US Senator Elizabeth Warren is pressing the Federal Deposit Insurance Corp. for more information on how it’s holding banks accountable for their deposit-reporting practices, after the regulator called lenders’ reports into question last month.
(Bloomberg) — US Senator Elizabeth Warren is pressing the Federal Deposit Insurance Corp. for more information on how it’s holding banks accountable for their deposit-reporting practices, after the regulator called lenders’ reports into question last month.
Warren, who sits on the Senate Banking Committee, called on the agency to use its regulatory power to crack down on the banks and ensure they are reporting their uninsured deposit levels accurately. The Massachusetts Democrat asked the agency to answer a series of questions, including to identify the banks that have underreported their uninsured deposits, according to a letter to FDIC Chairman Martin Gruenberg seen by Bloomberg News.
“Given the importance of accurate reporting on uninsured deposits, it is critical that the FDIC use all of its tools to ensure that banks are meeting their requirements,” Warren wrote in the letter, cosigned by Representative Katie Porter, a Democrat from California. “The banks that are inaccurately reporting uninsured deposits are making millions of dollars doing so, while putting the entire banking system at increased risk – without receiving even the lightest slap on the wrist.”
A representative for the FDIC declined to comment, saying the agency would respond directly to Warren.
In July, the agency sent a letter to US banks that said some firms were incorrectly reporting the amount of their uninsured deposits after they restated the figures amid increased scrutiny of such funds. If a bank incorrectly restated the amount they have on their balance sheet, it’s incumbent on the firm’s chief financial officer or an executive performing a similar function to submit additional revisions, the agency said.
Read More: FDIC Warns Banks Over Errors in Reporting Uninsured Deposits
Since the 2008 financial crisis, Warren has frequently drawn the ire of financial institutions for pushing for stricter regulations and oversight. The senator has criticized overdraft fees, for example, saying that “big banks raked in billions from this abusive practice” during the Covid-19 pandemic.
After the collapse of Silicon Valley Bank and Signature Bank in March, investors began scrutinizing lenders with the biggest share of uninsured deposits. Because such funds aren’t protected by the FDIC, depositors are more likely to withdraw them in a crisis.
In her letter, Warren said that “there is no excuse for the bank’s inaccurate reporting: the reporting requirements here are not new, nor are they confusing.” Revised information could reduce an individual bank’s Deposit Insurance Fund assessments, resulting in “a gap in the DIF that could result in significant problems in the event of another large bank failure or series of bank failures,” she said.
Warren asked the FDIC whether it’s investigating if banks reported their uninsured deposits “knowingly or with reckless disregard for the accuracy,” and what the agency is doing to ensure banks comply with their reporting obligations.
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