Banks Face Billions in Fees After SVB, Signature Bank Collapse

WASHINGTON – The fallout from the spring’s banking crisis is hitting big banks’ bottom lines. The Federal Deposit Insurance Corporation (FDIC) Board of Directors today announced a proposed rule that would levy a special assessment on banks to recoup the staggering $15.8 billion lost protecting uninsured depositors after the spectacular collapses of Silicon Valley Bank and Signature Bank. The move, mandated by the Federal Deposit Insurance Act, isn’t a bailout – it’s a bill coming due for a system that prioritized protecting the wealthy over sound banking practices.

The FDIC, led by Chairman Martin J. Gruenberg, is targeting institutions that directly benefitted from the decision to shield uninsured deposits – those holding over $250,000. “The proposal 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,” Gruenberg stated. Translation: the bigger the bank, and the more uninsured money they held, the bigger the hit they’ll take.

According to the FDIC, a total of 113 banking organizations will be on the hook for the assessment. And it won’t be a broad-based sting. Banks with total assets exceeding $50 billion will shoulder more than 95 percent of the cost, while those with assets under $5 billion will escape the fee altogether. This tiered approach is intended to focus the burden on those institutions most capable of absorbing the financial impact, and those who reaped the greatest rewards from the systemic risk determination announced on March 12, 2023.

The proposed assessment will be collected at an annual rate of approximately 12.5 basis points over eight quarterly periods. However, the FDIC warns the rate is fluid and could change based on adjustments to the loss estimate, further bank failures, or revisions to reported uninsured deposit amounts. The agency estimates the assessment could slash bank income by an average of 17.5 percent in a single quarter – a substantial blow, even for the industry giants.

The base for the assessment will be calculated using each bank’s estimated uninsured deposits as of December 31, 2022, with the first $5 billion excluded. This exemption offers some relief to smaller institutions, but it doesn’t change the fundamental reality: the price of preventing a wider financial panic is now being passed on to the banks who stood to lose the most. The FDIC is opening the proposed rule for public comment before finalizing it, but the direction is clear: someone has to pay for the mess left behind by Silicon Valley Bank and Signature Bank, and it won’t be the government – or the uninsured depositors.

The FDIC’s move is a stark reminder of the risks inherent in the financial system, and the delicate balance between protecting depositors and maintaining stability. While the agency insists this assessment is necessary to recover losses and maintain liquidity, critics argue it’s a band-aid solution that doesn’t address the underlying issues that led to the bank failures in the first place. The Grimy Times will continue to follow this developing story and expose the truth behind the financial machinations that put the American economy at risk.

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