New Law Mixed Bag For Thrifts Sterling Will Take Charges

New federal legislation will improve the competitive position of the nation’s savings and loan institutions, Sterling Financial Corp. Senior Vice President Heidi Stanley said Wednesday.

But there will be near-term pain, she said, as the thrifts take charges against their earnings to cover one-time payments into the fund that insures deposits.

Stanley said Spokane-based Sterling will release the amount of its charge in about two weeks.

The changes were part of an appropriations bill signed late Monday by President Clinton. Besides shoring up the thrift insurance fund, the bill relaxes some restrictions on banks, and adds liability protection if a borrower illegally dumps hazardous waste.

The nation’s 2,000 thrifts will ante up $4.7 billion to reinforce their deposit insurance fund. The cash infusion will bring reserves up to the same level as those in the separate fund covering bank deposits.

The cash also will avoid a potential default on $8.2 billion on bonds issued to bolster the thrift fund when it was created in 1989.

As a result, thrifts will be able to scale back their insurance premiums.

Washington Mutual, for example, will take a charge of $35.7 million in the third quarter, but save an estimated $10 million per year thereafter.

Thrifts are now paying 23 cents per $100 in deposits, while banks, with adequate reserves already on hand in their fund, have paid nothing this year. Sterling has about $900 million in deposits.

With the gap on insurance premiums narrowed, Stanley said, thrifts will be able to price their financial products more competitively.

She said the changes anticipate consolidation of the thrift and bank insurance funds within a few years and, ultimately, the adoption by thrifts of bank charters.

The consolidation, she added, will vastly simplify the regulatory framework overseeing financial institutions for decades.

, DataTimes