Big US banks will pay billions to fill bankruptcy funds

By Pete Schroeder

WASHINGTON (Reuters) – Big U.S. banks will bear most of the cost of replenishing deposit insurance funds drained of $16 billion by the collapse of Silicon Valley Bank and two other firms, though the FDIC said banks’ midsize firms are also at risk. , the American deposit-guarantee company.

The U.S. will impose a “special assessment” fee of 0.125% on uninsured bank deposits of more than $5 billion based on bank holdings by the end of 2022. The banking regulator proposed the FDIC at its advisory meeting.

While the fee would apply to all banks, in practice companies with more than $50 billion in assets would cover more than 95% of the cost, while banks with less than $5 billion in assets would pay nothing, the agency said. Around 113 banks are expected to bear the burden.

The top 14 U.S. banks would have to spend $5.8 billion a year, which could reduce average earnings per share by 3%, Credit Suisse analyst Susan Roth Katzke wrote in a report.

Fees will be charged for eight quarters from June 2024, but may be adjusted as assessed losses for change in insurance funds. The extended schedule is intended to minimize the impact on the bank’s liquidity and is expected to have a small impact on the bank’s capital, according to FDIC officials.

JPMorgan is expected to pay $1.3 billion in annual fees, followed by $1.1 billion from Bank of America and $898 million from Wells Fargo. All three banks declined to comment.

FDIC funds, which guarantee customer bank deposits of up to $250,000, were $128.2 billion at the end of 2022, the agency said.

Banks usually pay quarterly fees to fund the fund, but the FDIC said in March that the special fee was needed to cover higher costs after the collapse of Silicon Valley Bank and Signature Bank.

Other regional banks with high rates of uninsured deposits include Comerica Bank, Western Alliance, Zions Bank and Synovus Financial, according to a Reuters analysis based on December data last month.

Shares of Comerica fell nearly 7%, Zions Bancorp and Synovus were down more than 4%, and Western Alliance was down nearly 1%. The banks did not immediately respond to requests for comment.

(Additional reporting by Niketh Nishant and Pete Schroeder; Manya Saini, Jayveer Shekhawat, Nubur Anand, Tatiana Bacher and Saeed Azhar)

((Translation Editorial São Paulo))

REUTERS BC PF