Major US banks are set to pay around $8.9 billion to replenish the US government’s Deposit Insurance Fund, which supported uninsured depositors at Silicon Valley Bank and Signature Bank. Citigroup Inc. will contribute up to $1.5 billion, completing disclosures by the six largest banks. Together, these banks will cover 56% of the total $15.8 billion FDIC cost for safeguarding uninsured depositors.
Anticipated fees are highest for JPMorgan Chase & Co., expected to pay around $3 billion, while Bank of America Corp. and Wells Fargo & Co. will each contribute nearly $2 billion.
Normally capping individual bank accounts at $250,000, the Deposit Insurance Fund took exceptional measures in response to Silicon Valley Bank and Signature Bank’s March insolvency. The FDIC, along with the Federal Reserve and Treasury Department, recognizing a possible financial system risk, introduced systemic risk exceptions. This decision ensured complete reimbursement for all depositors in these banks, preventing additional turmoil.
At the start of the year, the fund held over $128 billion, which diminished with each bank collapse. Typically, insured banks replenish it through quarterly fees termed assessments. However, the government chose to also secure uninsured deposits, promising to recoup fund losses through a mandated special assessment on banks as per legal requirements.
In May, the FDIC unveiled a draft regulation detailing the potential procedure for gathering special assessments. The current proposal, determining fees for each institution from their estimated uninsured deposits by December (excluding the initial $5 billion), could be adjusted after considering public feedback. As it currently stands, significant banks bear the responsibility.
As per the agency’s statement, entities holding assets exceeding $50 billion will be responsible for 95% of the fees, whereas those with assets below $5 billion will be entirely waived from payment.
Approximately ten days before the proposal’s unveiling, First Republic Bank’s collapse further impacted the Deposit Insurance Fund, estimated by the FDIC to be a $13 billion blow. However, there won’t be an isolated special assessment for First Republic due to its swift acquisition by JPMorgan, coupled with the absence of a perceived requirement for a systemic risk exception.
