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More banks face FDIC special assessment as agency uses Q4'22 vs Q1'23 data


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More banks face FDIC special assessment as agency uses Q4'22 vs Q1'23 data

Nearly 10% of the banks of the estimated 113 would be excluded from the Federal Deposit Insurance Corp.'s proposed special assessment absorb the cost of recent bank failures if the agency used first-quarter figures.

The FDIC proposed on May 11 an annual special assessment rate of 12.5 basis points based on a bank's estimated uninsured deposits as of Dec. 31, 2022. In an attempt to ensure that the largest banks with the most uninsured deposits pay the special assessment, the first $5 billion in uninsured deposits will be excluded.

If the proposal is finalized as is, the use of fourth-quarter 2022 figures over first-quarter 2023 numbers would have a large impact for some banks as deposit levels changed drastically during the first three months of the year. If first quarter numbers were used, some banks would pay millions less, while others would be excluded from paying all together.

Largest banks pay the most

The Big Four US banks will pay nearly half of the estimated $15.8 billion hit to the Deposit Insurance Fund (DIF) from the failures of Silicon Valley Bank and Signature Bank.

JPMorgan Chase & Co. will pay the most of any US bank with an estimated payment of $2.63 billion, according to an analysis by S&P Global Market Intelligence. Bank of America Corp., Wells Fargo & Co. and Citigroup Inc. will all individually pay over $1.4 billion, all more than half of the next bank on the list, U.S. Bancorp, which would pay $682.7 million as proposed.

Notably, three of the 20 banks that had the most uninsured deposits as of Dec. 31, 2022, are the banks that failed.

To avoid the hit to their cash, some banks are considering paying the assessment with Treasurys, The Wall Street Journal reported. According to the report, the FDIC said banks are not allowed to pay that way according to agency rules, though the public can comment on rules.

All of the banks that would pay the proposed special assessment have more than $10 billion in assets at the top-tier holding company level. FDIC staff said estimated uninsured deposits are reported as part of call reports in Schedule RC-O.

SNL ImageDownload an industry document to see the 113 banking organizations that reported over $5 billion in uninsured deposits at Dec. 31, 2022.
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Q1 variance

The FDIC said it used data as of Dec. 31, 2022, so that institutions with the most uninsured deposits when the systemic risk determination was made on March 12 would pay the largest share.

The agency asked in its request for information whether the assessment base should be estimated uninsured deposits as of a different date. The agency is seeking public comments until July 21.

An analysis by S&P Global Market Intelligence showed that if the FDIC used data as of March 31, instead of Dec. 31, 2022, 11 banking organizations would fall below the $5 billion threshold for uninsured deposits and would not be charged an assessment at all.

While a larger share of the bank's deposits were insured by March 31, Customers Bancorp Inc. "is not actively lobbying or advocating for a change to the FDIC special assessment proposal," David Patti, communications director at Customers Bank, wrote in an email. "Later is, of course, better and a change that reduces the impact is, of course, preferred. But Customers Bank is not taking issue with the assessment as proposed."

Excluding the banks that would fall below the threshold, 11 other institutions saw over 20% drops in their uninsured deposits quarter over quarter, meaning they would pay less if the agency used data through March 31.

For example, Huntington Bancshares Inc. reported an almost $32 billion drop in uninsured deposits quarter over quarter due almost entirely to a decline in inter-company deposits, according to the company's first-quarter 10-Q filing, which would lower its estimated special assessment payment by $79.6 million.

Among other institutions that posted large declines in uninsured deposits, The Charles Schwab Corp. would pay $59.8 million less, Western Alliance Bancorp. would pay $39 million less, while Comerica Inc. would pay $26.2 million less than Market Intelligence's estimates based on Dec. 31, 2022, figures if first-quarter 2023 numbers were used.

Discover Financial Services posted a 33.5% drop in its uninsured deposits, which would drop its estimated special assessment payment by $7.5 million. However, like Customers, Discover is not objecting to the use of fourth-quarter 2022 figures.

"Given Discover's high percentage of FDIC insured accounts, we do not anticipate that the special assessment will materially impact Discover financially," Matthew Towson, Discover's director of public relations, said in an email.