Following the liquidation of Silicon Valley Bank (SVB) and Signature Bank, the Federal Deposit Insurance Corporation (FDIC, the agency that guarantees savers’ deposits in case of bank failure) guaranteed that depositors would recover all their money, insured or not, and that the cost of that bailout was not going to be passed on to taxpayers. Two months later and the wounds are still open, the FDIC has proposed a rule so that the big banks can take care of what’s ‘broken’. In the United States, accounts are insured up to $250,000 but not more.
body has proposed this Thursday “special plan” to recover the costs arising out of the insolvency of the above banks, an amount of 15.8 billion dollars, According to their calculations, which correspond to open deposits. In all, there will be 113 US banks with around $50,000 million in assets that will always come to the rescue should larger institutions collapse.
The first names that come to mind are those of the big Wall Street banks whose assets exceed that figure, such as JPMorgan, Bank of America (BoFA) or Goldman Sachs, and so on until the list is longer than one. Together they don’t get along. Hundred. all those institutions will cover 95% of the cost, FDIC specified.
The agency justifies its decision, “Large banks with large amounts of uninsured deposits have benefited most from the resolution of systemic risk.” Systemic banks are those that, in the event of bankruptcy, would pose a risk to the financial system as a whole and even to the economy as a whole.
In any case, the FDIC plans to collect that money for two years (eight quarters) starting in 2024, when the first quarter ends. Big banks will have to pay under this proposal 0.125% or 12.5 basis points The sum of all its uninsured deposits at the end of December 2022, excluding the first $5,000 million. Since this is eight periods, it means that they will pay 1% of your open funds at the end of the full calendar.
As for estimates of what the special plan would be, the agency states that, if it is carried out in a single quarter (instead of eight), it would have a negative impact on profits of 17.5% of half of the big banks. On the other hand, it has also been specified that the proposal can be modified In the event that entities record losses, enter into merger or acquisition procedures and other special circumstances.
The regulatory proposal now enters a consultation phase during the next 60 days after it is published. There may be some modifications to the FDIC’s plan and then there will be a vote on its approval. In any case, what is clear is that the US authorities want them to be Big banks paying for recent bank failures.
The FDIC’s bailout plan, which aims to prevent the agency from writing off these losses of public money, comes when The wounds of banking stress are still open. Since SVB and Signature were defunct, the executives have also decided to close First Republic and sell its ‘remnants’ to JP Morgan. It was the second largest bank failure in United States history.
Following these collapses, regional banking remains at the center of tensions. packwest, western alliance hey first horizon The stock market has faced a lot of volatility since the beginning of March. On this same Thursday, the first of them reported a 9.5% decrease in its deposits over the past week. The entity has said that it is exploring strategic options to find a solution to its situation.
the market is Focus on the balance sheets of banks And it’s trying to predict what will happen next, dabbled in looking for vulnerabilities. For this reason, any sign of fragility could indicate strong pressure on the stock market and deposit withdrawals that put these banks in serious trouble. A context that does not allow financial tensions to be resolved.
