The government fund that insures deposits at savings and loan banks could go insolvent in less than two years, the chairman of the Federal Deposit Insurance Corporation said Monday.
The Savings Association Insurance Fund, or SAIF, “is not in good condition and its prospects are not favorable,” FDIC chairman Ricki Helfer said.
SAIF is significantly underfunded, with a balance of $1.9 billion, or 28 cents in reserves for every $100 of insured deposits, Helfer told the Tennessee Bankers Association.
In contrast, a separate fund for insuring deposits at the nation’s commercial banks, called The Bank Insurance Fund, is healthy and should reach its funding target by June 30.
Proposals to lower the premiums banks pay to the fund have prompted some large savings associations to consider switching their charters to become banks.
“If shrinkage increases - for whatever reason, including efforts by thrift institutions to leave the SAIF the shortfall could occur as early as 1996 or 1997,” Helfer said.