Banks Argue Over Who Really Benefited From the Protection of Uninsured Depositors
And other notable themes from comments on the FDIC's special assessment proposal
The public comment period for the FDIC’s proposed special assessment to cover the cost of protecting uninsured depositors in connection with the failures of Silicon Valley Bank and Signature Bank closed yesterday. This post looks at the key points of contention from commenters based on those letters added to the comment file as of early Saturday. A few more comments may trickle in over the next few days, but the 204 comments already posted should be fairly representative.
Background
When the systemic risk exception is invoked to permit the FDIC to fully protect all depositors in a resolution, as opposed to only those depositors who are fully insured, the Federal Deposit Insurance Act requires that the FDIC recover the loss to the Deposit Insurance Fund through a special assessment. The FDI Act further requires that the FDIC, in formulating the special assessment, “consider: the types of entities that benefit from any action taken or assistance provided under this subparagraph; economic conditions, the effects on the industry, and such other factors as the Corporation deems appropriate and relevant to the action taken or the assistance provided.”
The FDIC in May 2023 proposed to apply a special assessment rate of approximately 12.5 basis points to each insured depository institution’s estimated uninsured deposits as of December 31, 2022, provided, however, that the first $5 billion of uninsured deposits would be excluded from the assessment base. The assessment would be collected over eight quarters at a quarterly rate of 3.13 basis points.
As of May 2023 the FDIC estimated that, calibrated in this fashion, the special assessment would apply to 113 banking organizations, all of them with total assets over $5 billion.1
The FDIC justified its proposed calibration of the special assessment by saying summarily (six different times across the sixteen page Federal Register release) that “large banks and regional banks, and particularly those with large amounts of uninsured deposits, were the banks most exposed to and likely would have been the most affected by uninsured deposit runs. … Generally speaking, larger banks benefited the most from the stability provided to the banking industry under the systemic risk determination.”
The two Republicans on the FDIC’s Board of Directors voted against the proposal.
Vice Chairman Travis Hill argued that “the banks who experienced the largest outflows of deposits following the failure of Silicon Valley Bank (SVB) are generally the banks who benefitted most from the systemic risk exception, and the banks who experienced inflows of deposits are generally the banks who benefited least.” But, Vice Chairman Hill noted, the special assessment as proposed by the FDIC would require five banks to pay nearly half of the entire special assessment, and these banks “all experienced deposit inflows immediately after the SVB failure.”
Director Jonathan McKernan argued that the special assessment “could be better calibrated” and said he would have considered “distinguishing between absolute and relative measures of uninsured deposits” and “distinguishing between banks’ capital levels, after adjusting for unrealized losses.”2
Notable Comments
Who Was the Systemic Risk Exception For?
Mid-Size Banks Say Larger Banks Benefited, and Should Pay for the Benefit
Several regionals in the below $100 billion asset range, as well as a trade group for banks of this size, filed comment letters embracing the FDIC’s conclusion that larger banks benefited from the systemic risk exception. These commenters argue that, if anything, the brunt of the special assessment should be borne even more disproportionately by the largest banks (for some definition of largest).
A few comment letters staking out this position make the case more provocatively than others, but a theme running through nearly all of them is that deposit outflows from mid-size regionals, and deposit inflows at GSIBs and other very large banks, indicate that the latter were the true beneficiaries of the systemic risk exception.
Mid-Size Bank Coalition of America (MBCA)
The MBCA fully agrees that small banks should not be burdened by the Special Assessment and applauds the FDIC’s proposal to exclude the first $5 billion of uninsured deposits from the Special Assessment Base (the deductible). We think, however, that the deductible should be raised to provide greater relief to more banks while fairly allotting more of the Special Assessment to the large banks which benefited the most from the stability provided by the systemic risk determination.
Not only did the largest banks benefit the most from the latest systemic risk determination, they have benefited, and continue to benefit, from the existence of the systemic risk mechanism. This is because many depositors view such institutions as “too big to fail” and flock to them in times of financial instability. This is evident from the significant amount of deposit outflows that mid-size and smaller banks have experienced in the wake of the Regional Bank Failures, while large banks saw far fewer outflows; some large banks even saw significant inflows of deposits. For instance, from Q4 2022 to Q1 2023, mid-size banks experienced approximately eight times greater deposit outflows than what the money center banks experienced.
