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FDIC Proposal to Assess 12.5 bps on Uninsured Deposits over $5 Billion

"The FDIC is proposing to collect the special assessment at an annual rate of approximately 12.5 basis points over eight quarterly assessment periods; however, the special assessment rate is subject to change prior to any final rule depending on any adjustments to the loss estimate, mergers or failures, or amendments to reported estimates of uninsured deposits."


  • My question, why not return the lost money at 90cents on the dollar. If people, supposedly very smart individuals, couldn't spread their money around then let them feel the pain also ! Plus the big wigs need to kick in any profit when they sold stock they held in their banks.
  • edited May 11
    This is almost a soft expansion of the FDIC insurance, although not stated explicitly.

    First, the FDIC covers ALL deposits at 3 failed banks (SVB, Signature, First Republic). Second, to recover its costs, it imposes this 12.5 bps fee for 8 quarters on uninsured deposits over $5 billion. During this time, depositors and banks may realize that this is a reasonable cost to just make the insurance "ahead", instead of "after" in an ad-hoc way. If the fee would be for the long-term, it would be reduced too.

    The FDIC also has some proposals for deposit insurance modifications on the table. The Treasury and the Fed are evaluating those.
  • edited May 12
    The FDIC needs to recover it costs after the recent banking turmoil.
    Under their proposal, banks with more that $50 billion would shoulder 95% of the cost.
    This "special assessment" fee would apply to approximately 113 banks.

    A very small number of individual depositors are at risk due to FDIC insurance limits ($250K of deposits per depositor, per FDIC-insured bank, and per ownership category).
    These depositors should be offered an option to purchase additional FDIC insurance beyond the $250K limit.
    If additional insurance is not purchased, depositors will be subject to complete losses beyond the limits.
    There is no need to saddle everyone with this added expense.
  • This FDIC proposal is under the US government agency's rule-making authority. So, the proposal is published, people & businesses can comment for 60 days, the agency may tinker with the proposal (or not), and the proposal goes into effect as a rule. So, it should be seen as almost done.

    It puts the cost burden on the banks with lot of uninsured deposits, not the customers. But if banks' costs go up for uninsured deposits, they will surely pass on those costs to customers, possibly with slightly lower rates on jumbo deposits, or with added fees, or advance notice requirements for withdrawals.

    I can see giant banks like JPM, C, BAC, WFC complaining (because that isn't where the problem has been), but they may just go along.
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