The Federal Deposit Insurance Corporation (FDIC) announced on Thursday that 113 banks will be charged the fee that will make up the losses to the FDIC fund that baled out numerous banks this spring, including Silicon Valley Bank (SVB) and Signature Bank which used $15.8 billion.
Under the law, the FDIC requires the FDIC to “recover any losses to the DIF as a result of protecting uninsured depositors through a special assessment,” the agency said, adding they have discretion in how to do it.
Around 113 banks are expected to pay the fee. While the fee applies to all banks, in practice lenders with more than $50 billion in assets would be responsible for over 95 percent of the replenishment, the agency said. Banks with less than $5 billion in assets would not pay any fee.
The agency is focusing on large banks since they benefited the most from the FDIC’s unprecedented actions in the wake of the collapse of SVB and Signature Bank.
“In general, large banks with large amounts of uninsured deposits benefited the most from the systemic risk determination,” FDIC Chairman Martin Gruenberg said in a statement.
The federal bank regulator plans to apply a “special assessment” fee of 0.125 percent each year for uninsured deposits that are above $5 billion. The payments would be made in eight quarterly periods to maintain liquidity at the banks and would start in June 2024, the agency said.
The FDIC plans to recoup a total of $15.8 billion to refill the deposit fund’s coffers, which is “approximately equal to the losses attributable to the protection of uninsured depositors at these two failed banks,” the agency said.
The top 14 U.S. lenders will need to fork out an estimated $5.8 billion a year, which could erode their earnings per share by a median 3 percent, Credit Suisse analyst Susan Roth Katzke wrote in a report. Most banks will likely pass on the cost in the form of higher fees to consumers.
The seizure of First Republic Bank and sale to JP Morgan Chase this month is expected to cost that fund another $13 billion.