Feds Want Big Banks to Pay $23 Billion SVB Collapse Bill

Regulators want America’s biggest banks to help cover the cost of the recent banking crisis.

The Federal Deposit Insurance Corp. (FDIC) is weighing the idea of shifting a large chunk of the $23 billion cost of two high-profile bank failures to large lenders like J.P. Morgan Chase and Bank of America, Bloomberg News reported Wednesday (March 29).

The FDIC said earlier this month that it will issue a “special assessment” on banks to protect the deposit insurance fund following the failures of Signature Bank and Silicon Valley Bank (SVB).

However, officials want to limit the burden on smaller banks by moving a large portion of the cost to bigger banks, Bloomberg reported, citing sources with knowledge of the matter.

The sources say talks are in the early stages, but requiring bigger banks to carry a larger load seems to be the more attractive path, politically speaking.

In the wake of the two bank collapses, the federal government took the unusual step of backstopping deposits at the lenders, even those whose accounts exceeded the typical $250,000 limit on FDIC insurance.

When lawmakers voiced concerns that those actions could lead to expectations of a new norm for banks, Treasury Secretary Janet Yellen admitted that other banks may not get the same treatment as SVB and Signature Bank.

“Will the deposits in every community bank in Oklahoma, regardless of their size, be fully insured now?” Sen. James Lankford, R-Okla., asked Yellen when she appeared before the Senate Banking Committee earlier this month.

“Will they get the same treatment that SVB just got, or Signature Bank just got?”

Yellen replied by acknowledging that deposits beyond the FDIC insured limit of $250,000 per account would be covered only in the event that, “a failure to protect uninsured depositors would create systemic risk and significant economic and financial consequences.”

And as PYMNTS reported earlier this week, lawmakers now think it’s those bigger banks who should pay their share.

“Community banks should not be liable to pay for the rescue of larger banks that made risky bets,” said Rep. Roger Williams, a Republican from Texas.

“If you’re the little guy, you’re going to be the one to pick up the bill,” said Rep. Frank Lucas (R-Okla.), asking specifically that his state’s small banks be exempted from the assessment.

Meanwhile, the White House has called for tougher regulation for mid-sized banks such as SVB and Signature.

In addition to President Joe Biden’s recent proposal for stricter penalties for failed banks’ executives, possible new regulations could include restoring sections of the Dodd-Frank law that were eliminated under President Donald Trump and either temporarily extending FDIC  insurance to all bank customers or raising the cap above the current maximum of $250,000.