Special Assessments Pursuant to Systemic Risk Determination

In view of the recent failures of the Silicon Valley Bank (SVB) in Santa Clara, CA, and Signature Bank (SB) in New York, NY, the Federal Deposit Insurance Corporation (FDIC) has published in the Federal Register a proposed regulation that aims to recover the losses incurred by the Deposit Insurance Fund (DIF) when safeguarding uninsured depositors of the two failing institutions in accordance with the provisions of the Federal Deposit Insurance Act.
Under the proposed rule, the FDIC would impose additional levies on institution to recover these losses pursuant to the systemic risk determination announced on March 12, 2023. The assessment base for the so-called „special assessments (levies)“ would be the estimated uninsured deposits of an insured depository institution (IDI) as of December 31, 2022, with an adjustment to exclude the first $5 billion in estimated uninsured deposits of an institution. If an IDI is part of a holding company with one or more subsidiary IDIs, the assessment would be at bank organization level. In this case, the $5 billion deduction would be allocated based on an institution’s estimated uninsured deposits as a percentage of the total estimated uninsured deposits held by all IDIs of a holding company.
The FDIC is suggesting an approximate annual rate of 12.5 basis points to be collected over eight quarterly assessment periods, which is projected to generate a total revenue of $15.8 billion – the currently expected loss resulting from the failures of SVB and SB.
As the estimated loss resulting from these failures may be adjusted in the future, the FDIC would have the flexibility to stop collection ahead of time, extend the collection period beyond the initial eight quarters to cover the difference between actual or estimated losses and the collected amounts, and impose a one-time final shortfall „special assessment“ once the receiverships for Silicon Valley Bank and Signature Bank conclude. The proposed effective date for the rule is January 1, 2024, with the collection of special assessments commencing in the first quarterly assessment period of 2024.
Details on calculation and payment specifics, including the invoicing of the additional levies, and on notification requirements of the FDIC when making changes to the „special assessments“ are included in the proposed rule. The consultation will be open for public comment up to July 21, 2023.