Despite industry pushback, the Federal Deposit Insurance Corp. finalized its special assessment to replenish the Deposit Insurance Fund largely as it was proposed but upped the rate banks will pay.
Under the final rule, banks will pay a special assessment at an annual rate of 13.4 basis points based on their uninsured deposits at Dec. 31, 2022, with the first $5 billion in uninsured deposits excluded. The payments will begin in the first quarter of 2024 with an anticipated total of eight quarterly assessment periods. The rule is largely the same as it was proposed, but the annual rate is higher from 12.5 basis points in the proposal.
The agency currently estimates the failures of Silicon Valley Bank and Signature Bank will result in a $16.3 billion loss to the Deposit Insurance Fund, up from the agency's estimate of $15.8 billion when the rule was proposed. The estimated impact changes as the FDIC sells assets, satisfies liabilities and incurs receivership expenses.
Under the final rule, 114 banks will pay the special assessment, with 48 of those having more than $50 billion in assets, according to the release. No banks with less than $5 billion in assets at Dec. 31, 2022, will pay the assessment.
The use of Dec. 31, 2022, data was a source of concern among the industry because some banks have made significant steps to reduce their uninsured deposits since the failures.
The possibility of paying the special assessment based on Dec. 31, 2022, data made many banks take a second look at their previous call report data, which led to a surge in banks restating their fourth-quarter 2022 uninsured deposit totals. Those restatements altered what the banks would pay toward the special assessment, an analysis by S&P Global Market Intelligence found.
Additionally, regional banks were unhappy with having to pay the special assessment at all, with many advocating in letters to the FDIC for only the "too big to fail" banks to pay it since those banks benefited from deposit inflows after the failures.
Many banks also asked the agency to exclude collateralized, preferred and intercompany deposits from the uninsured deposits totals, arguing that those deposits are more stable than other uninsured deposits.
The FDIC put out guidance after the surge of fourth-quarter 2022 restatements, saying banks must include those deposits in their uninsured deposit totals, leading to another round of restatements.
In the final rule preamble, the agency indicated banks might still be incorrectly tallying their uninsured deposit totals, so it is conducting a review of banks' reporting methodology "because of the importance of these items as indicators of safety and soundness."
That review "may result in amendments to uninsured deposits and related items reported on the Call Report if the FDIC determines that an institution is not reporting these items in accordance with the instructions," the agency said in the final rule.
The FDIC finalized the rule largely as it was proposed by a vote of 3-2.
"The final rule applies the special assessment to the types of banking organizations that benefited most from the protection of uninsured depositors while ensuring equitable, transparent, and consistent treatment based on amounts of uninsured deposits," said FDIC Chairman Martin Gruenberg in the release. "The final rule also promotes maintenance of liquidity, which will allow institutions to absorb any potential unexpected setbacks while continuing to meet the credit needs of the [US] economy."
The FDIC was set to hold a public board meeting to vote on the rule the morning of Nov. 16, but the agency canceled it at the last minute and instead pivoted to a notational vote. It was unclear why the meeting was canceled and if it was related to multiple Wall Street Journal reports published this week on allegations of misconduct at the agency by Chair Martin Gruenberg and others.