FDIC: Deposit insurance fund on track for recovery

The Deposit Insurance Fund could be replenished as early as 2024 under a restoration plan adopted by the FDIC last year, although a special assessment is required to recover losses resulting from the recent bank closures, according to an agency report released today. The FDIC last year raised the deposit insurance assessment rate two basis points as part of a plan to restore the DIF to its statutory minimum of 1.35% of total insured deposits by 2028. The DIF was at 1.27% in the fourth quarter of 2022. It could reach the statutory minimum as early as next year under favorable conditions—such as stable interest rates—but even if those conditions fail to materialize, the fund is on track to reach the minimum by the 2028 deadline.

During an FDIC board meeting on the report, Chairman Martin Gruenberg said the recent failures of SVB and Signature Bank cost the DIF a combined $22.5 billion, with approximately $19.2 billion of that figure attributable to covering uninsured deposits through a systemic risk declaration. The bank closures do not change the FDIC’s projection that the fund will be restored to its statutory minimum by 2028, but only because regulators are required by law to make up the $19.2 billion in uninsured deposit losses through a special assessment, he said.

FDIC will propose a special assessment in May. That assessment could be tailored to apply to institutions the agency believes benefited the most from the systemic risk determination.