26078 Federal Register / Vol. 61, No. 102 / Friday, May 24, 1996 / Rules and Regulations

tested for insulation imperfections in

accordance with § 1755.702(e)(7) and

§ 1755.703(b)(5), respectively.

(2) Capability tests. Tests on a quality

assurance basis shall be made as

frequently as is required for each

manufacturer to determine and maintain

compliance with:

(i) Performance of the conductors;

(ii) Performance of the conductor

insulation and jacket material;

(iii) Sequential marking and lettering;

(iv) Mutual capacitance, capacitance

unbalance, attenuation, and crosstalk;

(v) Conductor resistance, resistance

unbalance, and insulation resistance;

(vi) Dielectric strength and fusing

coordination;

(vii) Impact, abrasion, static load,

elongation, and plasticizer compatibility

tests; and

(viii) Cold temperature handling, light

absorption, low temperature separation,

and flammability tests.

(c) Summary of records of electrical

and physical tests. (1) Each

manufacturer shall maintain suitable

summary records for a period of at least

3 years of all electrical and physical

tests required on completed wire as set

forth in paragraph (b) of this section.

The test data for a particular lot of aerial

service wire shall be in a form such that

it may be readily available to the

purchaser or to RUS upon request.

(2) Measurements and computed

values shall be rounded off to the

number of places or figures specified for

the requirement according to ANSI/

ICEA S–89–648–1993, paragraph 1.3.

(d) Manufacturing irregularities. (1)

Repairs to the insulation of CCSR aerial

service wires are not permitted in wires

supplied to end users under §§ 1755.700

through 1755.704.

(2) Repairs to the jacket of NMR aerial

service wires are not permitted in wires

supplied to end users under §§ 1755.700

through 1755.704.

(e) Splicing. Splicing of completed

CCSR and NMR aerial service wires

shall comply with the requirement

specified in ANSI/ICEA S–89–648–

1993, paragraph 8.1.1.

(f) Preparation for shipment. (1) CCSR

and NMR aerial service wire shall be

shipped either in coils or on reels.

(2) When CCSR and NMR aerial

service wires are shipped on reels the

following provisions shall apply:

(i) The diameter of the drum shall be

large enough to prevent damage to the

wire from reeling or unreeling. The reels

shall be substantial and so constructed

as to prevent damage to the wire during

shipment and handling;

(ii) A waterproof corrugated board or

other suitable means of protection

accepted by RUS prior to its use may be

applied to the reel. If the waterproof

corrugated board or other suitable

material is used for protection, it shall

be suitably secured in place to prevent

damage to the wire during storage and

handling. The use of the waterproof

corrugated board or other suitable

means of protection shall be at the

option of the manufacturer unless

specified by the end user;

(iii) The outer end of the wire shall be

securely fastened to the reel head so as

to prevent the wire from becoming loose

in transit. The inner end of the wire

shall be securely fastened in such a way

as to make it readily available if

required for electrical testing. Spikes,

staples, or other fastening devices which

penetrate the conductor insulation of

the CCSR aerial service wire and the

jacket of the NMR aerial service wire

shall not be used. The method of

fastening the wire ends shall be

accepted by RUS prior to their use;

(iv) Each length of wire shall be

wound on a separate reel;

(v) Each reel shall be plainly marked

to indicate the direction in which it

should be rolled to prevent loosening of

the wire on the reel; and

(vi) Each reel shall be stenciled or

labeled on either one or both sides with

the following information:

(A) Customer order number;

(B) Manufacturer’s name and product

code;

(C) Factory reel number and year of

manufacture;

(D) Gauge of conductors and pair size

of wire;

(E) Length of wire; and

(F) RUS designation letter ‘‘K.’’

(3) When CCSR and NMR aerial

service wires are shipped in coils the

following provisions shall apply:

(i) The diameter of the coil shall be

large enough to prevent damage to the

wire from coiling or uncoiling;

(ii) The nominal length of the wire in

a coil shall be 305 meters (1,000 feet).

No coil shall be less than 290 meters

(950 feet) long or more than 460 meters

(1,500 feet) long; however, 25 percent of

the total number of coils may be less

than 305 meters (1,000 feet);

(iii) The coils of wire shall be wound

securely with strong tape in four

separate evenly spaced places;

(iv) The coils may be protected from

damage by wrapping the coil with heavy

paper, burlap, or other suitable material

accepted by RUS prior to its use. The

use of the heavy paper, burlap, or other

suitable means of protection shall be at

the option of the manufacturer unless

specified by the end user; and

(v) Each coil shall be tagged with the

following information:

(A) Customer order number;

(B) Manufacturer’s name and product

code;

(C) Year of manufacture;

(D) Gauge of conductors and pair size

of wire;

(E) Length of wire; and

(F) RUS designation letter ‘‘K.’’

