schedule applicable to SAIF-members,
or whether the rates should be lowered
to the statutory minimum of 18 basis
points or some point in between. The
FDIC is interested in receiving analyses
exploring the impact a differential
between BIF and SAIF premiums might
have on SAIF members, and the FDIC
invites comment as to whether the
current spread of 8 basis points from the
lowest to the highest assessment rates
should be retained for SAIF members.
The FDIC solicits comment as to how
lower SAIF rates would impact current
efforts to recapitalize the SAIF. The
FDIC further invites comments as to
whether current rates are sufficient to
recapitalize the SAIF in an expeditious
manner.
VII. Paperwork Reduction Act
No collection of information pursuant
to section 3504(h) of the Paperwork
Reduction Act of 1980 (44 U.S.C. 3501
et seq.) are contained in this proposed
rule. Consequently, no information has
been submitted to the Office of
Management and Budget (OMB) for
review.
VIII. Regulatory Flexibility Analysis
The Board hereby certifies that the
proposed rule would not have a
significant economic impact on a
substantial number of small entities
within the meaning of the Regulatory
Flexibility Act (5 U.S.C. 601, et seq.).
This proposed rule will not necessitate
the development of sophisticated
recordkeeping or reporting systems by
small institutions nor will small
institutions need to seek out the
expertise of specialized accountants,
lawyers, or managers to comply with
this proposed rule. Therefore, the
provisions of that Act regarding an
initial and final regulatory flexibility
analysis (Id. at 603 and 604) do not
apply here.
List of Subjects in 12 CFR Part 327
Assessments, Bank deposit insurance,
Banks, Banking, Financing Corporation,
Savings associations.
For the reasons set forth in the
preamble, the Board of Directors of the
Federal Deposit Insurance Corporation
proposes to amend part 327 of title 12
of the Code of Federal Regulations as
follows:
PART 327—ASSESSMENTS
1. The authority citation for part 327
continues to read as follows:
Authority: 12 U.S.C. 1441, 1441b, 1817–
1819.
2. Paragraph (c)(1) of § 327.9 as added
at 59 FR 67165, effective April 1, 1995,
will be retained without change. The
text of paragraph (c)(1) is republished
for the convenience of the reader to read
as follows:
§ 327.9 Assessment rate schedules.
* * * * *
(c) SAIF members. (1) Subject to
§ 327.4(c), the annual assessment rate
for each SAIF member shall be the rate
designated in the following schedule
applicable to the assessment risk
classification assigned by the
Corporation under § 327.4(a) to that
SAIF member (the schedule utilizes the
group and subgroup designations
specified in § 327.4(a)):
SCHEDULE
Capital group
Supervisory
subgroup
A B C
1 .................................... 23 26 29
2 .................................... 26 29 30
3 .................................... 29 30 31
* * * * *
By the order of the Board of Directors.
Dated at Washington, D.C., this 31 day of
January, 1995.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Acting Executive Secretary.
[FR Doc. 95–3669 Filed 2–15–95; 8:45 am]
BILLING CODE 6714–01–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 327
RIN 3064–AB58
Assessments; New Assessment Rate
Schedule for BIF Member Institutions
AGENCY: Federal Deposit Insurance
Corporation.
ACTION: Proposed Rule.
SUMMARY: The Board of Directors
(Board) of the Federal Deposit Insurance
Corporation (FDIC) is proposing to
amend its regulation on assessments to
establish a new assessment rate
schedule of 4–31 basis points for
members of the Bank Insurance Fund
(BIF) to apply to the semiannual period
in which the reserve ratio of the BIF
reaches the designated reserve ratio
(DRR) of 1.25% of total estimated
insured deposits and to semiannual
periods thereafter. The Board is further
proposing to amend the assessment risk
classification framework to widen the
existing assessment rate spread from 8
basis points to 27 basis points.
When the DRR is achieved, the Board
is required to set rates to maintain the
reserve ratio at the DRR. Based on
current projections, the reserve ratio is
expected to reach the DRR between May
1 and July 31, 1995. Therefore, the
Board is proposing to lower assessment
rates to maintain the reserve ratio at the
DRR and to maintain a risk-based
assessment system. The Board is further
proposing to amend the assessments
regulation to establish a procedure for
adjusting the proposed rate schedule
semiannually as necessary to maintain
the DRR at 1.25%.
DATES: Written comments must be
received by the FDIC on or before April
17, 1995.
ADDRESSES: Written comments shall be
addressed to the Office of the Executive
Secretary, Federal Deposit Insurance
Corporation, 550 17th Street NW.,
Washington, DC 20429. Comments may
be hand-delivered to room F–400, 1776
F Street NW., Washington, DC 20429, on
business days between 8:30 a.m. and 5
p.m. (FAX number: (202) 898–3838).
