Dear Ms. Fain:
The Bank Policy Institute[1] is writing to express concerns about the Federal Deposit Insurance Corporation’s resolutions last year of Silicon Valley Bank and Signature Bank, the FDIC’s actions taken in connection with those resolutions pursuant to the systemic-risk exception under 12 U.S.C. § 1823(c)(4)(G), and the special assessment of insured depository institutions that the FDIC has implemented in a final rule to recover the FDIC’s estimated $19.2 billion loss to the Deposit Insurance Fund, which continues to change following a 25 percent upwards adjustment in the quarter after adoption.[2]
Although we support the use of the systemic-risk exception in appropriate cases and appreciate the difficulty of bank resolutions, the recent resolutions and resulting assessment (the first levied to recover the costs of utilizing the systemic-risk exception) have revealed both a lack of transparency and substantive shortcomings in the FDIC’s approach. Insufficient transparency regarding costly choices made by the FDIC undermines the critical goals of confidence, stability, and soundness in the banking system and undermines confidence in the FDIC’s ability to resolve failing institutions. Further, some of the FDIC’s choices during the resolutions appear to have needlessly increased—by billions of dollars—the FDIC’s losses, and thus needlessly increased the amount of the assessment.
We have addressed this letter to you because nondisclosure agreements[3] and a general lack of transparency surrounding the FDIC process effectively block media, industry, and Congress from discovering how the process of resolving the failed banks has worked. The banking industry, members of Congress, and the public have raised concerns that the FDIC’s process was flawed, but we have no ability to learn the underlying facts.[4] We submitted information requests to the FDIC pursuant to the Freedom of Information Act on March 15, 2024, but to date the FDIC has not responded, despite the statutory requirement that federal agencies must respond to FOIA requests within 20 working days unless unusual circumstances exist.[5] The FDIC is required by statute to maintain some of the information we have sought and make it available to members of the public upon request, but the FDIC still has not responded to our request for this information.[6] Therefore, we urge the OIG to investigate the concerns we raise and make public any findings; only in this way can Congress and a future FDIC consider better solutions with respect to resolutions, financial management, and policies and processes related to any future systemic-risk resolutions and resulting special assessments.
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[1] BPI is a nonpartisan public policy, research and advocacy group that represents universal banks, regional banks, and the major foreign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud, and other information security issues.
[2] 88 Fed. Reg. 83,329 et seq. The FDIC publicly disclosed a revised loss estimate of $20.4 billion in the FDIC’s 2023 annual report. See FDIC, FDIC Annual Report 2023, at 140 (Updated Mar. 22, 2024), https://www.fdic.gov/about/financial-reports/reports/2023annualreport/2023-arfinal.pdf The FDIC subsequently adjusted that estimate to $19.2 billion in its Quarterly Banking Profile for the first quarter of 2024. See FDIC, FDIC Quarterly Banking Profile First Quarter 2024 (May 29, 2024), https://www.fdic.gov/news/speeches/fdic-quarterly-banking- profile-first-quarter-2024.
[3] See, e.g., Federal Deposit Insurance Corporation Confidentiality Agreement, https://www.fdic.gov/buying/loan/documents/confidentiality.pdf (Dec. 7, 2022).
[4] See, e.g., Jeff Huther, The FDIC’s Unusual Loan from the Federal Reserve, ABA Banking Journal (Apr. 4, 2024), https://bankingjournal.aba.com/2024/03/the-fdics-unusual-loan-from-the- federal-reserve/; Polo Rocha, Banks Knock FDIC Over Growing Tab for Last Year’s Failures, American Banker (Mar. 13, 2024), https://www.americanbanker.com/news/banks-knock-fdic-over-growing-tab-for-last-years-failures; Noah Buhayar, FHLB Charged $285 Million to Wind Down Lifeline After SVB Failed, Bloomberg Law (Mar. 12, 2024), https://news.bloomberglaw.com/banking-law/fhlb-charged-285-million-to-wind-down-lifeline- after-svb-failed; Letter from Senator Bill Hagerty to FDIC Chairman Martin Gruenberg regarding sale of Signature Bank’s loan portfolio (Mar. 10, 2024), available at subscriber.politicopro.com/f/?id=0000018e-2b12-dba0-abcf-6f971bf90000; Antoine Gara, Stephen Gandel, and Joshua Chaffin, Brookfield Chides US Bank Regulator for ‘Secret’ Auction of Housing Loans, Financial Times (Dec. 11, 2023), https://www.ft.com/content/29c13fbc-0ee6-4755-a9ea-349d9ef7bc55; WSJ Editorial Board, How the FDIC Rigged the SVB Auction, Wall Street Journal (April 18, 2023), https://www.wsj.com/articles/fdic-nonbanks-silicon-valley-bank-sale-martin-gruenberg-609af47
[5] 5 U.S.C. § 552(a)(6).
[6] Under 12 U.S.C. § 1821(d)(15), the FDIC is required to “maintain a full accounting of each conservatorship and receivership” and “with respect to each conservatorship or receivership to which the Corporation was appointed, the Corporation shall make an annual accounting or report, as appropriate.” The statute further requires that, “any report prepared… shall be made available by the Corporation upon request to…any other member of the public” (emphasis added).
