(Reuters) - Despite the second- and third-largest bank failures in U.S. history last month, the U.S. Federal Deposit Insurance Corporation remains on track to refill its deposit insurance fund ahead of a 2028 legal deadline, the head of the agency said Tuesday.
At a public meeting of the Federal Deposit Insurance Corporation, Chairman Martin Gruenberg said a plan adopted three years ago to bring the FDIC insurance fund back to a legal minimum need not change despite March's collapse of Silicon Valley Bank and Signature Bank (OTC:SBNY), which cost the FDIC an estimated $22.5 billion.
The failures "are not expected to have a material effect on the projected timeline," Gruenberg said in prepared remarks, citing staff projections.
By law, the FDIC must keep at least $1.35 in the fund for every $100 of insured deposits, making in a crucial tool in preserving public confidence in the financial system.
Banks pay quarterly, risk-weighted insurance premiums into the fund. However, after it fell below this ratio due to a rise in insured deposits during the coronavirus pandemic response in 2020, the FDIC adopted a plan to refill the fund by 2028.
The March bank failures resulted in more than $3 billion in losses to cover insured funds, with the remaining $19.2 billion occurring because the FDIC also agreed to cover uninsured deposits at both banks.
According to Gruenberg, the timeline will not be changed because the larger uninsured losses are due to be replaced through a "special assessment," which the FDIC says it will propose next month.