Replenishing the Deposit Insurance Fund: A ‘Modest’ Proposal by the FDIC

Financial Services Law

On May 11, 2023, the Federal Deposit Insurance Corporation (FDIC) approved a notice of proposed rulemaking (NPR) to place a special assessment on larger banks in order to recover the costs associated with protecting uninsured depositors from certain significant bank failures that happened earlier this year. The FDIC estimates these current costs at approximately $15.8 billion.

The NPR provides that banking organizations with greater than $5 billion in assets would be subject to the special assessment, with organizations with total assets over $50 billion incurring over 95% of the aggregate special assessment cost. The FDIC estimates that 113 banking organizations would be subject to the special assessment while the thousands of community and regional banks with assets under $5 billion would incur no such charge. The FDIC’s justification for imposing the special assessment on the nation’s largest banks is based on the assumption that large banks with large amounts of uninsured deposits received the most benefit from the FDIC’s systemic risk determination.

In his remarks in support of the NPR Martin Gruenberg, Chairman of the FDIC remarked, “The proposal applies the special assessment to the types of banking organizations that benefitted most from the protection of uninsured depositors, while ensuring equitable, transparent, and consistent treatment based on amounts of uninsured deposits. The proposal also promotes maintenance of liquidity, which will allow institutions to continue to meet the credit needs of the U.S. economy.”

Larger banks are in the crosshairs of a number of legislative and executive proposals to reinstate certain rules that were rolled back during the administration of President Donald Trump. This NPR confirms an apparent effort to reinforce the strength of the banking system while requiring larger banks to shoulder a greater burden of that responsibility relative to smaller banks.

The NPR provides that the assessment would be collected at the annual rate of approximately 12.5 basis points over eight quarterly assessment periods commencing with the first quarterly assessment period of January 1, 2024 through March 31, 2024. The rate would be applied to an assessment base equal to a bank’s estimated uninsured deposits reported as of December 31, 2022, exclusive of the first $5 billion in estimated uninsured deposits.  

Comments are due within 60 days of the publication of the NPR in the Federal Register.



pursuant to New York DR 2-101(f)

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