Update of FDIC deposit insurance fund restoration plan slated Tuesday

A semiannual update of the Deposit Insurance Fund (DIF) restoration plan is the only item slated for discussion at the April 18 open meeting of the Federal Deposit Insurance Corp. (FDIC) Board.

That discussion could yield general comments about how the DIF is faring after the recent failures of Silicon Valley Bank (SVB) of Santa Clara, Calif., and Signature Bank of New York, N.Y. However, the agency has a stated target of May 1 for reporting detailed findings of its review of those failures. It has also said it expects to issue a proposed rule in May for a special assessment on insured banks to cover the associated costs.

The DIF restoration plan was set and later revised last year to restore the fund’s reserve ratio, over time, to its statutory minimum of 1.35%. During a rapid period of deposit growth amid the coronavirus pandemic, the fund saw its reserve ratio drop to 1.23%. The related restoration plan seeks to ensure the ratio returns to 1.35% by Sept. 30, 2028. An increase in assessments related to that plan began this January.

Meanwhile, FDIC Board Chairman Martin Gruenberg, testifying before Congress in March, noted that under the Federal Deposit Insurance (FDI) Act, the loss to the DIF arising from the use of a systemic risk exception – which was applied to both SVB and Signature Bank – must be recovered from one or more special assessments on insured depository institutions, depository institution holding companies, or both, as the FDIC determines to be appropriate.

At the time, he estimated the cost of resolving SVB at $20 billion and the cost of resolving Signature Bank at $2.5 billion. Of those amounts, about 88%, or $18 billion, was considered attributable to the cost of covering uninsured deposits at SVB; while about two-thirds, or $1.6 billion, was said to be attributable to the cost of covering uninsured deposits at Signature Bank. He emphasized that these estimates were subject to “significant uncertainty and are likely to change, depending on the ultimate value.”

Tuesday’s FDIC Board meeting is set to begin at 10 a.m. Eastern, observable solely via webcast, the agency said.

Agenda for April 18 FDIC Board meeting