I disagree with the conclusion as to which banks benefited from the handling of these two closures. As they teach in detective school, Follow the Money. Money flowed out of most community and regional banks after the seizure of Silicon Valley Bank and into the banks designated as systemically important by the banking regulators and where the FDIC implicitly guarantees their deposits.
When the formal declaration by Federal Regulatory Agencies, Treasury Secretary and President was made that systemic risks were present, the banks considered too-big-to-fail were the ones which benefitted by deposit inflows, and a reduced need to compete on price. In addition, these banks have been receiving the benefit of perceived unlimited deposit insurance for many years, at no incremental cost in the FDIC assessment formula.
Nevertheless, following the Bank Failures there were immediate and pronounced shifts in uninsured deposits from regional and community banks into banks thought by the public and large depositors to in fact be systemically important and "too big to fail," and whose total deposits would, implicitly, be fully insured. Indeed, the most immediate beneficiaries of the systemic risk declaration were the handful of Category I-III banks whose sheer size suggests to large depositors that their uninsured deposits will, in a time of crisis, be fully covered by the FDIC. The actions taken to protect all depositors at the failed banks served to confirm this assumption
While the systemic risk determination helped stabilize the industry and may have prevented broader deposit flight, the majority of deposit outflows driven by the recent bank failures took place after the determination, with the immediate and well-documented movement of uninsured deposits from regional and local banks to systemically important institutions where depositors believed their funds, by virtue of the massive size of such institutions, were in effect fully insured. The timing and scope of this deposit flow suggests that the largest banks experienced considerably more benefit from the systemic risk determination than their smaller counterparts, and increasing the threshold exclusion to $10 billion or above would properly recognize and account for this disparity.
See also the letter from Better Markets, discussed below.
U.S. GSIBs Draw Different Conclusions
The Financial Services Forum, a trade group that represents the eight U.S. GSIBs, draws a different conclusion from the inflow and outflow patterns of March 2023.
The U.S. GSIBs were not beneficiaries of the FDIC’s SRE determination. Rather, the U.S. GSIBs, which are already subject to the highest level of prudential requirements—such as the inclusion of losses on available-for-sale securities in the calculation of their capital ratios, and robust loss-absorbing debt and resolvability requirements—generally experienced deposit inflows and served as sources of strength and safety to the banking sector following the failures of SVB and Signature. […]
The U.S. GSIBs played this stabilizing role during the most recent crisis because of their strength and resiliency. As noted above, U.S. GSIBs have stable funding sources and high-quality assets and engage in prudent and effective asset-liability management practices. In addition, they are subject to the highest level of prudential requirements, including, for example, factoring losses on available-for-sale securities into the calculation of their capital ratios. Further, their compliance with the total loss-absorbing capacity (“TLAC”) rule already requires them to incur the cost of holding a minimum amount of long-term debt (“LTD”) above and beyond minimum regulatory capital requirements (which include a GSIB surcharge).
The Forum makes some other more targeted recommendations, discussed further below, but their bottom line conclusion in this section of the letter is that, even if the FDIC does not change anything about how the special assessment is going to work, the FDIC could at least be nicer about it.
Despite U.S. GSIBs not benefitting from the SRE determination and serving as sources of strength and resilience to the banking sector, our member institutions would pay approximately 60% of the total special assessment. At a minimum, we request that the final rule acknowledge the differentiated role played by our member institutions and not mischaracterize the role of our member firms.
Custody Banks Make Their Own Case
The two U.S. GSIB custody banks joined with Northern Trust to write a joint comment letter giving the perspective of custody banks.
The custody banks call for the FDIC, rather than using uninsured deposits as the assessment base, to instead use each bank’s existing assessment base and the FDIC’s existing pricing methodology. This would “properly incentivize stable funding sources, liquid asset composition appropriately calibrated to a bank’s liability structure, and prudent asset-liability management.”
Failing that, the custody banks ask the FDIC to make modifications that “properly account[] for the unique business model of the Custody Banks.” In particular, the custody banks say the FDIC should either:
allow custody banks to exclude from their assessment base “an amount equal to their domestic deposit balances placed with the Federal Reserve”; or
permit custody banks to deduct from their assessment base 75% of their domestic operational deposits.
Trade Groups, Perhaps Caught in the Middle, Offer Process-Based Objections
In its own letter, the American Bankers Association notes that “any changes to the Proposal regarding the assessment base will necessarily redistribute the obligation among members subject to the assessment.” Thus ABA is “neutral on the proposed assessment base, other than to encourage the FDIC to take into consideration the comments of each and every institution that chooses to share perspectives on the Proposal.”