(4) In lieu of wrapping the coil with

heavy paper, burlap, or other suitable

material, the coil may be packaged in a

moisture resistant carton.

(5) When the coils are shipped in

moisture resistant cartons, each carton

shall be marked with the information

specified in paragraphs (f)(3)(v)(A)

through (f)(3)(v)(F) of this section.

(6) Other methods of shipment may be

used if accepted by RUS prior to their

use.

(7) When NMR aerial service wire is

shipped, the ends of the wire shall be

sealed in accordance with ANSI/ICEA

S–89–648–1993, paragraph 9.2.

Dated: May 10, 1996.

Jill Long Thompson,

Under Secretary, Rural Development.

[FR Doc. 96–12834 Filed 5–23–96; 8:45 am]

BILLING CODE 3410–15–P

FEDERAL DEPOSIT INSURANCE

CORPORATION

12 CFR Part 327

Assessments; Continuation of

Adjusted Rate Schedule for BIFAssessable Deposits

AGENCY: Federal Deposit Insurance

Corporation (FDIC).

ACTION: Continuation of adjusted rate

schedule.

SUMMARY: On May 14, 1996, the Board

of Directors of the FDIC (Board) adopted

a resolution to continue in effect the

current downward adjustment to the

assessment rate schedule applicable to

deposits assessable by the Bank

Insurance Fund (BIF). The continuation

of the downward adjustment will apply

to the semiannual assessment period

beginning July 1, 1996. As a result, the

BIF assessment rates will continue to

range from 0 to 27 basis points. This rate

schedule will result in an estimated

average annual assessment rate of

approximately 0.29 basis points; the

estimated annual revenue produced by

this rate schedule will be $72 million.

EFFECTIVE DATE: July 1, 1996, through

December 31, 1996.

FOR FURTHER INFORMATION CONTACT:

Frederick S. Carns, Assistant Director,

Division of Insurance, (202) 898–3930;

Christine E. Blair, Financial Economist,

Division of Research and Statistics,
Federal Register / Vol. 61, No. 102 / Friday, May 24, 1996 / Rules and Regulations 26079

(202) 898–3936; James R. McFadyen,

Senior Financial Analyst, Division of

Research and Statistics, (202) 898–7027;

Christopher L. Hencke, Counsel, Legal

Division, (202) 898–8839; Federal

Deposit Insurance Corporation, 550 17th

Street, N.W., Washington, D.C., 20429.

SUPPLEMENTARY INFORMATION:

I. Continuation of Adjustment to Rate

Schedule 2

Section 7(b) of the Federal Deposit

Insurance Act, 12 U.S.C. 1817(b),

provides that the Board shall set

semiannual assessments for insured

depository institutions. On August 8,

1995, the Board adopted a new

assessment rate schedule for deposits

subject to assessment by the BIF. 60 FR

42680 (August 16, 1995). The new

schedule was codified as Rate Schedule

2 at 12 CFR 327.9(a). This schedule

provided for an assessment-rate range of

4 to 31 basis points and became

effective retroactively on June 1, 1995,

the beginning of the month following

the month in which the BIF reached its

designated reserve ratio (DRR) of 1.25

percent of total estimated insured

deposits.

In adopting Rate Schedule 2, the

Board also amended the FDIC’s

assessment regulations to permit the

Board to make limited adjustments to

the schedule without notice-andcomment rulemaking. Any such

adjustments can be made as the Board

deems necessary to maintain the BIF

reserve ratio at the DRR and can be

accomplished by Board resolution.

Under this provision, codified at 12 CFR

327.9(b), any such adjustment must not

exceed an increase or decrease of 5 basis

points and must be uniform across the

rate schedule.

The amount of an adjustment adopted

by the Board under 12 CFR 327.9(b) is

to be determined by the following

considerations: (1) the amount of

assessment revenue necessary to

maintain the reserve ratio at the DRR;

and (2) the assessment schedule that

would generate such amount of

assessment revenue considering the risk

profile of BIF members. In determining

the relevant amount of assessment

revenue, the Board is to consider BIF’s

expected operating expenses, case

resolution expenditures and income, the

effect of assessments on BIF members’

earnings and capital, and any other

factors the Board may deem appropriate.

