The FDIC takes aim at big banks with a special assessment
The FDIC is staring down some pretty hefty expenses, adding up to around US$23 billion.
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The backstory: A string of recent bank failures, including Silicon Valley Bank (SVB), Signature Bank and Credit Suisse, have been making waves in the financial sector. Naturally, this has some people feeling a bit antsy about the safety of their hard-earned cash stashed away in these institutions.
So, business honchos and regulators are stepping up to calm any fears and assure customers that their money is still as safe as can be. This is all thanks to the Federal Deposit Insurance Corp. (FDIC), Federal Reserve and US Treasury, who've got depositors' backs, both insured and uninsured.
More recently: First Citizens agreed to buy the remnants of Silicon Valley Bank through a loss-sharing arrangement with the FDIC. Now the FDIC is staring down some pretty hefty expenses, adding up to around US$23 billion. One way of dealing with this is adjusting the fees it charges the banks it insures. The FDIC has proposed a “special assessment” fee on banks this coming May to help cover the costs. But, some lawmakers have said that small banks shouldn't have to foot the bill for the intervention at SVB.
The development: Because of this political pressure, the FDIC has said it has latitude on how to impose this assessment fee. Basically, it wants to avoid putting too much strain on smaller banks and may instead shift those costs to big players like JPMorgan Chase, Bank of America and Wells Fargo to cover the costs, according to people familiar with ongoing talks.
Key comments:
“I’m concerned that Arkansans will have to subsidize Silicon Valley Bank and Signature Banks deposits, and maybe others that come forward,” said Republican Senator John Boozman at a hearing last week. “Will the community banks get charged for that special assessment?”
“We’re going to be keenly sensitive to the impact,” said Martin Gruenberg, FDIC Chairman, at a hearing on Wednesday. “We have the discretion to tailor that assessment to the institutions that most directly benefited.”
“You’re creating the need for a special assessment that’s going to be imposed on those well-managed community banks that didn’t take those risks,” said Democratic Senator Patty Murray to Treasury Secretary Janet Yellet at the hearing.
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