The recent failures of Silicon Valley Bank and Signature Bank did not significantly impact FDIC reserves, according to a semiannual agency update.
According to the FDIC, the statutory minimum reserve ratio of 1.35 percent could still be reached next year, far ahead of its Sept. 30, 2028, deadline. As bank deposits swelled during the first half of 2020, the Deposit Insurance Fund fell below the statutory minimum. In September 2020, the FDIC established a plan to restore its reserves to at least 1.35 percent by Sept. 30, 2028. Last October, the FDIC’s board of directors increased deposit insurance assessment rates by two basis points.
“Even with increased uncertainty in the banking industry and the recent failure of two large banks, staff project that the losses from the two failures are not expected to have a material effect on the projected timeline for reaching the statutory minimum reserve ratio,” said FDIC Chair Martin Gruenberg.
The banks’ failures resulted in approximately $22.5 billion in losses, $19.2 billion of which was for protecting uninsured depositors after the insurance cap was lifted. Those losses are being repaid by a special assessment on banks. The remaining $3.3 billion is expected to impact the deposit balance but will not have a major impact on the projected timeline to meet the statutory minimum.
The Independent Community Bankers of America has called on the FDIC to exempt community banks from the assessments to cover losses from the failures. “Community banks and their customers shouldn’t have to pay for the miscalculations and speculative practices of large financial institutions like SVB and Signature,” said President and CEO Rebeca Romero Rainey. “If any assessment increase is warranted, it should be imposed on the institutions that pose the most risk to the DIF — not community banks.”