Global: US FDIC Urges Banks to Rectify ‘Inaccurate’ Statements Ahead of New Fee Implementation

The U.S. Federal Deposit Insurance Corporation (FDIC) has issued a directive to banks to correct financial statements that contain “inaccuracies” related to uninsured deposits. The FDIC’s warning and call for revisions come as the agency plans to impose a special fee primarily on large banks to recover losses incurred from the failures of institutions like Silicon Valley Bank. This proposed fee could potentially amount to billions of dollars.

The special fee, which was proposed in May, is based on the volume of uninsured deposits held by banks at the end of 2022. The FDIC stated that some banks were not accurately reporting estimated uninsured deposits as per the given instructions. However, the regulator did not mention any specific banks in its warning.

The FDIC referred to instances where certain banks had revised their amounts of depositors’ uninsured money downwards since the end of 2022. A report by S&P Global revealed that 55 banks restated their fourth-quarter uninsured deposits in FDIC reports, which is more than double the usual number.

The FDIC emphasized that banks must report uninsured deposits that are backed by pledged assets and also uninsured deposits held at their own subsidiaries. Any incorrect reductions in the reported uninsured deposits, such as excluding intercompany deposit balances of subsidiaries or reflecting collateralization of deposits by pledged assets, were flagged as inaccurate by the regulator.

Some banks, including Bank of America and Huntington National Bank, have already made downward revisions to their reported uninsured deposits. These revisions were done to rectify errors like reporting certain internal or intra-bank accounts as uninsured deposits. Bank of America clarified that it had identified such inaccuracies and did not plan to make further changes to its latest reported number.

Larger firms have voiced concerns about the new fee, arguing that it disproportionately affects them and that they did not benefit from the government’s efforts to support depositors at smaller lenders. The Bank Policy Institute, which represents larger banks, expressed dissatisfaction with the FDIC’s assessment methodology, stating that it lacked sufficient supporting analysis.

As the situation unfolds, banks will be closely monitoring their uninsured deposit reporting to comply with the FDIC’s instructions and address any inaccuracies before the proposed special fee is implemented.