The Federal Deposit Insurance Corporation (FDIC) Board of Directors wants to implement a special assessment on the nation’s largest banks to recover the cost associated with protecting uninsured depositors following the closures of Silicon Valley Bank and Signature Bank earlier this year. The Federal Deposit Insurance Act (FDI Act) requires the FDIC to take this action in connection with the systemic risk determination announced on March 12, 2023.
“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,” said FDIC Chairman Martin J. Gruenberg. “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. In addition, the law provides the FDIC authority to consider “the types of entities that benefit from any action taken or assistance provided.” Currently, the FDIC estimates that of the total cost of the failures of Silicon Valley Bank and Signature Bank, approximately $15.8 billion was attributable to the protection of uninsured depositors.
In general, large banks with large amounts of uninsured deposits benefitted the most from the systemic risk determination. As proposed, it is estimated that a total of 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 total assets under $5 billion 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.
Assuming that the effects on capital and income of the entire amount of the special assessment would occur in one quarter only, it is estimated to result in an average one-quarter reduction in income of 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 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 (i.e., January 1 through March 31, 2024, with an invoice payment date of June 28, 2024), and would continue to collect special assessments for an anticipated total of eight quarterly assessment periods.
The proposed rule provides opportunity for public comment for 60 days following publication in the Federal Register.