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GAO-02-646R 1 (2002-04-16)

handle is hein.gao/gaobaalym0001 and id is 1 raw text is: £ Accountability * Integrity * Reliability United States General Accounting Office Washington, DC 20548 April 16, 2002 The Honorable Michael G. Oxley Chairman Committee on Financial Services House of Representatives Subject: Responses to Questions Relating to H.R. 3717, Federal Deposit Insurance Reform Act of 2002 Dear Mr. Chairman: This letter responds to your April 12, 2002, request that we answer questions relating to H.R. 3717, the Federal Deposit Insurance Reform Act of 2002. Among other things, H.R. 3717 proposes changes to the definition of the reserve ratio for the deposit insurance fund, as well as provides the Federal Deposit Insurance Corporation (FDIC) with the flexibility to set the fund's designated reserve ratio within a range. Current law requires FDIC to maintain the deposit insurance fund balances (net worth) at a designated reserve ratio of at least 1.25 percent of estimated insured deposits. If the reserve ratio falls below 1.25 percent of estimated insured deposits, FDIC's Board of Directors is required to set semiannual assessment rates that are sufficient to increase the reserve ratio to the designated reserve ratio not later than 1 year after such rates are set, or in accordance with a recapitalization schedule of 15 years or less. Your questions, along with our responses, follow. 1. Would there be any impact on FDIC's GAAP prepared financial statements if the numerator of the reserve ratio were legislatively changed to add back any estimated liabilities for anticipated failures? No. FDIC prepares its annual financial statements in accordance with U.S. generally accepted accounting principles (GAAP). GAAP requires FDIC to report the fund balance (difference between total assets and total liabilities) including any estimated liabilities for anticipated failures in its Statement of Financial Position. Fund balance and estimated liabilities for anticipated failures are clearly identifiable line items in the Statement of Financial Position. The reserve ratio is legislatively defined and does not affect FDIC's financial statements. GAO-02-646R Federal Deposit Insurance Reform Act

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