FDIC Proposal Taps Big Lenders for Deposit Insurance Fund Replenishment

The Federal Deposit Insurance Corporation (FDIC) has unveiled a proposal to replenish its deposit insurance fund. The proposal released on Thursday would see the nation’s largest lenders bear more than 95% of the cost, according to a recent Reuters report.

The fund was depleted by nearly $16 billion in recent months, thanks to the collapse of three U.S. banks. The FDIC’s plan would see lenders that had more than $5 billion in uninsured deposits in December 2022 pay a 0.125% special assessment fee to cover the costs of the fund’s recent losses.

How the deposit insurance fund is financed

The deposit insurance fund is maintained through regular quarterly fees paid by the nation’s banks. According to reports, the new plan came as a surprise to some observers. In fact, some had reportedly expected the agency to recoup its fund losses over a longer period of time. The current plan would replenish the fund over the next two years, instead of three. Obviously, that compressed pace will result in the largest banks paying more in less time.

Reuters estimates that just three banks—JPMorgan Chase, Wells Fargo, and Bank of America—will be assessed more than $3 trillion in fees as part of the plan. An estimated 113 banks will be subject to the assessment. Banks with assets below $5 billion will not have to pay the special assessment fee.

FDIC officials claim that the shortened replenishment timeframe is the the correct choice. The two year schedule is designed to lessen the plan’s effect on bank liquidity. The agency approved the plan along partisan lines. Both Republicans on the board opposed the measure. Meanwhile, all three Democrats voted yes. Public comment will now be solicited before the plan can be finalized.

If the proposal for replenishing the deposit insurance fund becomes final, the fee assessments are planned to begin in June 2024.

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