Big banks may cover 95% of the cost to refill the $16 billion hole blown in the FDIC's deposit insurance fund by bank failures

• The FDIC proposed a fee on banks to refill the $16 billion hole from covering depositors at SVB and Signature Bank.
• The country's biggest banks would cover 95% of the cost under the regulator's plan.

The FDIC proposed a fee on banks to refill the $16 billion hole created in its insurance fund from covering depositors at failed lenders.

A proposal approved by the FDIC's board of directors and outlined by the agency on Thursday called for a special assessment on 113 banks, with bank behemoths picking up the bulk of the cost.

Lenders with more than $50 billion in total assets would pay more than 95% of the special assessment, the FDIC said, while banks with total assets under $5 billion would escape the fee.

The country's biggest bank, JPMorgan Chase, had assets of $3.7 trillion as of March 31. Bank of America, Citigroup and Wells Fargo are also among the country's largest banks.

The regulator aims to impose a fee at an annual rate of 0.125% to uninsured deposits exceeding $5 billion. Payments over eight quarters would start in the first quarter of 2024. The fee will be based on a bank's amount of uninsured deposits at the end of 2022.

"The proposal applies the special assessment to the types of banking organizations that benefitted most from the protection of uninsured depositors, while ensuring equitable, transparent, and consistent treatment based on amounts of uninsured deposits," FDIC Chairman Martin Gruenberg said in a statement.

The FDIC's insurance fund was depleted of $15.8 billion to cover depositors at Silicon Valley Bank and Signature Bank when those banks collapsed and were seized in March.

The FDIC typically insures bank deposits of up to $250,000, but the agency covered all deposits at SVB and Signature Bank to prevent a larger run on banks.

An industry group representing community banks gave its stamp of approval on the FDIC's fee proposal.

"Community banks should not have to bear any financial responsibility for losses to the Deposit Insurance Fund caused by the miscalculations and speculative practices of large financial institutions," Rebeca Romero Rainey, president and CEO of Independent Community Bankers of America, said in a statement.

"Large banks should pay for the special assessment because they are the chief beneficiaries of these two receiverships," she said.

The FDIC said its proposal promotes liquidity maintenance to give institutions the means to meet the credit needs of the US economy.

The FDIC estimated a $13 billion hit to the insurance fund stemming from the failure of First Republic Bank in May. Most of that lender's assets were sold to JPMorgan.