Comments will be available for
inspection in room 7118, 550 17th
Street, NW., Washington, DC, between 9
a.m. and 4:30 p.m. on business days.
FOR FURTHER INFORMATION CONTACT:
Christine Blair, Financial Economist,
Division of Research (202) 898–3936; or
Connie Brindle, Chief, Assessment
Operations Section, Division of Finance,
(703) 516–5553; or Lisa Stanley, Senior
Counsel, Legal Division (202) 898–7494;
9271Federal Register / Vol. 60, No. 32 / Thursday, February 16, 1995 / Proposed Rules
or Cristeena Naser, Attorney, Legal
Division (202) 898–3587, Federal
Deposit Insurance Corporation,
Washington, D.C. 20429.
SUPPLEMENTARY INFORMATION:
I. Background
At present, BIF members are assessed
rates for FDIC insurance ranging from 23
basis points for the best risk
classification to 31 basis points for the
riskiest classification. This assessment
schedule is based on the requirements
of section 7(b)(2)(E) of the Federal
Deposit Insurance Act (FDI Act), 12
U.S.C. 1817(b)(2)(E). That provision was
enacted as part of section 302 of the
Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA)
(Pub. L. 102–242, 105 Stat. 2236, 2345)
which completely revised the
assessment provisions of the FDI Act by
requiring the FDIC to: (1) establish a
system of risk-based assessments; (2)
establish rates sufficient to provide
revenue at least equivalent to that
generated by an annual 23 basis point
rate until the BIF reserve ratio achieves
the DRR of 1.25% of total estimated
insured deposits; (3) when the reserve
ratio remains below the DRR of 1.25%,
set rates to achieve that ratio within one
year or establish a recapitalization
schedule to do so within 15 years; and
(4) once the DRR is achieved, set rates
to maintain the reserve ratio at the DRR.
Based on the financial condition of
the BIF, the Board has established two
recapitalization schedules, most
recently on May 25, 1993, which
estimated that the DRR would be
achieved in the year 2002. 58 FR 31150
(May 25, 1993). Once the DRR has been
attained, the recapitalization schedule
will no longer apply. Due to the health
of the banking industry, current
projections indicate that the BIF will
recapitalize sometime between May 1
and July 31, 1995. Accordingly, the
Board must implement the statutory
provisions which will apply once the
DRR is reached. In particular, because
the mandate to collect at a minimum
average rate of 23 basis points will no
longer be operative, the Board must
determine when and how much to
lower assessments of BIF members.
Following is a discussion of the
statutory provisions which must be
considered in determining how and
when rates may be set, a proposed new
assessment rate schedule, a method for
applying the proposed rate in the
semiannual period during which the
DRR is achieved, and a process for
adjusting that assessment schedule in
future semiannual periods.
II. Statutory Framework for Setting
Assessment Rates
A. Summary
Section 7(b) of the FDI Act governs
the Board’s authority for setting
assessment rates for members of the BIF.
12 U.S.C. 1817(b). The assessment rates
the Board is authorized or required to
set are dependent on whether the fund’s
reserve ratio has reached its DRR. The
reserve ratio is the dollar amount of the
BIF fund balance divided by the
estimated insured deposits of BIF
members. The Board must set
semiannual assessments and the DRR
for the BIF and the Savings Association
Insurance Fund (SAIF) independently.
FDI Act, section 7(b)(2)(B).
The DRR for the BIF currently is
1.25% of estimated insured deposits
(i.e., $1.25 for each $100 of insured
deposits), the minimum level permitted
by the FDI Act. FDI Act, section
7(b)(2)(A)(iv). The Board may increase
the DRR to such higher percentage as
the Board determines to be justified for
a particular year by circumstances
raising a significant risk of substantial
future losses to the fund. However, the
Board is not authorized to decrease the
DRR below 1.25%. Id.
Section 7(b), among other things,
directs the Board to:
(1) establish a risk-based assessment
system whereby an institution’s
assessment is based in part on the
probability that the deposit insurance
fund will incur a loss with respect to
that institution [FDI Act, section
7(b)(1)(C)(i)]; and
(2) set assessments, not less than
$2000 annually per BIF member, to
‘‘maintain’’ the reserve ratio ‘‘at’’ 1.25%
when that ratio has been achieved [FDI
Act, section 7(b)(2)(A)(i)(I), (iii)].
