Ladies and Gentlemen:
The Bank Policy Institute (“BPI”)[1], submits this letter in response to the Federal Deposit Insurance Corporation’s May 22, 2023, notice of proposed rulemaking entitled Special Assessments Pursuant to Systemic Risk Determination. The special assessment is intended to recover the costs to the Deposit Insurance Fund arising from the protection of uninsured depositors of Silicon Valley Bank and Signature Bank in connection with the systemic risk determination announced on March 12, 2023. [2]
Under the proposed rule, the assessment base for the special assessment would be equal to an insured depository institution’s estimated uninsured deposits, reported as of December 31, 2022,[3] adjusted to exclude the first $5.0 billion of the IDI’s estimated uninsured deposits.[4] This approach would exclude approximately 97% of all IDIs.[5] The special assessments would be collected at an annual rate of 12.5 basis points, over eight quarterly assessment periods (i.e., 3.13 basis points per quarter).[6]
The FDIC estimates that the special assessment will result in total revenue of $15.8 billion, equal to the FDIC’s estimate of the losses to the DIF attributable to the protection of uninsured depositors of Silicon Valley Bank and Signature Bank. As the estimated loss is periodically adjusted, the FDIC retains the ability to cease collection early, extend the collection period, or impose a final, one-time special assessment after the receiverships for Silicon Valley Bank and Signature Bank terminate. These adjustments would account for the difference between actual or estimated losses and the amounts actually collected by the FDIC under the special assessment. The proposed effective date for the rule is January 1, 2024, with special assessments collected beginning with the first quarterly assessment period of 2024 (i.e., January 1 through March 31, 2024, with a first invoice payment date of June 28, 2024).
As discussed in greater detail below, there are flaws in the FDIC’s rationale for the special assessment methodology that should not be perpetuated in any future assessment or otherwise reflected in any future FDIC policymaking. In particular, the proposal does not provide sufficient analysis to support the special assessment methodology. Furthermore, the proposal may have several regulatory effects on the assessed banks that should be adjusted to avoid undue impact on those banks. Lastly, the FDIC should undertake further analysis of the factors that it considered in establishing the proposed special assessment methodology and provide forward-looking guidance on the implementation of any future special assessments pursuant to a systemic risk exception.
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[1] BPI is a nonpartisan public policy, research, and advocacy group, representing the nation’s leading banks and their customers. BPI’s members include universal banks, regional banks, and major foreign banks doing business in the United States.
[2] FDIC, Special Assessments Pursuant to Systemic Risk Determination, 88 Fed. Reg. 32694 (May 22, 2023) (proposed rule).
[3] Estimated uninsured deposits are reported in Memoranda Item 2 on Schedule RC-O, Other Data for Deposit Insurance Assessments of both the Consolidated Reports of Condition and Income and the Report of Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks.
[4] For banks that are part of a holding company with one or more subsidiary banks, the exclusion would occur at the banking organization level. The proposing release uses the term “banking organization” to include banks that are not subsidiaries of a holding company as well as holding companies with one or more subsidiary banks.
[5] The banks that are subject to the special assessment are referred to in this letter as the “assessed banks.”
[6] For purposes of this letter, we refer to the FDIC’s proposed methodology as the “special assessment methodology.”
