Several major banks in America, including JPMorgan, Wells Fargo, Bank of America, Goldman Sachs, Morgan Stanley, PNC Financial Services Group, and Citigroup, are preparing to collectively pay $8.2 billion to the Federal Deposit Insurance Corporation.
Replenishing an insurance fund
This payment is intended to replenish an insurance fund that supports the financial system during emergencies. JPMorgan will contribute the most with a payment of $3 billion.
The payment is part of the FDIC’s “special assessment” implementation proposed in May, which aims to create a new system where large financial institutions cover the costs of protecting depositors.
The new banking system requires banking organizations with over $50 billion in total assets to pay 95% of a special assessment fee. However, those with under $5 billion will not be subject to the assessment.
According to the FDIC, 113 firms are currently subject to these new rules. The proposal to apply the special assessment to certain banking organizations was based on their benefit from the protection of uninsured depositors.
Large banks with substantial uninsured deposits benefitted the most from the systemic risk determination.
The FDIC’s action follows the trend of major US financial institutions tightening their control over the American banking system, while many smaller competitors are closing down.
Recently, a small bank called Heartland Tri-State Bank of Elkhart, Kansas failed and closed on July 28th. The bank’s assets were transferred to Dream First Bank, National Association (N.A.), which is also based in Kansas.
JPMorgan in the news
JPMorgan, the largest bank in the US, had an impressive Q2 presentation with a 67% increase in profits to $14.47 billion in the quarter ending June 30th, despite a significant decrease in deposits.
According to the Federal Deposit Insurance Corporation (FDIC), all customer deposits have been moved to Dream First Bank, National Association (N.A.).
Additionally, a recent report indicates a decline in the amount of cash being held by customers in the four largest banks in the US.
We suggest that you check out the latest reports about this in our previous article.
