FDIC Recommends New Rules to Protect Depositors, May Assess Fee on Big Banks

The Federal Deposit Insurance Corporation (FDIC) Board of Directors met today and announced a proposal aimed at addressing recent shortcomings in the regulatory approach regarding the litany of failed banks. The FDIC rules would assess a fee on large banks to generate revenue to cover the costs following the collapse of Silicon Valley Bank and Signature Bank. The FDIC currently estimates the cost of covering these banks’ uninsured deposits at $15.8 billion.

While many different regulators engage with chartered banks, the FDIC is the entity responsible for taking over a failed bank and finding a solution for account holders.

Several federal agencies have published reports as to the cause of the failures indicating a combination of poor executive management in regard to interest rate risk, ineffective bank regulators, and the ability for account holders to quickly pull money from a bank via an internet-connected account.

In a statement, FDIC Chairman Martin J. Gruenberg said the special assessment would apply to those banks that  “benefitted most from the protection of uninsured depositors.”

“The proposal also promotes maintenance of liquidity, which will allow institutions to continue to meet the credit needs of the U.S. economy.”

The FDI Act requires the FDIC to recover any losses to the DIF as a result of protecting uninsured depositors through a special assessment.

The law also provides the FDIC authority to consider “the types of entities that benefit from any action taken or assistance provided.”

The FDIC states that approximately 113 banks would be subject to the special assessment. Banking firms with total assets over $50 billion would pay over 95% of the assessment.

No banking organizations with total assets under $5 billion would be subject to the special assessment.

The proposed rules would collect the assessment at an annual rate of approximately 12.5 basis points over eight quarterly assessment periods but is subject to change prior to any final rule depending on any adjustments to the loss estimate, mergers or failures, or amendments to reported estimates of uninsured deposits.

The base for the special assessment would be equal to an insured depository institution’s (IDI’s) estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion, applicable either to the IDI, if an IDI is not a subsidiary of a holding company, or at the banking organization level, to the extent that an IDI is part of a holding company with one or more subsidiary IDIs.

The FDIC is proposing to collect the special assessment beginning with the first quarterly assessment period of 2024  with an invoice payment date of June 28, 2024.

The FDIC is accepting public comment for 60 days following publication in the Federal Register.


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