The Blubber

Per Bloomberg

The Federal Deposit Insurance Corp. just announced that big banks would have to pay extra FDIC fees in order for the failure of SVB to be covered. This would be true for banks with over $50 billion in assets, as the FDIC says they would have to "pay 95% of fees."

This comes as the US government is trying to replenish its Deposit Insurance Fund after it had to cover uninsured depositors for two of the regional banks that recently made headlines for crashing, namely Silicon Valley Bank and Signature Bank.

In regular circumstances, the FDIC only covers up to $250,000 in an account. Still, now, since they're covering uninsured depositors for the two lenders, they estimate that it will cost $15.8 billion to their Deposit Insurance Fund.

While banks with over $50 billion in assets would have to pay 95% of fees, smaller banks would be exempted. It was noted that the exemption was only for banks with less than $5 billion in assets.

FDIC Chairman Martin Gruenberg gave a statement regarding who benefited the most.

Gruenberg: “In general, large banks with large amounts of uninsured deposits benefited the most"

It was revealed that starting in 2024, banks that would need to pay could do so in eight quarterly instalments. So far, the projections are that out of a thousand banks in the US, only 113 of them would have to pick up the bill.

In mid-March, the FDIC announced that the regular taxpayer wouldn't pick up the losses of Silicon Valley Bank. Now, with the more recent announcement, it was clarified that big banks with over $50 billion in assets would pick up the bill.

During that time, the FDIC and the Federal Reserve contemplated creating a fund that would allow the regulators to backstop more bank deposits. This came after the collapse of Silicon Valley Bank.

See flow at unusualwhales.com/flow.

Other News:

• FDIC: no losses for Silicon Valley Bank will be borne by the taxpayer
• The FDIC and Federal Reserve are weighing creating a fund that would allow the regulators to backstop more deposits at banks

Resources:

Bloomberg