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Rhode Island Depositors' Economic Protection Corporation (RISDIC) corporate records

 Series — Box: 1-3. Rhode Island Depositors' Economic Protection Corporation (RISDIC) corporate records
Identifier: 1636-1732

Scope and Contents

This series consists of files containing RISDIC acts of incorporation and charters. It also includes, but is not limited to, corporate by-laws, rules and regulations, and personnel policies and guidelines, board minutes, annual report booklets, and committee records.

Dates

  • 1971-1991

Creator

Language of Materials

English

Conditions Governing Access

No special restrictions unless otherwise specified.

Conditions Governing Use

Copyright is in the public domain unless otherwise specified. We reserve the right to restrict reproduction of materials due to preservation concerns.

Biographical / Historical

RISDIC was chartered by the Rhode Island General Assembly in 1969 and began operation in 1971 as a private nonprofit insurance company. Its initial purpose was to provide insurance for credit unions chartered in Rhode Island. At first, the membership was limited mostly to small institutions, with total deposits in 1972 of $134 million distributed over 40 institutions. Both the number of institutions and the total deposits in these institutions gradually increased, partly as a result of legislation enacted in 1976 that allowed RISDIC to insure financial institutions other than credit unions, and a 1977 law requiring insurance for all depository institutions. By 1980 RISDIC insured $761 million in deposits, slightly more than a 300 percent increase in real dollars from 1972, at 78 institutions. RISDIC’s responsibilities grew with its membership. In 1980, legislation permitted the Rhode Island Department of Business Regulation (DBR) to accept RISDIC examinations. Limited hiring by DBR in the late 1980s as a result of austere state budgets compelled DBR to rely increasingly on RISDIC personnel to conduct depository examinations. Placing the management of the process for examining the financial institutions with RISDIC, the organization that insured them, decreased the objectivity and effectiveness of the supervisory process. In addition, insurance coverage was increased by RISDIC over time, rising from the initial maximum coverage of $40,000 per account to $100,000, consistent with the increase in federal limits. The ceiling was raised further in 1985, when RISDIC adopted rules to provide insurance up to $500,000 and to provide unlimited coverage on specific accounts. The desire to extend insurance coverage to larger accounts and to a more diverse group of institutions was, in part, an attempt to compensate for a shift to federal insurance coverage by the stronger RISDIC- insured institutions. The exodus to federal insurance was accelerated by the failure of private insurance funds in Ohio and Maryland in early 1985. While the Rhode Island legislature did not enact a 1986 bill filed by the governor that would have required federal insurance for all RISDIC institutions, nine of the twenty-two largest RISDIC-insured institutions nonetheless became federally insured, leaving behind mostly small or weak institutions. Two-thirds of the remaining large RISDIC-insured institutions ultimately were unable to obtain federal insurance.

The defections of some of the strongest companies from RISDIC to the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Association (NCUA; failures of a number of those institutions still insured by RISDIC, and withdrawals by panicked major depositors drained these institutions of their funds. This eventually hit RISDIC, which did not have the financial resources to respond to the crisis and make good on depositors’ losses.

Source: Thomas Pulkkinen and Eric Rosengren, "Lessons from the Rhode Island Banking Crisis," in: New England Economic Review, May/June 1993:3-12.

In 1991, the Rhode Island General Assembly created the Depositors Economic Protection Corporation (DEPCO) to assist in protecting the interests of depositors of certain credit unions, loan and investment companies and bank and trust companies in the state (PL 1991, ch.116.) This was made necessary by a banking crisis triggered by the collapse of the RISDIC. The failure of a number of RISDIC-insured companies over a short period of time overwhelmed RISDIC's limited resources. This prompted Governor Bruce Sundlun to declare a banking emergency and to close over forty institutions unable to obtain the required insurance. This was the last in a series of post-1970 failures of state-chartered, privately operated deposit insurance funds for thrift institutions, industrial banks, and some credit unions. The failures began in Mississippi in 1976 and continued in Nebraska and California (1983), Ohio and Maryland (1985), Utah and Colorado (1987), and Rhode Island (1991).

Extent

3.6 Cubic Feet (3 record cartons)

Accruals

No accruals are anticipated at this time.
Language of description
Undetermined
Script of description
Code for undetermined script

Repository Details

Part of the Rhode Island State Archives Repository

Contact:
33 Broad Street
Providence RI 02903 USA
401-222-2353