Big US banks will bear most of the costs of rebuilding a deposit insurance fund that was drained $16 billion by the collapse of Silicon Valley Bank and two other institutions, although medium-sized banks are also expected to size will be at risk, said the FDIC, the US depository insurance agency.
The U.S. banking regulator will levy a 0.125% “special valuation” fee on uninsured bank deposits exceeding $5 billion, based on the amount held by the bank at the end of 2022, the FDIC proposed at a board meeting.
While the fee applies to all banks, in practice institutions with more than $50 billion in assets will cover more than 95% of the cost, the agency said, while banks with less than $5 billion in assets will not pay. no fare. About 113 banks are expected to pay the burden.
The 14 major US banks will have to pay out about $5.8 billion a year, which could erode their earnings per share by an average of 3%, Credit Suisse analyst Susan Roth Katzke wrote in a report.
The fee will be charged over eight quarters starting in June 2024, but may be adjusted based on estimated losses for insurance fund change. The expanded program is intended to minimize the impact on the bank’s liquidity and is expected to have a negligible impact on the bank’s capital, according to FDIC officials.
JPMorgan is expected to pay an estimated $1.3 billion in annual fees, followed by $1.1 billion from Bank of America and $898 million from Wells Fargo. The three banks declined to comment.
The FDIC fund, which guarantees customer bank deposits of up to $250,000, totaled $128.2 billion at the end of 2022, according to the agency.
Banks usually pay a quarterly fee to fund the fund, but the FDIC said the special fee was needed to cover the high costs incurred after the collapse of Silicon Valley Bank and Signature Bank in March.
Other regional banks with high rates of uninsured deposits include Comerica Bank, Western Alliance, Zions Bank and Synovus Financial, according to a Reuters analysis last month based on December data.
Shares of Comerica fell nearly 7%, Zions Bancorp and Synovus fell more than 4%, while Western Alliance lost nearly 1%. Banks did not immediately respond to requests for comment.
Source: Terra
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