Summary: The Bank Insurance Fund ended 1991 with a deficit of $7 billion. Just four years ago, the fund's balance topped $18 billion--its highest level ever--and its ratio of reserves to insured deposits equaled 1.10 percent. Since then, the fund's reserves have been drained by losses of more than $25 billion. The Federal Deposit Insurance Corporation (FDIC) and others project that the fund faces significant additional exposure from failing banks, a scenario made even more troubling by accounting and regulatory issues that hinder early warning of problem banks and work against minimizing fund losses. FDIC estimates that the fund may spend more than $35 billion over the next two years resolving problem institutions, although the Congressional Budget Office and others have projected that these costs could be as high as $72 billion over the next four years. The Comptroller General testified that it is critical that the accounting, auditing, and regulatory reforms of the FDIC Improvement Act of 1991 and its provisions for rebuilding the insurance funds be effectively implemented.
