FDIC Deposit Insurance Fund (DIF)

The FDIC’s Deposit Insurance Fund (DIF) balance improved for the second quarter in a row, according to a FDIC’s August 2010 press release.

The DIF balance – the net worth of the fund – improved from negative $20.7 billion to negative $15.2 billion during the second quarter. The improvement stemmed primarily from assessment revenues and from a reduction in the contingent loss reserve, which covers the costs of expected failures. The reserve declined from $40.7 billion to $27.5 billion during the quarter.

Liquid resources stood at $44 billion at the end of the second quarter, a decline from $63 billion at the end of the first quarter, as the FDIC tapped into these resources to cover Bank Failures during the quarter.

To bolster the DIF’s cash position, the FDIC Board approved a measure in November 2010 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.