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Speeches, Statements & Testimonies

Statement by Martin J. Gruenberg, Chairman, FDIC Board of Directors, on the Final Rule on the Special Assessment Pursuant to Systemic Risk Determination

November 16, 2023

The FDIC Board is considering today a Final Rule to implement a special assessment to recover the loss to the Deposit Insurance Fund (DIF) arising from the actions taken to protect uninsured depositors pursuant to the systemic risk determination announced on March 12, 2023. A special assessment in such circumstances is required by the Federal Deposit Insurance Act (FDI Act).1

Following the failures of Silicon Valley Bank on March 10, 2023, and Signature Bank on March 12, 2023, the FDIC was appointed as the receiver for both institutions.2, 3 On March 12, 2023, the Secretary of the Treasury, acting on the recommendations of the FDIC and the Federal Reserve and after consultation with the President, determined that the FDIC could use systemic risk authorities under the FDI Act to protect uninsured depositors in winding down those institutions.4

On May 11, 2023, the FDIC Board approved a notice of proposed rulemaking to implement a special assessment.5 The FDIC received 312 comments on the proposed rule and carefully considered all comments in developing the final rule being considered today. The majority of commenters supported the proposal, and in particular the scope of application, which has the result that no small banking organization is subject to the special assessment.

Under the final rule, an annual special assessment rate of approximately 13.4 basis points will be applied to a special assessment base that will be equal to an IDI's estimated uninsured deposits reported as of December 31, 2022. For IDIs that are not part of a holding company, the first $5 billion in estimated uninsured deposits will be excluded from the assessment base. For IDIs that are part of a holding company, the first $5 billion of the banking organization's total estimated uninsured deposits will be excluded.

Defining the assessment base in this way effectively excludes all banking organizations under $5 billion in total assets from the special assessment. In implementing the special assessment, the law requires the FDIC to consider the types of entities that benefit from any action taken or assistance provided as well as economic conditions, the effects on the industry, and other factors deemed appropriate and relevant.6 In general, large banks with large amounts of uninsured deposits benefitted the most from the systemic risk determination.

It is currently estimated that a total of 114 banking organizations are subject to the special assessment. Banking organizations with total assets over $50 billion will pay more than 95 percent of the special assessment.

Following the issuance of the proposed rule, the FDIC observed that some banks were reporting or filing amendments to the reporting of estimated uninsured deposits for the December 31, 2022 reporting period in a manner that is inconsistent with the instructions to the Call Report. The FDIC takes seriously the matter of accurately reported Call Report data, and as we were reminded in March, uninsured deposits are an important indicator for monitoring the safety and soundness of individual institutions and the banking system as a whole. The reporting requirements for this item are longstanding, and banks are responsible for the accuracy of the data in their Call Report.

Given the importance of this matter, the FDIC is closely reviewing whether banks are reporting estimated uninsured deposits in accordance with Call Report instructions. Given this ongoing review, the final rule implements the special assessment as proposed, with a modification to allow for amendments to correct the reporting of uninsured deposits associated with the FDIC's review.

The total amount collected for the special assessment will be approximately equal to the losses attributable to the protection of uninsured depositors at both Silicon Valley Bank and Signature Bank. These losses are currently estimated to total $16.3 billion. As with all failed bank receiverships, this estimate will be periodically adjusted as assets are sold, liabilities are satisfied, and receivership expenses are incurred.

In order to preserve liquidity at IDIs, and in the interest of consistent and predictable assessments, the special assessment will be collected over eight quarters. Because the estimated loss to these receiverships will be periodically adjusted, the FDIC retains the ability to cease collection early, extend the special assessment collection period one or more quarters beyond the initial eight-quarter collection period, or impose a final shortfall special assessment on a one-time basis after the receiverships for Silicon Valley Bank and Signature Bank are terminated.

Assuming that the effects on capital and income of the entire amount of the special assessment to be collected over eight quarters will occur in one quarter only, it is estimated to result in an average one-quarter reduction in income of approximately 20 percent, while the effect on the dollar amount of Tier 1 capital is minimal, measuring less than one percent, on average.

The final rule applies the special assessment to the types of banking organizations that benefitted most from the protection of uninsured depositors, while ensuring equitable, transparent, and consistent treatment based on amounts of uninsured deposits. The final rule also promotes maintenance of liquidity, which will allow institutions to absorb any potential unexpected setbacks while continuing to meet the credit needs of the U.S. economy. I am therefore supportive of this final rule.

The special assessment will be applicable the first quarterly assessment period of 2024, and the first payment date will be at the end of the second quarter of 2024.

Finally, I would like to thank FDIC staff for their thoughtful work on this final rule.

Last Updated: November 16, 2023