In its semiannual update on the restoration plan for its Deposit Insurance Fund (DIF), the Federal Deposit Insurance Corporation (FDIC) cited the impact of the recent bank failures.
The FDIC estimates that the recent collapses of Silicon Valley Bank and Signature Bank resulted in losses of approximately $22.5 billion. Of that amount, about $19.2 billion is attributable to the protection of uninsured depositors under the Systemic Risk Exception.
Federal law requires that any losses to the FDIC’s Deposit Insurance Fund related to this action be repaid by a special assessment placed on banks. However, only the remaining $3.3 billion in losses will directly impact the DIF balance. Thus, the FDIC report said that the bank failures are not expected to have a material effect on the projected timeline for reaching the statutory minimum reserve ratio.
“The bottom line to today’s update is that even with increased uncertainty in the banking industry and the recent failure of two large banks, staff project that the losses from the two failures are not expected to have a material effect on the projected timeline for reaching the statutory minimum reserve ratio of 1.35 percent. The reserve ratio is expected to reach the minimum ahead of the statutory deadline of September 30, 2028, and staff recommend no changes to the Amended Restoration Plan at this time,” FDIC Chairman Martin Gruenberg said.
For some background, the FDIC’s board is required to adopt a restoration plan when the DIF’s reserves fall below 1.35 percent of all insured deposits held in FDIC-insured financial institutions. Extraordinary deposit growth during the first and second quarters of 2020 caused the fund’s reserve ratio to decline below this statutory minimum. On Sept. 15, 2020, the FDIC established a plan to restore the fund’s reserves to at least 1.35 percent by Sept. 30, 2028, while maintaining the assessment rate schedule.
Then, on June 21, 2022, the FDIC board voted to increase deposit insurance assessment rates by two basis points for all insured depository institutions. On October 18, 2022, the FDIC board adopted a final rule to increase initial base deposit insurance assessment rate schedules by two basis points beginning in the first quarter of 2023.