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GGD-95-47R 1 (1994-12-13)

handle is hein.gao/gaobacksc0001 and id is 1 raw text is: United States GAO General Accounting Office Washington, D.C. 20548 General Government Division B-258440 December 13, 1994 The Honorable Henry B. Gonzalez Chairman, Committee on Banking, Finance and Urban Affairs House of Representatives Dear Mr. Chairman: This correspondence is in partial response to your request that we review bank mutual fund activities. As part of that request you asked about the impact on the federal deposit insurance funds of the movement of money between deposits and mutual funds. Specifically, you requested that we evaluate whether the movement of money from deposits into mutual funds will significantly affect the assessment income of the federal deposit insurance funds. You also asked whether the Federal Deposit Insurance Corporation's (FDIC) projections for the federal deposit insurance funds take this movement of money into account and whether they should take it into account. We plan to address the other parts of your request for information about bank mutual fund activities in forthcoming reports. BACKGROUND FDIC administers two deposit insurance funds: the Bank Insurance Fund (BIF), which primarily covers the deposits of commercial banks, and the Savings Association Insurance Fund (SAIF), which primarily covers the deposits of thrifts. Each fund derives its income primarily from premiums levied on an assessment base that approximately corresponds to domestic deposits.' Any income not needed to pay for insurance losses and administrative expenses is added to the fund's reserves. An important measure of the soundness of the deposit insurance funds is the reserve ratio. This ratio relates fund reserves (a measure of fund resources) to insured 'The funds also receive income from earning assets contained in the funds. GAO/GGD-95-47R Federal Deposit Insurance

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