Big Banks Face Billions in Extra FDIC Fees After SVB Failure

We knew this was coming. Yeah, and the bad news is that the big banks are gonna be paying the lion's share of the billions it's gonna take to replenish this fund, which was drained by these multiple regional bank failures. Let's take a look at what the proposal laid out by the FDIC calls for, that really the largest banks will take the biggest hits. Banks with more than 50 billion in assets will be on the hook to pay 95% of the fees. Again, the fund was drained by these recent spate of regional bank failures, but in particular, the so-called special assessment that the FDIC is placing on these banks now, that stems from the extraordinary decision back in March to ensure all deposits at the two failed lenders, SVB, Silicon Valley Bank, and Signature Bank, again, to ensure all deposits, where normally the FDIC only ensures deposits with up to 250,000 in an account, and the cost of making that decision to go outside the typical bounds of what they cover is about 15.8 billion. Now, the FDIC chairman, Marty Grunberg, said that quote in general, large banks with large amounts of uninsured deposits benefited the most, so the rationale goes, they should be pitching in the most here.

The payments can be made, they say, in eight installments, quarterly, starting in 2024. The agency projects that 113 banks out of thousands in the US would have to face these fees, and again, they're staggering the deposits as a way to mitigate any liquidity concerns or claims of liquidity concerns. So what kind of political battle then lies ahead? Oh, it's gonna get ugly, many say. There's no question, the proposal immediately pours fire, or fuel on the fire that's already been lit in Washington over the FDIC, who will pay to refill the fund, known as Diff, that's already been raging. There's also a side debate on whether they should have ever raised the 250,000 floor as they did in this particular situation, and whether it should have been raised, but in any event, a lot of controversy. Notably, a lobbying group for the smaller banks who have really been working hard to make sure they weren't hit by any so-called special assessment, they commend the FDIC for this decision. The agency is gonna take comment on its plan for 60 days and make tweaks before holding another vote to finalize the plan, but they've made absolutely clear the big banks are on the hook for most of it.

That's unlikely to change.

Bloomberg