- Sen. Elizabeth Warren, D-MA, and Rep. Katie Porter, D-CA, accused the Federal Deposit Insurance Corp. on Thursday of issuing a “feeble response” after the agency observed some banks are undercounting their estimated uninsured deposits.
- In a letter to FDIC Chair Martin Gruenberg, the lawmakers urged the regulator “to act aggressively” to ensure the nation’s largest banks are accurately reporting their uninsured deposits and contributing their fair share to the Deposit Insurance Fund.
- The letter follows a public notice the FDIC issued last month, warning banks that it is aware some firms are not correctly reporting their estimated uninsured deposits.
“We are concerned these banks may be misreporting important information in an effort to reduce their Deposit Insurance Fund assessment, and we are troubled by the agency’s feeble response to these concerns, which consisted of a ‘reminder’ to the banks via a Financial Institution Letter,” the lawmakers wrote. “We write to ask for more information on this problem and the tools the agency has to discourage this behavior.”
The letter comes as the FDIC is preparing to levy a special assessment fee on banks in an effort to replenish the DIF, which was depleted after the agency guaranteed the uninsured deposits of several failed banks earlier this year.
The assessment is based on the value of banks’ uninsured deposits at the end of 2022’s fourth quarter.
According to S&P Global Market Intelligence, 55 banks restated their total uninsured deposits from the fourth quarter — a nearly fourfold increase from 14 for the last three months of 2021.
The lawmakers said they are concerned that banks may be underreporting their uninsured deposits so they can contribute less to the DIF than legally obligated.
If left unchecked, the underreporting could lead to shortfalls to the DIF, which “could threaten the stability of the entire U.S. banking system,” the lawmakers warned.
Porter and Warren called out Bank of America in their letter, saying the Charlotte, North Carolina-based lender restated its uninsured deposits by $125 billion, 14% lower than what it originally reported.
“With its new estimates, Bank of America’s payments to the DIF would be reduced by $310 million,” they wrote.
Columbus, Ohio-based Huntington Bank provided numbers 40% lower than originally reported, the lawmakers added.
“The banks’ revisions would reduce their individual payments — payments which are fairly calculated based on the benefit they received from the FDIC’s actions — and leave a gap in the DIF that could result in significant problems in the event of another large bank failure or series of bank failures,” the lawmakers wrote.
Porter and Warren accused the FDIC of being too lenient in its response to the underreporting.
“The agency’s Financial Institution Letter names no names, and imposes no consequences,” they wrote. “The banks that are inaccurately reporting uninsured deposits are making millions of dollars doing so, while putting the entire banking system at increased risk — without receiving even the lightest slap on the wrist.”