This morning, the FDIC issued a notice of proposed rulemaking to implement the special assessment required following the Silicon Valley Bank and Signature Bank failures.
The FDIC Board approved the notice on a 3-2 vote, with two dissenters.
The Federal Deposit Insurance Act requires the FDIC to use a special assessment to recover any losses to the Deposit Insurance Fund (DIF) resulting from a systemic risk determination. Because the FDIC used a systemic risk determination to protect the uninsured depositors of the two banks, the special assessment is designed to recover the costs of covering these uninsured deposits. The FDIC estimates that the loss to the DIF attributable to uninsured deposits is approximately $15.8 billion.
An estimated 113 banking organizations would be subject to the special assessment, with banks with over $50 billion in assets paying more than 95% of the special assessment. Banks with total assets under $5 billion would not be subject to the special assessment.
The FDIC proposes to collect the special assessment at an annual rate of approximately 12.5 basis points, over eight quarterly assessment periods, beginning the first quarterly assessment period of 2024, and would be subject to adjustment as estimates for losses to the DIF are updated due to asset sales, liability payoffs, and receivership expenses. The assessment base for each bank would be its estimated uninsured deposits reported as of December 31, 2022, adjusted to exclude the first $5 billion of uninsured deposits.
Comments on the proposal will be due 60 days from its publication in the Federal Register.
For additional information, please see:
Clients with questions should reach out to any of their regular contacts at Cleary Gottlieb or any of the partners or counsel listed on our website under Banking and Financial Institutions or Bankruptcy and Restructuring.
Additional Cleary Gottlieb content regarding SVB, Signature Bank and related developments can be found here. Cleary Gottlieb is a trusted resource in the financial sector for clear and up-to-the-minute guidance on the evolving regulatory landscape. Our preeminent banking and bankruptcy and restructuring practices have been intimately involved advising the private sector and governments in times of crisis, including the 2008 financial crisis and in the federal government’s actions to stabilize the economy during the COVID pandemic. We have extensive experience advising banking institutions and their depositors, creditors, and investors through the FDIC resolution process.