UPDATED: Following canceled meeting, FDIC Board votes by notation to approve special assessment, as sexual harassment charges swirl around agency

An open meeting was abruptly canceled Thursday of the board of the federal bank deposit insurance agency amidst press reports of sexual harassment issues at the agency, according to new reports.

Instead, the Federal Deposit Insurance Corp. (FDIC) board members voted by notation to approve a special assessment on 114 banks having large amounts of uninsured deposits. According to the FDIC, no banking organizations with total assets under $5 billion will pay the special assessment, based on data for the Dec. 31, 2022, reporting period.

The vote tally was not reported by the agency.

According to a release issued by the FDIC late Thursday, the special assessment is aimed at recovering the loss to the Deposit Insurance Fund (DIF) associated with protecting uninsured depositors following the closures last spring of Silicon Valley Bank of Santa Clara, Calif., and Signature Bank of New York, N.Y. The agency said it estimates that of the total cost of the failures of the two banks, approximately $16.3 billion was attributable to the protection of uninsured depositors.

The agency said that the special assessment final rule includes clarifications to “promote transparency and a modification to allow for corrective amendments to estimated uninsured deposits associated with the FDIC’s review of an institution’s reporting methodology.”

The rule specifies that the FDIC will collect the special assessment at an annual rate of 13.4 basis points beginning with the first quarterly assessment period of 2024 (i.e., Jan. 1 through March 31, 2024) with an invoice payment date of June 28, 2024, and will continue to collect special assessments for an anticipated total of eight quarterly assessment periods. “The base for the special assessment is equal to an insured depository institution’s (IDI’s) estimated uninsured deposits for the Dec. 31, 2022 reporting period, adjusted to exclude the first $5 billion in estimated uninsured deposits from the IDI, or at the banking organization level for IDIs that are part of a holding company with one or more subsidiary IDIs.”

Thursday’s open meeting of the FDIC Board was canceled in the wake of a growing controversy over past sexual harassment claims at the agency.

A report in the Wall Street Journal Nov. 13 alleged workplace misconduct at the FDIC. Since then, FDIC Chairman Martin Gruenberg said he had hired an outside law firm to investigate the charges raised in the Journal’s reporting. The two Republican members of the board, Vice Chairman Travis Hill and Director Jonathan McKernan, issued at least two statements jointly about the stories, particularly as Gruenberg faced previously scheduled oversight hearings before both House and Senate committees.

In their joint statement Wednesday, the pair said the alleged misconduct “has no place at this agency or anywhere in the workforce and should not be tolerated.”

McKernan, later that day, issued a statement on his own urging the board to release victims from their confidentiality agreements; “figure out” why no perpetrator (allegedly) was fired (including one who allegedly texted nude photos to co–workers); expand the investigation to cover workplace culture; and “ensure the investigation is truly independent by forming a board committee to direct the outside law firm’s review.”

Thursday, Hill and McKernan issued another joint statement. They said an “essential step” would be a comprehensive review of the reported allegations “that is truly and fully independent.” They called for two steps to be taken:

  • Ensure that a review look at all conduct described in the recent news reports, in all parts of the organization, including that of Gruenberg and FDIC General Counsel Harrel M. Pettway, “and they need to fully recuse from the process.”
  • The FDIC board, not agency management, should determine the scope of the investigation, the appropriate structure for day-to-day direction of the review, and who conducts the inquiry.

FDIC Board of Directors Issues a Final Rule on Special Assessment Pursuant to Systemic Risk Determination

Joint Statement by Vice Chairman Travis Hill and Director Jonathan McKernan on Independent Review of FDIC Workplace Culture

Statement by Jonathan McKernan, Director, FDIC Board of Directors, on the FDIC Workplace Culture

Joint Statement by Vice Chairman Travis Hill and Director Jonathan McKernan on FDIC Workplace Culture