Summary: Congress, regulators, and others have expressed concern that a significant insurance premium disparity between banks and thrifts could arise when the Federal Deposit Insurance Corporation lowers bank premiums once the Bank Insurance Fund is fully recapitalized. It is expected that thrift premiums could be as much as five times greater than bank premiums because thrift premiums would have to remain higher to fully capitalize the Savings Association Insurance Fund. Also, higher thrift premiums will be needed to pay interest on bonds issued to help pay for resolving the thrift crisis that developed in the 1980s. Concerns have been raised that high premiums would place thrifts at a competitive disadvantage with banks. This testimony (1) discusses the likelihood, the potential size, and the timing of a premium rate differential between banks and thrifts; (2) analyzes possible effects of the premium rate differential on the two industries; (3) assesses potential adverse effects on the Savings Association Insurance Fund's viability; and (4) identifies ways to avoid or mitigate problems that the premium rate differential may create.