The Bank Policy Institute, whose membership includes U.S. GSIBs, foreign banks, large regionals, and slightly smaller regionals, also generally in its letter tries to avoid explicitly taking sides with respect to any differences of opinion between its members. BPI instead focuses on how the FDIC’s analysis is lacking:
The proposing release repeatedly asserts that larger banks – particularly those with high amounts of uninsured deposits – benefited the most from the systemic risk determinations made in March 2023, without providing support for that assertion. […]
In asserting that “larger banks benefited the most,” the FDIC implies that all larger banks and the failed banks were similarly situated. However, larger banks do not all have the same key risk characteristics or business model as the failed banks (e.g., larger banks typically have a different or more diversified client base and different uninsured deposit models (such as higher rate of operational deposits) as compared to the banks that failed). Moreover, prior to the announcement of the determination to protect uninsured deposits, larger banks experienced a range of depositor behaviors, indicating that the mere size of a bank or the sheer dollar amount of its uninsured deposits cannot be correlated with whether, or to what extent, the systemic risk determination benefited the bank. […]
The failure to provide sufficient evidence to support the assertion that larger banks benefited the most is particularly problematic because it forms the primary basis for the proposed allocation of the special assessment, including the proposed adjustment to the assessment base to exclude the first $5.0 billion from estimated uninsured deposits. Even if evidence were provided to support this assertion, the FDI Act requires the FDIC to consider all entities that benefit from any actions taken under the systemic risk determination, not only those entities that benefit the most. Yet, the proposal does not explain why the FDIC disregards the benefits to the broader banking system and focuses exclusively on banks that, in the FDIC’s view, benefited the “the most.” Thus, it is unclear how the proposed approach comports with either the statutory factors or the actual distribution of benefits across the banking industry.
BPI recommends that the FDIC, in addition to conducting a better and more complete analysis as to this current special assessment, provide more general forward-looking guidance on the types of benefits, both direct and indirect, it will consider and the type of information and data that it will consult in determining which institutions benefit from any future use of the systemic risk exception.
Other commenters calling for a better process, additional transparency, and more well-defined parameters for determining who benefits from invocations of the systemic risk exception include the American Bankers Association, Financial Services Forum, Wisconsin Bankers Association, and Michigan Bankers Association.
Should all uninsured deposits be assessed equally?
Looking past the headline dispute over who benefited and who should pay, commenters were broadly in agreement on other topics. For example, banks, trade groups, state and local government officials, and in some cases even banking regulators all made the case that not all uninsured deposits are equally at risk of running, and that certain types of deposits should be excluded from the assessment base, or at the least treated differently.
Preferred and Other Collateralized Deposits
The most common request for an exclusion from the assessment base relates to collateralized deposits. These are frequently, though not always, deposits made by governments and other federal, state or municipal units which, under applicable law, must be secured by collateral or assets of the bank. 3
A joint comment letter from Fifth Third, Huntington, and Key Corp, each a large Ohio regional bank, is representative of the argument.
In our experience, deposits of states and municipalities that are fully collateralized are not withdrawn in times of economic stress. Because the deposits are fully secured even in the event of a bank’s insolvency, they are extremely stable. Moreover, the amounts of these deposits are typically well in excess of FDIC insurances limits, so the depositors look to the collateral rather than deposit insurance for assurance of payment. Effectively, then, by bearing the cost of the collateral, banks are already paying insurance premiums for these deposits.
Collateralized governmental deposits are further protected by comprehensive regimes enacted by numerous states, governing the ability of depositories, including banks, to accept public funds from state, county, and municipal authorities. […]
As further protection, secured creditors have the highest priority claims in a receivership, with such claims being paid ahead of claims of unsecured creditors (including uninsured depositors) up to the value of the pledged collateral. Secured creditors look to the specific pledged collateral to protect their interests in the event of a receivership, because such assets are unavailable to the FDIC to pay the claims of other claimants. As a result, public deposits are qualitatively different from uninsured deposits and do not share any of risk characteristics that make them susceptible to a bank run.
Also notable here was a detailed comment letter from the Puerto Rico Bankers Association noting that Puerto Rican banks have comparatively high concentrations of preferred deposits as a percentage of total uninsured deposits.
