Bank Insurance Fund (BIF)

Bank Insurance Fund (BIF) is a unit of the FDIC that provides insurance protections for banks that are not classified as a savings and loan association. As with all FDIC protection, the BIF provides coverage of up to $250,000 per customer account for insolvent banks. The BIF was created as a result of the savings and loan meltdown in the late eighties.

The creation of the BIF resulted in two separate branches of FDIC coverage. One is the BIF, while the other is the Savings Association Insurance Fund (SAIF). However, the insurance funds for these two entities were merged by Congress in 2006 into the Deposit Insurance Fund.

The Deposit Insurance Fund (DIF) balance increased by $1.8 billion, to $84.9 billion, during the first quarter of 2017, the FDIC reported.  The fund is used to pay depositors of failed banks. "Each bank is required to set up a minimum Designated Reserve Ratio (DRR) of 1.35 percent of estimated insured deposits or the comparable percentage of the new assessment base, average consolidated total assets minus average tangible equity," the FDIC reported.

"If the reserve ratio falls below 1.35 percent, or the FDIC projects that the reserve ratio will, within 6 months, fall below 1.35 percent, the FDIC generally must adopt a restoration plan that provides that the DIF will return to 1.35 percent within 8 years. Notwithstanding that 8 year requirement, however, the FDIC must take steps as necessary for the reserve ratio to reach 1.35 percent of estimated insured deposits by September 30, 2020.
The FDIC must offset the effect on small institutions (less than $10 billion in assets) of the requirement that the reserve ratio reach 1.35 percent by September 30, 2020, rather than 1.15 percent by the end of 2016."

If the reserve ratio exceeds 1.5 percent, the FDIC must dividend to DIF members the amount above the amount necessary to maintain the DIF at 1.5 percent, but the FDIC Board of Directors may, in its sole discretion, suspend or limit the declaration of payment of dividends.

Following the financial crisis of 2008-09, banks failures spiked, peaking in 2011, and have steadily declined since then. "The total number of institutions on the FDIC's Problem Institution List fell to 123 as of December 31, 2016, down from 183 at the end of 2015. The number of problem banks, which . peaked at 888 in March 2011 and has declined in every quarter since then, is now at its lowest level since the second quarter of 2008," the FDIC reported. "The number of bank failures also continues to decline. Five banks failed in 2016, compared to eight failures in 2015."