FDIC: Failures won’t have material impact on DIF restoration

The FDIC said it does not expect losses from recent bank failures to materially affect the restoration of the Deposit Insurance Fund, and policymakers continued to signal support for a risk-based special assessment.

Details: In its semiannual update on the DIF Restoration Plan, the FDIC said:

• The recent failures of Silicon Valley Bank and Signature Bank of New York are unlikely to have a material effect on the projected timeline for reaching the DIF’s statutory minimum reserve ratio of 1.35%.

• The bank failures are expected to result in losses of approximately $22.5 billion, of which $19.2 billion is attributable to the protection of uninsured depositors under the federal Systemic Risk Exception.

• Federal law requires that any losses to the DIF related to this action be repaid by a special assessment on banks.

• Only the remaining $3.3 billion in losses will directly affect the DIF balance and are not expected to have a material effect on the projected timeline for reaching the statutory minimum by the deadline of Sept. 30, 2028.

• Staff recommends no changes to the Amended Restoration Plan.

Calls for Risk-based Special Assessment: During Tuesday’s FDIC board meeting, Consumer Financial Protection Bureau Director Rohit Chopra—a member of the board—said deposit insurance premiums should be based on risk and special assessments following the recent failures should target the kinds of institutions that benefit from the Systemic Risk Exception. FDIC Chairman Martin Gruenberg last month told Congress that his agency is considering tailoring the special assessment, with the White House separately calling on the agency to exempt community banks.

ICBA Advocacy: ICBA is urging the FDIC to exempt community banks from any special assessment to recover DIF losses caused by the recent failures, including in a recent national news release and letter to the FDIC that was covered by Politico’s Morning Money. ICBA has said since the immediate aftermath of the failures that Washington’s response should not affect community banks.

Industry Differentiation: In a recent blog post and video to community bankers, ICBA President and CEO Rebeca Romero Rainey said round-the-clock media outreach, the ICBA National Campaign, and focused advocacy efforts are helping to differentiate community banks from larger financial institutions among policymakers and the public.