In the current economic environment,
because of investment income alone, the
reserve ratio may continue to grow
beyond 1.25%. Moreover, a risk-based
assessment system contemplates a range
of rates such that even if the least risky
institutions pay the lowest rate
consistent with a meaningful risk-based
assessment system, riskier institutions
must pay a higher rate. While the Board
must set rates to maintain fund reserves
at the 1.25% DRR once that level is
achieved, even with assessment rates as
low as prudently possible the fund
could continue to grow as a result of
assessments paid by riskier institutions
and investment income. The following
sections address these statutory
directives.
B. Directive: Set Rates To Maintain the
Reserve Ratio at the DRR
Pursuant to section 7(b)(2)(A)(i) of the
FDI Act, the Board must set semiannual
assessments to maintain the reserve
ratio of the BIF at the DRR taking into
consideration the following factors: (1)
Expected operating expenses; (2) case
resolution expenditures and income; (3)
the effect of assessments on members’
earnings and capital; and (4) any other
factors the Board may deem appropriate.
Section 7(b)(2)(A)(iii) limits the Board’s
discretion to set assessment rates by
imposing a minimum semiannual
assessment of $1,000 per BIF member.
The directive to ‘‘set rates to maintain
the reserve ratio at the designated
reserve ratio’’ was enacted as part of the
amendments to section 7 made by the
FDIC Assessment Rate Act of 1990
(Assessment Rate Act). Public Law 101–
508, 104 Stat. 1388, 1388–14. The
Assessment Rate Act is Subtitle A of
Title II of the Omnibus Budget
Reconciliation Act of 1990. While the
phrase ‘‘set assessments * * * to
maintain the reserve ratio at the
designated reserve ratio’’ is not defined
in the statute, the legislative history
discussed below illuminates Congress’
intentions.
1. Interpretations of ‘‘maintain * * *
at the DRR’’.
The Board is of the opinion that this
phrase establishes the DRR as a target,
a position supported both by the
difficulty of managing the size of the
reserve ratio as well as the statutory
history. Changes in the reserve ratio are
a function of the size of estimated
insured deposits, investment earnings,
assessment revenue (which, in turn, is
a function of the risk profile of the
industry and revenue received from the
statutory minimum assessment), and
revenue from corporate-owned and
other assets, none of which is in the
complete control of the FDIC. In
addition, operating expenses and
insurance losses to the fund will vary.
The primary factors affecting the fund
balance are assessment revenues,
investment income, operating expenses
and insurance losses resulting from
bank failures. Assessment revenues
depend upon deposit growth, and
investment income depends upon
interest rate movements as well as
factors affecting the fund’s investable
balance. Deposit growth and interest
rate movements in turn are related, but
as the number and variety of financial
instruments and financial management
techniques expand that relationship
becomes less predictable. Both deposit
growth and interest rates have become
more variable and, thus, less predictable
or Cristeena Naser, Attorney, Legal
Division (202) 898–3587, Federal
Deposit Insurance Corporation,
Washington, D.C. 20429.
SUPPLEMENTARY INFORMATION:
I. Background
At present, BIF members are assessed
rates for FDIC insurance ranging from 23
basis points for the best risk
classification to 31 basis points for the
riskiest classification. This assessment
schedule is based on the requirements
of section 7(b)(2)(E) of the Federal
Deposit Insurance Act (FDI Act), 12
U.S.C. 1817(b)(2)(E). That provision was
enacted as part of section 302 of the
Federal Deposit Insurance Corporation
Improvement Act of 1991 (FDICIA)
(Pub. L. 102–242, 105 Stat. 2236, 2345)
which completely revised the
assessment provisions of the FDI Act by
requiring the FDIC to: (1) establish a
system of risk-based assessments; (2)
establish rates sufficient to provide
revenue at least equivalent to that
generated by an annual 23 basis point
rate until the BIF reserve ratio achieves
the DRR of 1.25% of total estimated
insured deposits; (3) when the reserve
ratio remains below the DRR of 1.25%,
set rates to achieve that ratio within one
year or establish a recapitalization
schedule to do so within 15 years; and
(4) once the DRR is achieved, set rates
to maintain the reserve ratio at the DRR.
Based on the financial condition of
the BIF, the Board has established two
recapitalization schedules, most
recently on May 25, 1993, which
estimated that the DRR would be
achieved in the year 2002. 58 FR 31150
(May 25, 1993). Once the DRR has been
attained, the recapitalization schedule
will no longer apply. Due to the health
of the banking industry, current
projections indicate that the BIF will
recapitalize sometime between May 1
and July 31, 1995. Accordingly, the
Board must implement the statutory
provisions which will apply once the
DRR is reached. In particular, because
the mandate to collect at a minimum
average rate of 23 basis points will no
longer be operative, the Board must
determine when and how much to
lower assessments of BIF members.