The Association’s member firms include the leading banks in Puerto Rico, which are relied upon by public sector entities in Puerto Rico to provide a wide array of banking services, including depository services. These banks have a much higher ratio of preferred deposits to uninsured deposits as compared with other IDIs and, as a result, would be disproportionately penalized by the inclusion of preferred deposits in the special assessment base. As of [December 31, 2022], preferred deposits account for approximately 58% of the total uninsured deposits of Popular, Inc. (“Popular”) and approximately 33% of total uninsured deposits of First Bancorp (“FirstBank”). Popular and FirstBank are the two largest financial institutions on Puerto Rico and, collectively, have approximately 85% of the deposits maintained by Puerto Rico public sector entities.
The Puerto Rican banks got a helping hand here from their regulator, the Puerto Rico Office of the Commissioner of Financial Institutions, which a day later wrote in to say that:
OCFI is concerned by, and thus provides comments to address, the FDIC's proposed inclusion of preferred deposits in its calculation of an !Di's total uninsured deposits subject to the special assessment, as this inclusion seems to directly contradict the FDIC's proposed methodology and the purpose of the Proposed Rules. Specifically, OCFI believes that including preferred deposits i.e., uninsured deposits of a public sector entity which are secured or collateralized as required under State law- in the base for the special assessment is contrary to the goal of charging these assessments to those who benefitted most from the systemic risk determination.
Other commenters asking the FDIC to exclude (or at least treat differently) preferred or collateralized deposits: FirstBank (Colorado), FirstBank Puerto Rico,4 Home BancShares, BOK Financial, MBCA, Citizens Business Bank, Independent Bankers Association of Texas, Alabama Bankers Association, Wisconsin Bankers Association, Government Finance Officers Association; the National Association of State Auditors, Comptrollers and Treasurers; and the National Association of State Treasurers, Bank OZK, Hancock Whitney, Community Development Bankers Association, Bank Policy Institute, American Bankers Association.
Affiliate or Intercompany Deposits
Commenters also argue that deposits from a bank’s affiliates are qualitatively different than other uninsured deposits. The Ohio regionals again:
The special assessments are targeted at uninsured deposits because, according to the Notice, they would have been withdrawn if not for the systemic risk determination. We respectfully submit that this rationale does not apply to deposits held by affiliates. […]
[U]nlike uninsured deposits held by unaffiliated third parties, uninsured deposits of affiliates that were held at our banks were not at risk of being withdrawn following the collapse of Silicon Valley Bank and Signature Bank. This would have been the case with or without the systemic risk determination. Because retention of these deposits in no way benefitted from the systemic risk exception, they should not be included as part of the special assessment base.
Other commenters making this request to exclude (or at least treat differently) affiliate or intercompany deposits: FirstBank, New Jersey Bankers Association, BOK Financial, MBCA, Bank OZK, Hancock Whitney, Bank Policy Institute, American Bankers Association.
Operational Deposits
A few of the larger trade groups also devoted portions of their letters to explaining why operational deposits should receive differential treatment under any special assessment on uninsured deposits, consistent with how such deposits are currently treated differently from other uninsured deposits in the context of, for example, the Liquidity Coverage Ratio and Net Stable Funding Ratio.
BPI:
Operational deposits must meet strict requirements under the LCR and NSFR rules. The term “operational deposit” is defined as short-term unsecured wholesale funding or lending that is a deposit, or a collateralized deposit, that is necessary for the provision of operational services as an independent third-party intermediary, agent, or administrator to the wholesale customer or counterparty providing the deposit. To qualify as an operational deposit, the deposit liability must be related to one of twelve distinct operational services, performed as part of cash management, clearing, or custody services, and meet stringent qualification requirements. As a supervisory matter, banks are required to employ highly granular processes to accurately identify those deposits that are operational and that a client is therefore reasonably expected to hold in support of its day-to-day operations, even in periods of stress. These processes are subject to review and validation, including through the use of simulations to assess liquidity usage over time.
Therefore, treating operational deposits like other uninsured deposits, without differentiation, is inconsistent, if not contradictory, with how federal banking supervisors treat operational deposits in the LCR and NSFR rules. The FDIC has provided no basis for disregarding its own prior analysis.
The Financial Services Forum and American Bankers Association also in their letters call for differentiated treatment of operational deposits.
