The recent failures of Silicon Valley Bank and Signature Bank won’t prevent US regulators from bolstering a key measure of deposit insurance, according to the Federal Deposit Insurance Corp.
(Bloomberg) — The recent failures of Silicon Valley Bank and Signature Bank won’t prevent US regulators from bolstering a key measure of deposit insurance, according to the Federal Deposit Insurance Corp.
The measure of protection to insured deposits known as the Deposit Insurance Fund reserve ratio could return to the required 1.35% as soon as next year, the FDIC projected on Tuesday. The ratio, which is the fund balance compared with the aggregate value of overall insured deposits, fell below that number in June 2020 due to the Covid-19 pandemic.
“Despite increased uncertainty in the banking industry and the recent failure of two large banks, staff project that the reserve ratio will reach the statutory minimum of 1.35% ahead of the deadline of September 30, 2028,” the FDIC said in a staff update. “Accordingly, staff recommend no changes to the Amended Restoration Plan at this time.”
The inner workings of the Deposit Insurance Fund, or DIF, are in the spotlight after SVB and Signature Bank failed last month. The FDIC has said it plans to approve a special assessment on lenders to replenish the fund after billions of dollars were used to cover uninsured depositors with the two banks.
On Tuesday, the FDIC said the special assessment will keep the regulator on track to reach the 1.35% ratio by replacing $19.2 billion used to cover uninsured deposits. A remaining $3.2 billion that was used to cover insured depositors will impact the DIF balance.
“However, this estimated loss alone is not expected to have a material effect on the projected timeline for reaching the statutory minimum reserve ratio,” the FDIC said.
Meanwhile, bank lobbyists are gearing up for a fight over who will pay for the special assessment. The FDIC plans to propose how it will be implemented next month.
(Adds information on special assessment starting in fifth paragraph.)
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