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FDIC to replenish deposit fund by year's end

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The Federal Deposit Insurance Corp. is halfway to reaching certain goals mandated by the Dodd-Frank Act. The first is getting its reserve fund, used to cover failed banks, into positive territory. According to the American Bankers Association, the fund ran at a negative $20.9 billion balance at the end of 2009. At the end of 2010, it stood at negative $7.4 billion. The year, banks will pay approximately $13 billion in assessments, pushing the fund to a positive balance by year-end, the FDIC anticipates. "These projections and trends are indeed good news, but I want to caution that we are not out of the woods yet," said FDIC Chairman Sheila Bair. "While it is difficult to make long-term projections, we think that these latest projections are a sign of continued recovery in the banking industry." The fund is expected to continue improving over the next several years and reach 1.15% of insured deposits in 2018, a second Dodd-Frank Act mandate. The ABA cites improvements in the banking industry, notably the slowdown in the rate of bank failures. In a memo to the FDIC board Tuesday, the director of insurance and research, Arthur Murton, states "the DIF cash balance will be sufficient to meet obligations arising over the next five years from past and future institution failures." Write to Jacob Gaffney. Follow him on Twitter @JacobGaffney.

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