Changes to the Measurement Date
Several banks devoted a section of their letters to arguing against the December 31, 2022 date for measuring the uninsured deposits of a bank, and thus its assessment base for purposes of the special assessment. These letters say that a later date would be more appropriate. Here is FirstBank, for example:
The reporting date of December 31, 2022, does not consider the impact of the volatility experienced by many banks. Using March 31, 2023, or June 30, 2023, as the reporting date would be better options. The gain or loss of deposits at each bank and therefore the impact of the systemic risk declaration could be more accurately measured by those later time periods. Our mid-size bank lost 16% of uninsured deposit balances between December 31, 2022, and March 31, 2023.
Zions Bank made a similar point and, going further, in its letter also alleges that some large banks have recently amended their year-end 2022 call reports to reduce uninsured deposits as of that date.
The use of December 31, 2022, as the date for establishing the assessment base is also highly problematic. Using December 31, 2022, as the assessment date unfairly assesses banks, particularly regional banks that experienced higher levels of deposit outflows subsequent to the bank failures, for uninsured deposits they may no longer have. […]
Finally, employing uninsured deposits as reported on the Call Report as the basis for the special assessment is problematic in that the measure is, by definition, an estimate. The Call Report instructions explicitly note that "the capabilities of a bank's information systems to provide an estimate of its uninsured deposits will differ from bank to bank at any point in time and, within an individual institution, may improve over time."
It is also our understanding that some large banks have already begun to amend their year-end Call Reports to reduce their reported uninsured deposits. The proposed rule suggests that Call Report amendments which impact reported uninsured deposits made prior to the finalization of the rule would be included in the assessment, while amendments made after the adoption of the final rule would not impact the assessment. Additional guidance and standards are needed to improve the consistency in reporting of these estimates given the proposed use.
Other commenters making a request for a date change: Ohio regionals, MBCA, East West Bank, UMB, Citizens Business Bank, Hancock Whitney.
Support for a date change was not quite unanimous among banks, however. BOK Financial says it is against a change in as-of date for the special assessment.
As of December 31, 2022, all banks provided their estimation of uninsured deposits within their call reports. After March 10, 2023, deposit customers had the opportunity to move uninsured deposits into insured deposit products, such as reciprocal accounts, or into other banks. As a general rule, this occurred at higher levels for banks with perceived weaknesses relating to capital and liquidity. Using a date later than December 31, 2023 [sic] would have the impact of reducing the amount of the special assessment for those banks who most needed to benefit from the systemic risk determination.
Accounting and Capital Issues
The MBCA explains that if the special assessment is finalized as proposed it could require banks to recognize a loss equal to the total amount of the special assessment on the day the rule is finalized.
Under the Proposed Rule, IDIs shall account for the Special Assessment in their financial reporting when the conditions for accrual have been met (i.e., when information indicates that it is probable that a liability has been incurred and the amount of loss is reasonably estimable). The American Bankers Association, and the banking industry writ large, take the view that if the Proposed Rule is adopted as-is, then a loss would be incurred on the date that the Special Assessment is published as a final rule in the Federal Register. Once the loss is incurred on that date, the total amount of the Special Assessment would be reasonably estimable and should be recognized. Additionally, it would be inappropriate to recognize the loss prior to the publication of the final rule. As the FDIC notes, the loss would be treated as a one-time loss. While the one-time loss may have marginal effect on the financial statements of larger banks, it can have an outsized impact on mid-size and regional banks.
BPI also shares a similar concern:
The special assessment may have several unintended regulatory effects that would unduly penalize the assessed banks, including, most significantly, by impacting the earnings and capital of assessed banks. This impact may be greater than the FDIC estimates because there is likely to be a mismatch between (i) the timing of the GAAP recognition of the assessment, which appears to be required to occur in a single quarter when the criteria in FASB ASC Topic 450 are met, and (ii) the deduction of the assessment for tax purposes, which will likely be spread out over the period during which actual payments are made. Because the special assessment may be deductible for Federal income tax purposes only as it is paid, a deferred tax asset will be established in the quarter of GAAP recognition. To the extent not deducted, this deferred tax asset would need to be capitalized using the 250% risk weight prescribed in the capital rule, thereby further increasing the actual cost of the special assessment.
The recommended fix from the MBCA is for the FDIC to structure the special assessment “as a prepaid expense that can be amortized over a multi-year period rather than a one-time loss as of the date when the final rule is published.” BPI makes a similar recommendation, as well as recommendations intended to avoid other unintended knock-on effects.5
Most individual banks opted not to address this in their own letters, but UMB Financial says it believes that the special assessment will result in a 16 basis point hit to its capital, and asks for the FDIC to “consider a phase-in provision for the impact of the assessment.”
