(Reuters) – Despite the second- and third-largest bank failures in U.S. history last month, the U.S. Federal Deposit Insurance Corporation remains on track to refill its deposit insurance fund ahead of a 2028 legal deadline, the head of the agency said Tuesday.
At a public meeting of the Federal Deposit Insurance Corporation, Chairman Martin Gruenberg said a plan adopted three years ago to bring the FDIC insurance fund back to a legal minimum need not change despite March’s collapse of Silicon Valley Bank and Signature Bank, which cost the FDIC an estimated $22.5 billion.
The failures “are not expected to have a material effect on the projected timeline,” Gruenberg said in prepared remarks, citing staff projections.
By law, the FDIC must keep at least $1.35 in the fund for every $100 of insured deposits, making in a crucial tool in preserving public confidence in the financial system.
Banks pay quarterly, risk-weighted insurance premiums into the fund. However, after it fell below this ratio due to a rise in insured deposits during the coronavirus pandemic response in 2020, the FDIC adopted a plan to refill the fund by 2028.
The March bank failures resulted in more than $3 billion in losses to cover insured funds, with the remaining $19.2 billion occurring because the FDIC also agreed to cover uninsured deposits at both banks.
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According to Gruenberg, the timeline will not be changed because the larger uninsured losses are due to be replaced through a “special assessment,” which the FDIC says it will propose next month.
(Reporting by Douglas Gillison; Editing by Chizu Nomiyama)