The Federal Deposit Insurance Corp. warned Monday that it is aware some financial institutions are not correctly reporting their estimated uninsured deposits.
“Some institutions incorrectly reduced the amount reported to the extent that the uninsured deposits are collateralized by pledged assets,” the FDIC said Monday. “The existence of collateral has no bearing on the portion of a deposit that is covered by federal deposit insurance.”
The warning comes a week after Salt Lake City-based Zions Bank — a lender typically seen as among the most at-risk regional banks — wrote to the agency alleging that some major U.S. banks have started to refile their year-end call reports to show a lower level of uninsured deposits.
"Some large banks have already begun to amend their year-end Call Reports to reduce their reported uninsured deposits," Zions CFO Paul Burdiss told the regulator July 17.
Such restatements could reduce by millions of dollars the amount some banks will pay to cover the cost of the March failures of Signature and Silicon Valley Bank, the Financial Times reported.
The FDIC in May proposed a special assessment that would leave banks with more than $50 billion in assets paying more than 95% of the estimated $15.8 billion hit to the Deposit Insurance Fund. Banks with less than $5 billion in assets would be exempt from the special assessment under the proposal, whose comment period ended Friday.
The assessment is based on the value of banks' uninsured deposits at the end of 2022’s fourth quarter. And, 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.
Bank of America's restatement ranked as the largest by dollar amount, according to S&P. The bank reduced uninsured deposits on its fourth-quarter 2022 call report by $125.3 billion. By percentage, Huntington Bank ranked highest, according to S&P, with a 39.9% downward revision. The Columbus, Ohio-based lender also restated its first-quarter uninsured deposit call report data, S&P Global noted.
BofA told S&P it had improperly reported some internal or intra-bank accounts that shouldn't have been reported. The restatement was made in early May, before the FDIC released its proposed assessment, a spokesperson for the bank told the Financial Times. Huntington declined to comment to the Financial Times.
"Whether you're worried about regulatory scrutiny, whether you're worried about customer scrutiny or whether you're worried about the special assessment, it's really the same thing," James Stevens, co-leader of law firm Troutman Pepper's Financial Services Industry Group, told S&P Global. "If people are paying more attention to it, they may be dotting their i's and crossing their t's, and that's potentially causing some restatements."
The Zions letter was one of the more than 200 submitted to the FDIC within the special assessment proposal’s 60-day comment period, according to the Financial Times.
Burdiss told the publication his letter was “not to imply or assert that any bank is ‘gaming’ the system or acting in any nefarious manner.” Rather, he said, he wanted to highlight concerns with the proposed assessment.
"Additional guidance and standards are needed to improve the consistency in reporting of these estimates given the proposed use," Burdiss said in his letter.
To that end, the FDIC said Monday, each institution “is responsible for the accuracy of the data in its Call Report and for filing amendments as necessary.”
“The chief financial officer (or the individual performing an equivalent function) and multiple directors of each IDI are required to attest to the correctness of the Call Report,” the FDIC added. “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.”
Institutions can submit up to three years of revisions, the agency said.
“[Institutions] that have incorrectly reported uninsured deposits should amend their Call Reports by making the appropriate changes to the data, and submitting the revised data file to the Central Data Repository (CDR) using the same processes as the original filing,” the FDIC added Monday.