The View from Better Markets
Dennis Kelleher, co-founder, President and CEO of Better Markets, also contributed a letter.
Mr. Kelleher believes that using uninsured deposits to determine which banks should be subject to the special assessment and providing for a $5 billion safe harbor is “complex and unfounded.” Instead, Better Markets thinks the FDIC should keep things more simple by collecting the entire special assessment from banks with more than $100 billion in total assets. The FDIC could do this by using a simple total assets measure to determine the banks in scope, and only then look to uninsured deposits as the assessment base.
This will achieve the goal of having institutions contribute to the special assessment in an amount that is proportionate to their overall share of risk stemming from uninsured deposit reliance, and also simplify and streamline the program and calculations.
Yes, Better Markets says, this would result in the “so-called burden” of the special assessment falling only on the largest banks, but this burden “should fall on the largest banks, even the ‘smallest’ large bank” (emphasis in original).
Moreover, Mr. Kelleher argues that giving banks eight quarters to repay the special assessment is a bit generous. Cutting that in half sounds better to him.
Large banks can and should repay the DIF for the special assessment as quickly as possible. A collection period of 4 quarters is both reasonable and appropriate.
Strong Support from Community Banks
Finally, though not given as great prominence in this post, the vast majority of the comments in the comment file are from community bankers urging the FDIC to, as proposed, make sure that banks with under $5 billion in total assets won’t be hit by the special assessment.
Most of these comments follow the rough outlines of a standard form letter provided by the ICBA.
A few community bankers, however, as they are sometimes in the habit of doing, added their own more colorful commentary.
The President & CEO of Wood & Huston Bank: “[The biggest banks] are raiding funds from communities with which they have no direct involvement. Via their electronic means they lead with ‘perceived’ FDIC/too big to fail coverage at pricing they do not offer in their own markets to the detriment of community banks. They have used the FDIC’s actions to attempt to gut rural America of its community banks.”
The President, CEO and Chief Credit Officer of Community State Bank: “We are the financial police department of the country and have to pay for that service, that we provide.”
Preston Kennedy, Vice Chairman of the Bank of Zachary and former Chairman, ICBA: “Community banks are not the problem. Community banks should not be part of the solution.”
The Founder and CEO of Climate First Bank: “The regulators are in my shorts if my parking lot isn't clean. Of course, that's a joke but apparently that is about all they were concerned with regarding SVB.”
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Specifically, the FDIC estimated that the special assessment would apply to “48 banking organizations with total assets over $50 billion and 65 banking organizations with total assets between $5 and $50 billion.”
Along the lines of the suggestion made by Director McKernan, BOK Financial’s comment letter encourages the FDIC to take “interest rate risk and its impact on capital” into account in formulating the special assessment. BOKF argues:
We believe it is very important that the banks who took the incremental risk and earned considerable incremental revenue over the last couple years as a result, and now benefit to a greater degree from the systemic risk determination, bear a greater share of the incremental FDIC special assessment.
To do this, BOKF proposes that the FDIC look at each holding company’s tangible common equity ratio, adjusted to include the effects of unrealized losses on HTM securities. BOKF even helpfully includes a formula for the FDIC to use.
See the FDIC’s overview of deposit insurance for accounts held by government depositors.
Depending on applicable state or federal law, public unit deposits may be secured by collateral or assets of the bank. In the event of the failure of the bank, the FDIC will honor the collateralization agreement if the agreement is valid and enforceable under applicable law. The FDIC does not guarantee, however, that the collateral will be sufficient to cover the amount of the uninsured funds. As such, although it does not increase the insurance coverage of the public unit deposits, collateralization provides an avenue of recovery in the unlikely event of the failure of an insured bank.
This comment letter also calls on the FDIC to exempt MDIs from the special assessment.
For instance, BPI says:
[A]ny impact on the assessed banks’ stress capital buffer (i.e., any potential increase to the stress capital buffer resulting from the impact of the special assessment) should be assessed to avoid unintended consequences.
For purposes of calculating requirements and guidance related to levels of dividends and stock repurchases, the reduction in earnings resulting from the payment of the special assessment should be disregarded, or at least be amortized over the collection period.
Examination findings related to earnings should exclude the special assessment from their evaluation.