Having considered all of these factors,

the Board decided on November 14,

1995, to adopt an adjustment factor of

4 basis points for the semiannual

assessment period beginning January 1,

1996, with a resulting adjusted schedule

ranging from 0 to 27 basis points. 60 FR

63400 (December 11, 1995). The Board

has now decided to adopt the same

adjustments to Rate Schedule 2 for the

upcoming semiannual period from July

1, 1996 to December 31, 1996. The

adjusted rate schedule is set forth

below.

BIF RATE SCHEDULE AS ADJUSTED

FOR THE SECOND SEMIANNUAL PERIOD OF 1996

Capital group

Supervisory subgroup

A B C

1 ........................ 1 0 3 17

2 ........................ 3 10 24

3 ........................ 10 24 27

1Subject to a statutory minimum assessment of $1,000 per semiannual period (which

also applies to all other assessment risk classifications).

The basis for the Board’s decision is

discussed below.

II. Basis for the Adjustment

A. Maintaining at the Designated

Reserve Ratio

In adopting a rate adjustment under

12 CFR 327.9(b), as mentioned above,

the Board must consider the following:

(1) the amount of assessment revenue

necessary to maintain the reserve ratio

at the DRR; and (2) the assessment

schedule that would generate such

amount of assessment revenue

considering the risk profile of BIF

members.

The BIF reserve ratio stood at 1.30

percent as of December 31, 1995, the

latest date for which complete data are

available. Assuming that insured

deposit growth during the first half of

1996 falls within the range of 2 percent

shrinkage to 6 percent growth annually,

and assuming that insurance losses

remain moderate as expected, the BIF

ratio will range from 1.29 to 1.34

percent at midyear 1996 (Table 1).

For the second half of 1996, insurance

losses and operating expenses are

expected to total under $350 million,

while assessments plus investment

income will exceed $650 million.

Insured deposit growth for 1996 is

subject to considerable uncertainty, as

recent experience has been mixed. From

1991 through early 1995, the growth rate

of BIF-insured deposits was essentially

zero but, for the year ending in

December 1995, BIF-insured deposits

grew by 3 percent, with much of this

growth occurring in the fourth quarter.

In light of the 1995 experience, as well

as considerable volatility in deposit

growth experienced during the 1980s,

the FDIC must consider the possibility

that BIF-insured deposits could grow at

a 6 percent annual rate throughout 1996.

Table 1 indicates the year-end 1996

range for the BIF reserve ratio, assuming

a 6 percent upper bound for annual

deposit growth in 1996 and assuming

that the values of other variables

affecting the reserve ratio in the second

semiannual period will fall within their

historical ranges. While the lower

bound on the year-end BIF reserve ratio

is below the 1.25 percent target, this

presumes an unexpected increase in

insurance losses/provisions of $600

million. Such an increase is consistent

with the historical experience of the

FDIC, but it must be viewed as a remote

possibility in light of the current

economic environment and the nearterm outlook.

The stronger possibility is that

insured-deposit growth rates could

exceed forecasts based upon historical

experience. While the 6 percent upper

bound for deposit growth included in

Table 1 is high relative to the experience

of the 1990s, the FDIC cannot rule out

such a rate of growth in response to the

dramatic reductions in BIF assessment

rates that were effected in the second

half of 1995.

Moreover, given the prospect of a

continuing, large premium differential

between the insurance funds, there is a

realistic possibility of substantial

deposit migration from the SAIF to the

BIF. Though the law imposes

constraints on at least some forms of

deposit-shifting from one fund to

another, such constraints may be

countered by adaptations in the

marketplace. The relatively low rate of

migration to date is not likely to be

indicative of the rate to be expected

going forward, given that many market

participants may have delayed any

plans to migrate deposits in anticipation

of a legislative solution. In the absence

of a legislative solution to date, the FDIC

believes that there is a realistic

possibility of a significant increase in

deposit migration. However, the precise

timing and ultimate magnitude of any

increase is uncertain.

