Federal deposit, savings insurance funds merely outlined in GAO report; solid financial positions noted

Both of the federal insurance funds for deposits and savings in banks, thrifts and credit unions are outlined in a new report from the congressional watchdog about federal insurance programs overall – but the report makes no particular recommendations about either of the funds.

Instead, the report – issued Wednesday by the Government Accountability Office (GAO) – recommended the two funds, like all federal insurance programs considered in the report (for a total of 148), be considered by Congress for “improving recognition of fiscal exposures in budget documents such as by expanding use of information on expected future spending arising from present-day commitments.”

The report, titled “Federal Insurance and Other Activities That Transfer Risk or Losses to the Government,” outlines the financial position of both the Federal Deposit Insurance Corp.’s (FDIC) Deposit Insurance Fund (DIF) and the National Credit Union Administration’s (NCUA) National Credit Union Share Insurance Fund (NCUSIF). The two funds back the deposits and savings of bank customers and credit union members, respectively, providing up to $250,000 of insurance per depositor.

The GAO report is a follow-up to a report it issued in 2007, which made the same recommendation as noted. The latest report aims to identify the activities covered by the insurance programs, noting that “understanding the fiscal exposures they create can be a challenge, making it difficult for Congress to oversee them through the budget and appropriation processes.”

But references to the DIF and NCUSIF generally were explanatory in nature only, providing no additional or specific recommendations.

The report does indicate, however, that both insurance funds are financially sound. “In November 2018, FDIC announced that the DIF reserve ratio had reached 1.36 percent (as of September 30, 2018), exceeding the statutorily required minimum reserve ratio of 1.35 percent ahead of the statutory deadline (September 30, 2020),” the report notes.

As for the credit union fund, the GAO report relies on year-end 2017 numbers. Nevertheless, it reports that “the reported equity ratio at the end of 2017 was 1.46 percent, which is above the normal operating level, set at 1.39 percent as of 2017,” the report states. “According to NCUA, a normal operating level of 1.39 percent was set with the goal of ensuring that the Share Insurance Fund could withstand a moderate recession without the equity ratio declining below 1.20 percent over a 5-year period.”

In fact, in 2018, the NCUA Board voted to return a portion of the money in the fund that exceeded the “normal operating level,” sending to credit unions nearly $736 million. An additional distribution totaling more than $160 million is set to be returned this year (as the fund’s equity level remained above 1.39% at year-end 2018).

GAO Report 19-353: Federal Insurance and Other Activities That Transfer Risk or Losses to the Government