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FDIC: Bank Failure Fund on Track to Good Health by 2018

The ""FDIC"":http://www.fdic.gov/ projects that it will replenish the hard-hit Deposit Insurance Fund on schedule, as fewer community banks fail and the economic recovery turns a corner.


The agency made the projections in a semi-annual update Tuesday that also found so-called Problem Institutions falling from 844 in September last year to 813 by the fourth quarter.

Requirements under the Dodd-Frank Act require that the FDIC shore up the fund by 1.35 percent by 2020.

The FDIC said that the fund ended last year at $11.8 billion ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô the equivalent of a shift to 0.17 percent for the reserve ratio. Agency


staff projected that the fund will climb to 1.15 percent by fall 2018 if current trends hold.

Consolidated by the Bush administration in 2006, the fund ran aground during the financial crisis, with 157 bank failures in 2010 and 92 last year depleting it by billions of dollars.

The fund replenishes itself by collecting fees and premiums from lenders that back loans on a revolving basis. The FDIC said that it pulled in $13.6 billion and $13.5 billion in assessment income for 2010 and 2011, respectively.

The update comes amid changes to the pace of failure for financial institutions, including many community banks. FDIC spokespeople said in past interviews with _MReport_ that 2010 likely offered up a ""high-water mark"" for bank failures since their rapid onset during the financial crisis.

The agency also predicted that real GDP would inch up to a range of 2.0 percent and 2.5 percent in 2012, buoying the still-steady housing recovery and helping restore the fund.

""Even if a slowdown in the economic recovery results in higher fund losses than projected, the existing statutory framework should provide sufficient time to evaluate the effect on the fund's recovery before considering future adjustments to the Restoration Plan and assessment levels,"" the FDIC said in the update.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.

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