For illustration, Table 2 examines the

impact on the year-end BIF reserve ratio

of alternative deposit migration rates

during the second semiannual period of

1996. Columns 2 through 4 of the table

indicate the impact of deposit migration

rates under three different assumptions

concerning ‘‘normal’’ growth of BIFinsured deposits (growth that is not due

to migration) for 1996. For example, the

ratios in the third column are derived

under the assumption that normal

deposit growth is 2 percent for 1996

(full year); assuming also that no deposit

migration occurs during the year, the
26080 Federal Register / Vol. 61, No. 102 / Friday, May 24, 1996 / Rules and Regulations

year-end BIF ratio would be 1.32

percent (the assumed values for all

nondeposit factors affecting the reserve

ratio are constant across columns 2–4).

Table 2 indicates that, in general, each

5 percent increase in the annual rate of

migration during the second half of

1996 (to a maximum annual rate of 30

percent) would reduce the year-end

1996 BIF ratio by approximately 1 basis

point. If 30 percent annual migration in

the second half of 1996 were to occur

along with 6 percent ‘‘normal’’ growth

of BIF-insured deposits, the BIF ratio at

year end would be 1.23 percent under

the assumptions of Table 2.

Given the uncertainties reviewed

above, the possibility of a large increase

in BIF-insured deposit growth during

1996 should be considered seriously.

Despite this concern, it is the judgment

of the Board that BIF assessment rates

should not be changed at this time;

rather, deposit flows and trends in

deposit growth rates should be closely

monitored in preparation for future

decisions regarding BIF assessment

rates.

In summary, for the reasons discussed

above, the Board believes that the

assessment schedule for the current

semiannual period will generate the

revenue necessary to maintain the

reserve ratio at the DRR in the next

semiannual period.

B. The Long-Term Outlook

The Board believes that an important

consideration in setting rates is the longterm revenue needs of the BIF. A

balance should exist between long-term

BIF revenues and long-term BIF

expenses (where expenses include

monies needed to prevent dilution due

to deposit growth). In August of 1995,

the FDIC determined that an effective

average BIF assessment rate of 4 to 5

basis points would be appropriate to

achieve such balance. This

determination was based on a thorough

historical analysis of FDIC experience

and consideration of recently enacted

statutory provisions that may moderate

deposit insurance losses going forward.

60 FR 42680 (August 16, 1995).

The Board has not altered its view

that, in setting rates, it should look

beyond the immediate time frame in

estimating the revenue needs of the BIF.

Moreover, the Board continues to

believe that an average annual

assessment rate of 4 to 5 basis points

would be appropriate to achieve a longterm balance between BIF revenues and

expenses. As discussed in the preceding

section, however, the current balance in

the BIF also is directly relevant to

determining the appropriate assessment

level. In light of the favorable existing

conditions and outlook for the next

several months, it is anticipated that the

current rate structure (with an

assessment rate of zero for the leastrisky institutions) will provide adequate

assessment revenue over the near term

to maintain the BIF reserve ratio at or

above the target ratio of 1.25 percent.

C. Other Considerations

In continuing the current adjustments

to the assessment rate schedule, the

Board has considered the effect on

members’ earnings and capital. In light

of the fact that these adjustments

represent a reduction in the rates set

forth in Rate Schedule 2, the Board does

not believe that the schedule will

produce unwarranted adverse effects on

members. Indeed, the rate for many

institutions will be zero (with a

minimum semiannual assessment of

$1,000 mandated by the Federal Deposit

Insurance Act).

Another consideration is the statutory

requirement under the Federal Deposit

Insurance Act for a risk-based

assessment system. To be effective, this

system must incorporate a range of rates

that provides an incentive for

institutions to control risk-taking

behavior while at the same time

covering the long-term costs of the

obligations borne by the deposit insurer.

In the judgment of the Board, these

goals will be achieved for the upcoming

semiannual period by retaining the

current spread of 27 basis points

between the highest- and lowest-rated

institutions.

For the reasons discussed above, the

Board has decided to continue in effect

the current adjustment to the BIF

assessment rate schedule with a range of

0 to 27 basis points for the semiannual

period from July 1, 1996 through

December 31, 1996.

By order of the Board of Directors.

Dated at Washington, DC, this 14th day of

May, 1996.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Deputy Executive Secretary.

BILLING CODE 6714–01–P
Federal Register / Vol. 61, No. 102 / Friday, May 24, 1996 / Rules and Regulations 26081
26082 Federal Register / Vol. 61, No. 102 / Friday, May 24, 1996 / Rules and Regulations

[FR Doc. 96–12885 Filed 5–23–96; 8:45 am]

BILLING CODE 6714–01–C