The Federal Deposit Insurance Corp. is coming under pressure from lawmakers to exempt community banks from the special fee it’s preparing to charge US lenders to account for its rescue of uninsured depositors at two failed lenders.
(Bloomberg) — The Federal Deposit Insurance Corp. is coming under pressure from lawmakers to exempt community banks from the special fee it’s preparing to charge US lenders to account for its rescue of uninsured depositors at two failed lenders.
In hearings at Congress Tuesday and Wednesday, FDIC Chair Martin Gruenberg repeatedly faced questions on the coming assessment. The deposit insurance fund will suffer an estimated $20 billion hit linked to the demise of Silicon Valley Bank, and a $2.5 billion blow from Signature Bank, according to the agency.
Special assessments must be charged to banks by law, Gruenberg noted. But he highlighted at House Financial Services and Senate Banking Committee hearings that “we have discretion to tailor” that assessment to account for which institutions benefited from the actions taken to secure the deposits at the collapsed banks.
“We’re going to be keenly sensitive to the impact on community banks,” Gruenberg told Representative Roger Williams, who had expressed concerns that small banks in his state would be on the hook for bailing out bank deposits in California and New York.
“Take a look at it, because we all know that what they’ll do is pass the cost on to someone like me,” the Texas Republican said.
Another House Republican, Frank Lucas of Oklahoma, said regional bank leaders are complaining that they are potentially going to have to pay “for the mistakes of the most sophisticated institutions, the biggest institutions” and urged Gruenberg to ensure smaller banks do not disproportionately shoulder the burden.
The concern over who will have to pay the bill is a bipartisan one, with some Democratic senators like Elizabeth Warren and Senate Banking Chair Sherrod Brown also wanting bigger banks to have to foot the bulk of the bill.
Gruenberg also reiterated the FDIC intends to issue a plan in May on how it plans to pay for the rescues.
–With assistance from Mackenzie Hawkins.
(Updates with Gruenberg comment on FDIC plans in final paragraph.)
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