Large U.S. lenders will bear the brunt of replenishing a depleted deposit insurance fund, which sustained a loss of $16 billion owing to the failure of Silicon Valley Bank and two other lenders, according to a recent announcement by the Federal Deposit Insurance Corporation (FDIC). Based on the total amount retained by each bank by the end of 2022, the FDIC proposed a "special assessment" fee of 0.125% on uninsured deposits that exceed $5 billion.

While all banks would be subject to the levy, it is anticipated that lenders with assets over $50 billion will cover more than 95% of the expense. The cost will not apply to banks with assets under $5 billion, leaving about 113 banks subject to the levy.

The top 14 U.S. lenders will jointly pay an estimated $5.8 billion yearly, according to Credit Suisse analyst Susan Roth Katzke, which could reduce their earnings per share by a median of 3%. Starting in June 2024, the levy will be collected across eight quarters, with changes based on anticipated losses to the insurance fund. FDIC authorities guarantee little to no impact on bank liquidity and capital.

JPMorgan Chase & Co is expected to pay an annual fee of around $1.3 billion towards the increased assessment fee, followed by Bank of America Corp with $1.1 billion, and Wells Fargo & Co with $898 million. However, these banks have declined to provide any comment on the matter.

Following the failures of Silicon Valley Bank and Signature Bank in March, regulators intervened to prevent further damage and backed all deposits to stabilize the financial system. To cover the significant costs incurred, a special levy was deemed necessary.

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