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FDIC regulators seek to levy fees on banks with over $5 billion in assets over SVB depositor bailout

Yahoo Finance fiscal policy reporter Jennifer Schonberger breaks down the FDIC's proposal to recover funds that were used to bailout Signature Bank and Silicon Valley Bank.

Video transcript

[AUDIO LOGO]

- Welcome back, everyone. The FDIC is out with a proposal to replenish funds used to bail out Silicon Valley Bank and Signature Bank in March. Yahoo Finance's Jennifer Schonberger joins us now with the details. Hey, Jennifer.

JENNIFER SCHONBERGER: Good morning, Brad. That's right, the FDIC holding a board meeting right now, where they are proposing recovering funds used to bail out both Signature and Silicon Valley Banks back in March by charging fees to banks with assets of $5 billion or more, essentially sparing community banks here.

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Breaking down the details, the largest banks, those with total assets of over $50 billion would pay more than 95% of the so-called special assessment to recover losses to the deposit insurance fund, according to the FDIC. The FDIC estimates that a total of 113 banks would be subject to this special assessment. No banks with total assets under $5 billion would be subject to this.

To put that in perspective, the overwhelming majority of banks, some 96% of banks, or 4,500 banks, will not pay for this. Community banks lobbied the FDIC very hard to be excluded from having to pay for SVB and Signature's bailouts, arguing that they did not engage in the risky practices that led to those banks' demises. Now, the FDIC is required by law to build the banks that benefited the most from its assistance, in this case, the large banks with the largest amount of uninsured deposits.

Now a little math for you this morning, the way the fee is calculated would take the total uninsured deposits as of December 31, 2022, subtract $5 billion from that, and multiply it by 12 and 1/2 basis points. The FDIC has extended payment terms over eight quarters to try to mitigate the effects of capital loss on banks. Total losses estimated at this point at about $16 billion, though that could change, depending on the number of assets still in receivership that need to be sold as the FDIC goes through that process.

Now, the FDIC board is going to vote on this proposal this morning. That would start the clock for a 60-day comment period, aiming for a final rule later this year and for this to go into effect in the first quarter of next year, with banks liable for their first payment by the end of the second quarter next year. Guys?

- Our Jennifer Schonberger, thanks so much for keeping us up to date on what's going on with the FDIC here. Thank you.