Following is a discussion of the
statutory provisions which must be
considered in determining how and
when rates may be set, a proposed new
assessment rate schedule, a method for
applying the proposed rate in the
semiannual period during which the
DRR is achieved, and a process for
adjusting that assessment schedule in
future semiannual periods.
II. Statutory Framework for Setting
Assessment Rates
A. Summary
Section 7(b) of the FDI Act governs
the Board’s authority for setting
assessment rates for members of the BIF.
12 U.S.C. 1817(b). The assessment rates
the Board is authorized or required to
set are dependent on whether the fund’s
reserve ratio has reached its DRR. The
reserve ratio is the dollar amount of the
BIF fund balance divided by the
estimated insured deposits of BIF
members. The Board must set
semiannual assessments and the DRR
for the BIF and the Savings Association
Insurance Fund (SAIF) independently.
FDI Act, section 7(b)(2)(B).
The DRR for the BIF currently is
1.25% of estimated insured deposits
(i.e., $1.25 for each $100 of insured
deposits), the minimum level permitted
by the FDI Act. FDI Act, section
7(b)(2)(A)(iv). The Board may increase
the DRR to such higher percentage as
the Board determines to be justified for
a particular year by circumstances
raising a significant risk of substantial
future losses to the fund. However, the
Board is not authorized to decrease the
DRR below 1.25%. Id.
Section 7(b), among other things,
directs the Board to:
(1) establish a risk-based assessment
system whereby an institution’s
assessment is based in part on the
probability that the deposit insurance
fund will incur a loss with respect to
that institution [FDI Act, section
7(b)(1)(C)(i)]; and
(2) set assessments, not less than
$2000 annually per BIF member, to
‘‘maintain’’ the reserve ratio ‘‘at’’ 1.25%
when that ratio has been achieved [FDI
Act, section 7(b)(2)(A)(i)(I), (iii)].
In the current economic environment,
because of investment income alone, the
reserve ratio may continue to grow
beyond 1.25%. Moreover, a risk-based
assessment system contemplates a range
of rates such that even if the least risky
institutions pay the lowest rate
consistent with a meaningful risk-based
assessment system, riskier institutions
must pay a higher rate. While the Board
must set rates to maintain fund reserves
at the 1.25% DRR once that level is
achieved, even with assessment rates as
low as prudently possible the fund
could continue to grow as a result of
assessments paid by riskier institutions
and investment income. The following
sections address these statutory
directives.
B. Directive: Set Rates To Maintain the
Reserve Ratio at the DRR
Pursuant to section 7(b)(2)(A)(i) of the
FDI Act, the Board must set semiannual
assessments to maintain the reserve
ratio of the BIF at the DRR taking into
consideration the following factors: (1)
Expected operating expenses; (2) case
resolution expenditures and income; (3)
the effect of assessments on members’
earnings and capital; and (4) any other
factors the Board may deem appropriate.
Section 7(b)(2)(A)(iii) limits the Board’s
discretion to set assessment rates by
imposing a minimum semiannual
assessment of $1,000 per BIF member.
The directive to ‘‘set rates to maintain
the reserve ratio at the designated
reserve ratio’’ was enacted as part of the
amendments to section 7 made by the
FDIC Assessment Rate Act of 1990
(Assessment Rate Act). Public Law 101–
508, 104 Stat. 1388, 1388–14. The
Assessment Rate Act is Subtitle A of
Title II of the Omnibus Budget
Reconciliation Act of 1990. While the
phrase ‘‘set assessments * * * to
maintain the reserve ratio at the
designated reserve ratio’’ is not defined
in the statute, the legislative history
discussed below illuminates Congress’
intentions.
1. Interpretations of ‘‘maintain * * *
at the DRR’’.
The Board is of the opinion that this
phrase establishes the DRR as a target,
a position supported both by the
difficulty of managing the size of the
reserve ratio as well as the statutory
history. Changes in the reserve ratio are
a function of the size of estimated
insured deposits, investment earnings,
assessment revenue (which, in turn, is
a function of the risk profile of the
industry and revenue received from the
statutory minimum assessment), and
revenue from corporate-owned and
other assets, none of which is in the
complete control of the FDIC. In
addition, operating expenses and
insurance losses to the fund will vary.
The primary factors affecting the fund
balance are assessment revenues,
investment income, operating expenses
and insurance losses resulting from
bank failures. Assessment revenues
depend upon deposit growth, and
investment income depends upon
interest rate movements as well as
factors affecting the fund’s investable
balance. Deposit growth and interest
rate movements in turn are related, but
as the number and variety of financial
instruments and financial management
techniques expand that relationship
becomes less predictable. Both deposit
growth and interest rates have become
more variable and, thus, less predictable