BMO, Northern Trust, Wintrust to pay for SVB, other bank failures
If the assessment is finalized — there's a 60-day comment period for the industry and others to respond — the three appear to be on the hook for a collective $429 million over two years beginning in 2024.
Much of that would be shouldered by BMO, which is now among the nation's 15 largest banks by assets by virtue of its $16.3 billion acquisition of San Francisco-based Bank of the West in February.
Assuming BMO is responsible for the uninsured deposits on Bank of the West's balance sheet as of Dec. 31, the bank would have to pay the FDIC $302 million over two years.
Chicago-based Northern Trust would be on the hook for more than $92 million in that time. Rosemont-based Wintrust would owe the FDIC about $35 million over that period.
"The proposal applies the special assessment to the types of banking organizations that benefited most from the protection of uninsured depositors, while ensuring equitable, transparent and consistent treatment based on amounts of uninsured deposits," FDIC Chairman Martin J. Gruenberg said in a press release. "The proposal also promotes maintenance of liquidity, which will allow institutions to continue to meet the credit needs of the U.S. economy."
The FDIC is allowing affected banks to pay in quarterly installments over two years.
The agency estimated that $15.8 billion of the losses from the failures of Silicon Valley Bank and Signature Bank are due to covering the uninsured exposure of depositors in those banks. The agency anticipates another $13 billion hit from the failure of San Francisco-based First Republic Bank. JPMorgan Chase is assuming most of the assets and deposits of First Republic.
The special assessment the FDIC is proposing is based on uninsured deposits at affected banks as of Dec. 31. The agency proposes a 0.125% levy on total uninsured deposits, with the first $5 billion of those excluded from the calculation.
The proposal excludes from the fee any bank below $5 billion in assets. That was met with unsurprising approval from community banks.
Effectively, the FDIC estimates that just 113 banks will be affected and that those with $50 billion or more in assets would bear more than 95% of the cost. Wintrust is just over that threshold, with $52 billion. Northern Trust had $151 billion as of March 31. Toronto-based BMO's U.S. banking operations, which are based in Chicago, had about $287 billion when Bank of the West was folded in.
Wintrust CEO Tim Crane said the bank is digesting the proposal and will have more to say later.
A Northern Trust spokesman declined to comment. A BMO spokesman didn't respond to a request for comment.
The special charges will be material to the banks if they're finalized in their current form. Wintrust, for example, generated net income of $510 million in 2022. The $17.5 million in a one-year assessment amounts to 3% of that.
Northern Trust's $46 million in one-year FDIC charges comes to more than 3% of the $1.34 billion it earned in 2022. BMO's impact is harder to determine because it hasn't reported earnings yet with Bank of the West's contributions included.
Unclear, too, is whether the special assessment will be tax-deductible. That would soften the impact on the banks' bottom lines.
Source: Crain's Chicago Business
