DEFINITION of '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.

BREAKING DOWN 'Bank Insurance Fund (BIF)'

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.

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."

RELATED TERMS
  1. Federal Deposit Insurance Corporation ...

    The Federal Deposit Insurance Corporation (FDIC) is an independent ...
  2. FDIC Insured Account

    An FDIC Insured Account is a bank account that meets the requirements ...
  3. Financial Institutions Reform, ...

    Among other things, the Financial Institutions Reform, Recovery ...
  4. Advance Dividend

    An advance dividend represents an estimate of the value of an ...
  5. Modified Payoff

    A modified payoff is a partial insurance reimbursement that is ...
  6. Bank Failure

    Bank failure is the closing of an insolvent bank by a federal ...
Related Articles
  1. Investing

    Mutual Funds Are Not FDIC Insured: Here Is Why

    Find out why mutual funds are not insured by the FDIC, including why the FDIC was created and how to minimize your risk with educated mutual fund investments.
  2. Insights

    Financial Regulations: Glass-Steagall to Dodd-Frank

    Here are some of the most important financial regulations that have been established.
  3. IPF - Banking

    Which Banks Pay the Highest Interest Rates on Savings Accounts?

    Online banks offer the best savings account interest rates. Not all banks offer the same features, so it pays to read the fine print.
  4. Insurance

    Are You Protected If Your Insurance Company Goes Belly-Up?

    Consumer protection against insurance company failures actually falls into the hands of state governments. How much protection do you have?
  5. Managing Wealth

    Asset Protection for High Net Worth Individuals

    OK, you've made it. Here's how to hang onto it.
  6. Insurance

    15 Insurance Policies You Don't Need

    Learn how to save money by saying "no" to unnecessary coverage.
  7. Insurance

    4 Reasons Why Waiting To Buy Life Insurance Is a Bad Idea

    Understand the benefits of applying for and securing life insurance coverage while you are young and healthy, and learn the cost of waiting to get coverage.
  8. Insurance

    Add-On Insurance: Do You Need It?

    Insurance is important in certain situations, but there isn't always a need.
  9. Insurance

    Homeowner's Insurance Guide: A Beginner's Overview

    Everything new homeowners need to know about homeowner's insurance to protect their residence.
RELATED FAQS
  1. Are 401ks FDIC insured?

    Learn what part of your 401(k) retirement plan is covered by FDIC insurance, and what part is not. Find out what happens ... Read Answer >>
  2. Does the FDIC cover business accounts?

    Learn what types of business accounts are insured by the FDIC, and find out how much of the deposits made by a business is ... Read Answer >>
  3. Why is my 401(k) not FDIC-Insured?

    Learn about the Federal Deposit Insurance Corporation (FDIC) and whether its protection extends to 401(k) accounts or just ... Read Answer >>
  4. Is my IRA or Roth IRA FDIC-Insured?

    Understand how the Federal Deposit Insurance Corporation (FDIC) protects certain individual retirement accounts, and learn ... Read Answer >>
Hot Definitions
  1. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  2. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  3. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  4. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  5. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  6. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
Trading Center