FDIC Deposit Insurance Fund (DIF)

The FDIC’s Deposit Insurance Fund (DIF) balance improved for the fourth quarter in a row, according to a FDIC’s latest press release.

The DIF balance – the net worth of the fund – improved from negative $15.2 billion during the second quarter to negative $8 billion during the third quarter, and further improved to negative $7.4 billion duing the fourth quarter 2010. The improvement stemmed primarily from assessment revenues and from a reduction in the contingent loss reserve, which covers the costs of expected failures, as well as from and an improving outlook for losses from future failures. The reserve declined from $21.3 billion to $17.7 during the fourth quarter 2010.

Liquid resources stood at $46.2 billion at the end of 2010, an improvement from $43.7 billion at the end of the third quarter. For 2010, the FDIC incurred a total cost of $22.4 billion resulting from 157 Bank Failures, during 2010.

To bolster the DIF’s cash position, the FDIC Board approved a measure in November 2009 to require insured institutions to prepay three years worth of deposit insurance premiums – about $45 billion – at the end of 2009.

“This measure will provide the FDIC with the funds needed to carry on with the task of resolving failed institutions in 2010, but without accelerating the impact of assessments on the industry’s earnings and capital,” Chairman Bair said.

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