FDIC: Banks must include intercompany deposits in uninsured deposit total

The Federal Deposit Insurance Corp. is calling on banks to take another look at uninsured deposit totals on their call reports.

According to a July 24 letter to financial institutions, banks should include both intercompany deposits from subsidiaries and deposits collateralized by pledged assets in their estimated uninsured deposit totals. The notice follows an uptick in the number of banks revising their amount of uninsured deposits on fourth-quarter 2022 and first-quarter call reports and comes after the agency proposed a special assessment on banks with the most uninsured deposits at Dec. 31, 2022, to replenish the Deposit Insurance Fund with a special assessment payment.

The FDIC called on institutions that "incorrectly reduced" their uninsured deposits levels to amend their call reports. Banks can submit up to three years of revisions or more, "if appropriate," according to the agency.

"Some institutions incorrectly reduced the amount reported on Schedule RC-O by excluding intercompany deposit balances of subsidiaries," the FDIC wrote. "If your institution incorrectly reduced the amount of reported uninsured deposits, for example, to reflect collateralization of deposits by pledged assets or by excluding intercompany deposit balances of subsidiaries, those reports are inaccurate."

Deposits collateralized by pledged assets must be included in uninsured deposit totals because "the existence of collateral has no bearing on the portion of a deposit that is covered by federal deposit insurance," the letter said.

The clarifications from the FDIC come after recent regional bank failures that made uninsured deposits a larger focus for regulators and investors alike. The letter does not apply to banks with less than $1 billion in total assets that are not required to report estimated uninsured deposits.

Fifty-five banks restated their total of uninsured deposits on their fourth-quarter 2022 call reports, well above the number of restatements in prior quarters, according to an analysis by S&P Global Market Intelligence. That trend continued into the first quarter with 22 restatements. Among the restatements in both quarters, 15 companies restated uninsured deposits by at least $1 billion. The majority were downward revisions.

Changes in how banks are treating intercompany deposits or intrabank accounts was one of the main reasons for the restatements. Intercompany deposits are held by one member of a company for another within a consolidated structure, such as cash accounts of a holding company with its bank subsidiary, Rick Childs, a partner at Crowe LLP, told S&P Global Market Intelligence earlier this month.