SVB Financial Group
Regulatory Coverage: FDIC Finalizes Special Assessment to Recoup Losses From SVB, Signature Failures; Agency Votes Behind Closed Doors After Harassment Allegations
Fri 11/17/2023 09:20 AM
Relevant Documents:
Final Rule
Memorandum
Press Release
The Federal Deposit Insurance Corp. on Thursday evening approved a final rule enacting a special assessment on large banks to recover $16.3 billion in losses on the Deposit Insurance Fund, or DIF, in connection with the agency’s invocation of the systemic risk exception that protected uninsured depositors during the closures of Silicon Valley Bank and Signature Bank this spring.
The FDIC proposed the special assessment in May. Despite opposition from some large banks including Wells Fargo, the FDIC’s final rule largely aligns with the original proposal and imposes nearly all of the costs on large banks with over $50 billion in assets.
The FDIC says that under the final rule, 114 banking organizations will be subject to the special assessment. The 48 banks with over $50 billion in assets will pay 95% of the assessment, and 66 banks with total assets between $5 billion and $50 billion will pay about 5% of the assessment. Banks with assets under $5 billion are exempt.
The agency said that it will collect the special assessment at an annual rate of 13.4 basis points over eight quarters, starting in the first calendar quarter of 2024. The base for the special assessment is equal to an insured institution’s uninsured deposits for the Dec. 31, 2022, reporting period, which is adjusted to exclude the first $5 billion in uninsured deposits, according to the agency.
FDIC Chairman Martin Gruenberg said that the rule “applies the special assessment to the types of banking organizations that benefited most from the protection of uninsured depositors, while ensuring equitable, transparent, and consistent treatment based on amounts of uninsured deposits.”
The FDIC voted 3-2 to adopt the final rule. FDIC Vice Chair Travis Hill and FDIC Director Jonathan McKernan voted against the final rule, mirroring their opposition to the original proposal in May.
The FDIC approved the final rule via a “notational vote” behind closed doors. The agency was scheduled to hold on open meeting on the matter yesterday, Thursday, Nov. 16, but canceled it amid allegations of a pervasive toxic workplace environment first reported by The Wall Street Journal this week.
Gruenberg was grilled by lawmakers on the allegations at previously scheduled oversight hearings earlier this week. Gruenberg said that he was “personally disturbed and deeply troubled” by the report and that the FDIC is conducting a “comprehensive review” and engaging an independent third party to investigate the allegations.
Additionally, Gruenberg was forced to correct his testimony to the House Financial Services Committee during questioning by members to reveal that he was interviewed in 2008 in response to an internal agency report. Gruenberg initially responded that he had not been investigated for inappropriate conduct during his tenure.
Republican lawmakers including House Financial Services Committee Chairman Patrick McHenry, R-N.C., and Senate Banking Committee Ranking Member Tim Scott, R-S.C., have questioned whether Gruenberg should continue to lead the agency. Hill and McKernan, the two Republican members of the FDIC board, have also called for an independent investigation into allegations of the agency’s allegedly toxic workplace.
The turmoil at the FDIC comes as the agency considers significant regulations for the banking industry - including the Basel III Endgame capital requirements and long-term debt requirements for large banks. The FDIC is jointly preparing the regulations alongside the Federal Reserve and the Office of the Comptroller of the Currency.
Lawmakers and regulators have largely moved on from considering reforms specific to the deposit insurance system following the banking crisis this spring. In May, the FDIC proposed a “targeted coverage” reform that would provide higher insurance coverage for business payment accounts, although such a change would require congressional action. This week’s hearings on Capitol Hill featured only fleeting discussion on the topic.
Final Rule
Memorandum
Press Release
The Federal Deposit Insurance Corp. on Thursday evening approved a final rule enacting a special assessment on large banks to recover $16.3 billion in losses on the Deposit Insurance Fund, or DIF, in connection with the agency’s invocation of the systemic risk exception that protected uninsured depositors during the closures of Silicon Valley Bank and Signature Bank this spring.
The FDIC proposed the special assessment in May. Despite opposition from some large banks including Wells Fargo, the FDIC’s final rule largely aligns with the original proposal and imposes nearly all of the costs on large banks with over $50 billion in assets.
The FDIC says that under the final rule, 114 banking organizations will be subject to the special assessment. The 48 banks with over $50 billion in assets will pay 95% of the assessment, and 66 banks with total assets between $5 billion and $50 billion will pay about 5% of the assessment. Banks with assets under $5 billion are exempt.
Source: Final Rule
The agency said that it will collect the special assessment at an annual rate of 13.4 basis points over eight quarters, starting in the first calendar quarter of 2024. The base for the special assessment is equal to an insured institution’s uninsured deposits for the Dec. 31, 2022, reporting period, which is adjusted to exclude the first $5 billion in uninsured deposits, according to the agency.
FDIC Chairman Martin Gruenberg said that the rule “applies the special assessment to the types of banking organizations that benefited most from the protection of uninsured depositors, while ensuring equitable, transparent, and consistent treatment based on amounts of uninsured deposits.”
The FDIC voted 3-2 to adopt the final rule. FDIC Vice Chair Travis Hill and FDIC Director Jonathan McKernan voted against the final rule, mirroring their opposition to the original proposal in May.
The FDIC approved the final rule via a “notational vote” behind closed doors. The agency was scheduled to hold on open meeting on the matter yesterday, Thursday, Nov. 16, but canceled it amid allegations of a pervasive toxic workplace environment first reported by The Wall Street Journal this week.
Gruenberg was grilled by lawmakers on the allegations at previously scheduled oversight hearings earlier this week. Gruenberg said that he was “personally disturbed and deeply troubled” by the report and that the FDIC is conducting a “comprehensive review” and engaging an independent third party to investigate the allegations.
Additionally, Gruenberg was forced to correct his testimony to the House Financial Services Committee during questioning by members to reveal that he was interviewed in 2008 in response to an internal agency report. Gruenberg initially responded that he had not been investigated for inappropriate conduct during his tenure.
Republican lawmakers including House Financial Services Committee Chairman Patrick McHenry, R-N.C., and Senate Banking Committee Ranking Member Tim Scott, R-S.C., have questioned whether Gruenberg should continue to lead the agency. Hill and McKernan, the two Republican members of the FDIC board, have also called for an independent investigation into allegations of the agency’s allegedly toxic workplace.
The turmoil at the FDIC comes as the agency considers significant regulations for the banking industry - including the Basel III Endgame capital requirements and long-term debt requirements for large banks. The FDIC is jointly preparing the regulations alongside the Federal Reserve and the Office of the Comptroller of the Currency.
Lawmakers and regulators have largely moved on from considering reforms specific to the deposit insurance system following the banking crisis this spring. In May, the FDIC proposed a “targeted coverage” reform that would provide higher insurance coverage for business payment accounts, although such a change would require congressional action. This week’s hearings on Capitol Hill featured only fleeting discussion on the topic.
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