August 04, 2023

Senator Warren Urges FDIC to Crack Down on Big Banks’ Misreporting of Uninsured Deposits; Blasts Agency’s “Feeble” Initial Response

 “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.”

Text of Letter (PDF)

Washington, D.C. – Today, U.S. Senator Elizabeth Warren (D-Mass.) and Congresswoman Katie Porter (D-Calif.) sent a letter to Martin J. Gruenberg, Chairman of the Federal Deposit Insurance Corporation (FDIC), urging him to act aggressively to ensure the nation’s biggest banks are accurately reporting their uninsured deposits and contributing their full and fair obligations to the Deposit Insurance Fund (DIF).. The letter comes in response to a FDIC public notice that some large banks are not reporting their uninsured deposits in accordance with FDIC instructions. This underreporting would allow them to contribute less than legally obligated to the DIF – the source from which the FDIC supports federal deposit insurance. Shortfalls to the DIF could threaten the stability of the entire U.S. banking system. 

“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,” wrote Senator Warren and Congresswoman Porter. “We write to ask for more information on this problem and the tools the agency has to discourage this behavior.”

March 2023, bank runs led to the collapse of Silicon Valley Bank (SVB) and Signature Bank, institutions whose deposits were overwhelmingly composed of uninsured deposits – those over the FDIC’s $250,000 deposit insurance limit and, therefore, not protected in the case of a bank collapse. In response to the SVB and Signature Bank collapses and ensuing threat to the stability of the American financial system, the Biden Administration and FDIC announced on March 12, 2023, a “systemic risk exception” for SVB and Signature Bank, allowing the FDIC to protect all depositors in full, including uninsured deposits. In doing so, the Biden Administration staved off a major economic crisis and stabilized the market. 

In granting this “systemic risk exception” for SVB and Signature Bank, the FDIC incurred a loss of $15.8 billion to the DIF as a result of reimbursing uninsured depositors from these two banks. To recoup this loss, the FDIC announced a “special assessment” to be paid by the country’s biggest banks, which benefited the most from the system risk determination. The special assessment is based on uninsured deposits held by banks as of December 31, 2022 and is calculated based on the benefit they received from the FDIC’s actions. 

However, in a July 24, 2023 letter to big banks, the FDIC observed that some of these banks are not accurately reporting their estimated uninsured deposits, which would allow them to pay hundreds of millions of dollars less in special assessment payments to the DIF. 

“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. This isn’t the first time that banks have tried to get out of paying their fair share to the DIF,” wrote Senator Warren and Congresswoman Porter. 

But, to date,  the FDIC has failed to hold these banks accountable for misreporting data on insured deposits, sending the warning letter but doing nothing else to penalize the banks for misreporting. This allows big banks to continue to find workarounds to avoid paying their legally-mandated obligations to the DIF and jeopardize the stability of the American financial system in the event of another major bank run. 

Senator Warren and Congresswoman Porter have asked that Chairman Gruenberg respond to questions concerning the misreporting of uninsured deposits and regulatory actions taken in response by the FDIC by August 17th. 

“The appears to be doing nothing to hold banks that are reporting inaccurate data accountable. The agency’s Financial Institution Letter names no names, and imposes no consequences. 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.” Senator Warren and Congresswoman Porter concluded. 

Senator Warren continues to be a leader in reining in big banks and ensuring regulators hold them accountable, including: 

  • In June 2023, Senator Warren sent a letter to Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra highlighting findings from a recent investigation into the late fee practices of the ten largest credit card issuers and urging the CFPB to finalize its proposed rule that would save American families up to $9 billion a year.
  • In June 2023, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren applauded the CFPB’s proposed rule to cap unreasonable credit card late fees, which could save working families billions of dollars each year.
  • In May 2023, Senator Warren, along with Senators Sherrod Brown (D-Ohio), Chair of the Senate Banking, Housing, and Urban Affairs Committee, Jack Reed (D-R.I.), Richard Blumenthal (D-Conn.), Tammy Baldwin (D-Wis.), Peter Welch (D-Vt.), and Bernie Sanders (I-Vt.), sent a letter to ten of the largest credit card issuers – PNC, JPMorgan Chase, Capital One, Citigroup, Discover, Bank of America, American Express, Wells Fargo, US Bancorp, and USAA –  requesting information on their credit card late fee practices following the CFPB’s proposed rule to limit exorbitant late fees and the banking lobby’s strong pushback against this proposed rule.
  • In February 2023, Senator Warren applauded the CFPB’s proposed rule to cut credit card late fees, saving Americans money as part of President Biden’s efforts to protect consumers.
  • On December 16, 2022, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren asked CFPB Director Chopra about the CFPB’s achievements over the last year to hold big banks and giant corporations accountable and put money back in working families’ pockets.

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