The Federal Deposit Insurance Corporation announced today that the Deposit Insurance Fund has dipped to a low of $10.4 billion at the end of June — that’s a decrease of 77 percent from a year ago when the fund, which covers deposits in a bank failure, had $45.2 billion.
The FDIC report also found that one in four financial institutions are currently unprofitable.
Source: FDIC Quarterly Banking Profile
The fund is dangerously close to being depleted — it’s reserve ratio, a measurement of the fund against insured deposits, was .22 percent at the end of June. By law, the fund is supposed to remain within 1.15 percent and 1.5 percent of all insured deposits. If the ratio falls below the lower limit, the FDIC must raise assessment rates on covered financial institutions.
In May, Congress approved an increase in a line of credit at the Department of Treasury to the FDIC, should the fund be depleted. The line of credit was increased to $100 billion with temporary borrowing authority of $500 billion. FDIC Chairman Sheila Bair said today that they do not expect to tap that line of credit “at this point in time.”
The only time that the fund was depleted was during the savings and loan crisis in the 1980s, when the FDIC borrowed $15 billion from the Treasury Department.