Bankers reviewing the impact of special assessment

Chloe Baul//June 7, 2023

File photo.

Bankers reviewing the impact of special assessment

Chloe Baul//June 7, 2023

The FDIC recently proposed a special assessment to make up for the losses caused by the failures of SVB and Signature Bank. The proposal would impose a special assessment on the excess of an independent bank’s estimated uninsured deposits more than $5 billion as of last 12/31/22. There is a 60-day comment period.

“While the Idaho Bankers Association (IBA) is still reviewing the details of the proposed FDIC special assessment, we appreciate the FDIC’s decision to exclude most community banks,” President and CEO of the Idaho Bankers Association, Trent Wright, said. “The association still has concerns regarding the timing of such an expense, and the ongoing increase in quarterly Deposit Insurance Fund assessments on Idaho Banks.”

IBA continues to engage with Idaho’s congressional delegation on reforms to enhance confidence in the banking system. “Specifically, we are focused on including increased scrutiny of predatory short selling of bank stocks and potential deposit insurance reforms on banks of all sizes,” Wright added.

Idahoan’s deposits are protected by FDIC insurance, and according to IBA, in the 88-year history of the FDIC, no one has ever lost a penny of an insured deposit. The FDIC insures up to $250,000 in eight separate account categories per depositor per bank.

“The FDIC is completely funded by the banking industry, including Idaho Community Banks. Every Idaho bank pays risk-based premiums every quarter to support the fund,” Wright said. “The Idaho Bankers Association knows that a strong FDIC and deposit insurance fund are essential to the banking system and the Idaho economy. Idaho Banks stand ready to do whatever it takes to ensure the health of the fund and strength of the FDIC.”

In the face of economic challenges, the banking industry in the United States has shown strength and resilience, as highlighted by the latest data from the American Bankers Association. The industry’s capital levels, which serve as a crucial indicator of its overall health, have remained robust.

Industry Capital Ratios Remain Strong

The Tier 1 risk-based capital ratio and Total risk-based capital ratio, both important measures of a bank’s financial stability, have exceeded pre-pandemic levels by more than 40 basis points. Specifically, the Tier 1 risk-based capital ratio stands at 13.75%, while the Total risk-based capital ratio is at 15.07%. These figures demonstrate that banks have fortified their capital positions to weather the storm caused by the pandemic.

The industry’s leverage ratio has witnessed a consistent upward trend, increasing for the fourth consecutive quarter in Q1 2023. Currently, it stands at 9.15%, reflecting a year-over-year growth of 48 basis points. This indicates that banks are effectively managing their assets and liabilities to maintain a solid financial foundation.

Overall, these positive indicators underscore the banking industry’s resilience and its ability to navigate through economic challenges. With strong capitalization, high liquidity, and prudent risk management practices, banks are well-positioned to support businesses and individuals in these uncertain times.