The Federal Deposit Insurance Corp. (FDIC) proposed a new rule that would allow it to impose special assessments to recover the loss to the deposit insurance fund (DIF) arising from the protection of uninsured depositors in connection with the systemic risk determination announced on March 12, following the closures of Silicon Valley Bank (SVB) and Signature Bank. The Federal Deposit Insurance Act (FDIA) requires the FDIC to recover any losses to the DIF caused by protecting uninsured depositors through a special assessment.
“The proposal applies the special assessment to the types of banking organizations that benefitted most from the protection of uninsured depositors, while ensuring equitable, transparent, and consistent treatment based on amounts of uninsured deposits,” FDIC Chair Martin Gruenberg said. “The proposal also promotes maintenance of liquidity, which will allow institutions to continue to meet the credit needs of the U.S. economy.”
The FDIA provides the FDIC authority to consider “the types of entities that benefit from any action taken or assistance provided.” The FDIC estimates that of the total cost of the failures of SVB and Signature Bank, approximately $15.8 billion was attributable to the protection of uninsured depositors.
The special assessment is focused on large banks with large amounts of uninsured deposits which the FDIC determined to be the greatest beneficiaries from the systemic risk determination.
The proposal estimates 113 banking organizations would be subject to the special assessment. Banking organizations with total assets over $50 billion would pay more than 95 percent of the special assessment. No banking organizations with less than $5 billion in total assets would be subject to the special assessment.
The FDIC is proposing to collect the special assessment at an annual rate of approximately 12.5 basis points over eight quarterly assessment periods; however, the special assessment rate 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 FDIC projects that, were the special assessment to be applied in one quarter only, it would result in an average one-quarter reduction in income of approximately 17.5 percent.
Under the proposal, the base for the special assessment would be equal to an insured depository institution’s (IDI’s) estimated uninsured deposits reported as of Dec. 31, 2022, adjusted to exclude the first $5 billion. This will be applied either to the IDI, if it 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 IDI.
The FDIC is proposing to collect the special assessment beginning with the first quarterly assessment period of 2024 (Jan. 1 through March 31, 2024, with an invoice payment date of June 28, 2024).
The special assessment proposal will be submitted to the Federal Register and will be subject to a 60-day comment period.