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."

  1. Federal Deposit Insurance Corporation ...

    The Federal Deposit Insurance Corporation (FDIC) is an independent ...
  2. Deposit Insurance Fund (DIF)

    A deposit insurance fund insures the deposits of individuals ...
  3. FDIC Problem Bank List

    To make the FDIC problem bank list, a U.S. bank must have financial, ...
  4. FDIC Improvement Act (FDICIA)

    The FDIC Improvement Act was passed in 1991 in response to the ...
  5. Advance Dividend

    An advance dividend represents an estimate of the value of an ...
  6. Niche Banks

    Niche banks cater to and serve the needs of a certain demographic ...
Related Articles
  1. Investing

    FDIC Sues Bank of America Over Deposit Insurance

    In a lawsuit filed Monday, the FDIC says Bank of America owes at least $542 million for deposit insurance.
  2. Personal Finance

    Are Your Bank Deposits Insured?

    Learn how the FDIC is helping to keep your money in your pockets.
  3. Insights

    Financial Regulations: Glass-Steagall to Dodd-Frank

    Here are some of the most important financial regulations that have been established.
  4. Insurance

    From Booms To Bailouts: The Banking Crisis Of The 1980s

    The economic environment of the late 1970s and early 1980s created the perfect storm for a banking crisis.
  5. IPF - Banking

    4 Savings Accounts for Investors

    Curious about the best saving accounts and which ones suit investors?
  6. 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?
  7. Personal Finance

    Top 5 Banks That Are Too Big to Fail (JPM, BAC)

    Discover how the five largest banks have become so big that it would be detrimental to the financial health of the US economy if they fail.
  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. What are key government regulations that affect investing in the banking sector?

    Discover how the global financial crisis of 2008 changed the face of banking in the United States and around the world by ... Read Answer >>
Trading Center