US FDIC presses banks to fix 'inaccurate' statements as new fee looms

By Pete Schroeder and Niket Nishant

(Reuters) -The U.S. Federal Deposit Insurance Corporation (FDIC) on Monday told banks to fix financial statements that "incorrectly" reduced uninsured deposits, restatements that preceded a proposed special fee tied to the size of those deposits.

The warning and revisions came as banks have complained about a fee the FDIC plans to impose mainly on large firms to recover its losses from the failures of Silicon Valley Bank and others. The banks could owe billions of dollars.

That special fee, which the FDIC proposed in May, would be assessed based on their uninsured deposits at the end of 2022.

The regulator said some banks were "not reporting estimated uninsured deposits in accordance with the instructions." It did not name any banks.

The FDIC was referring to downward revisions by banks since the end of 2022 to their amounts of depositors' uninsured money.

A July 6 report by S&P Global (NYSE:SPGI) noted 55 banks restated their fourth-quarter uninsured deposits in FDIC reports, more than twice the norm.

Specifically, the FDIC reminded banks they must report uninsured deposits backed by pledged assets as well as uninsured deposits held at their own subsidiaries.

"If your institution incorrectly reduced the amount of reported uninsured deposits, for example, to reflect collateralization of deposits by pledged assets or by excluding intercompany deposit balances of subsidiaries, those reports are inaccurate," the regulator said

In a comment letter on July 17, Zions Bancorporation (NASDAQ:ZION) Chief Financial Officer Paul Burdiss critiqued the FDIC's approach.

Bank of America (NYSE:BAC) revised its uninsured deposits reported to the FDIC downward in May by 13.8% to $783.92 billion to remove intra-bank accounts as uninsured deposits, the S&P report said.

“Earlier this year, we identified certain internal or intra-bank accounts that shouldn’t have been reported,” Bank of America spokesman Bill Halldin said. The bank does not plan to change the latest number it has reported to the FDIC.

The S&P Global report also noted Huntington National Bank reduced its uninsured deposits by 39.9% in its restatement, the largest percentage decline analysts found. Bank spokespeople did not respond to requests for comment.

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In comment letters to the FDIC this month, larger firms complained the new fee would fall heavily on them, arguing they did not benefit from the government's efforts to backstop depositors at smaller lenders.

"There are flaws in the FDIC’s rationale for the special assessment methodology," the Bank Policy Institute, which represents larger banks, said in a July 21 letter. It said the FDIC did not present analysis that supported its assessment methodology.