America’s biggest banks are preparing to pay billions of dollars to the Federal Deposit Insurance Corporation to replenish an insurance fund that’s propping up the system.
JPMorgan, Wells Fargo, Bank of America, Goldman Sachs, Morgan Stanley, PNC Financial Services Group and Citigroup will collectively pay $8.2 billion to restore the emergency fund, reports Reuters.
JPMorgan will pay a total of $3 billion, by far the largest out of any of the banks.
The fees are part of the FDIC’s “special assessment” implementation that it proposed in May to create a new system where the costs of protecting depositors is covered by payments from large financial institutions.
Under the new system, banking organizations with over $50 billion in total assets have to pay 95% of the special assessment, while those with under $5 billion won’t be subject to the assessment at all. The FDIC says 113 firms are currently subject to the new rules.
Say the FDIC,
“The proposal applies the special assessment to the types of banking organizations that benefitted most from the protection of uninsured depositors.
In general, large banks with large amounts of uninsured deposits benefitted the most from the systemic risk determination.”
The FDIC’s move comes as the biggest US financial institutions tighten their control over the American banking system while many of their smaller competitors close down. The latest small bank failure was on July 28th, when the FDIC says Heartland Tri-State Bank of Elkhart, Kansas, shut down and had its assets transfered to Dream First Bank, National Association (N.A.), also based in Kansas.
JPMorgan, which is the biggest in the US, recorded an impressive Q2 presentation, which recorded a 67% rise in quarterly profits to $14.47 billion in the quarter ended June 30th, despite a large drop in deposits.
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