US banks pressed to rectify ‘inaccurate’ financial statements. Here's why

Washington DC

The Federal Deposit Insurance Corporation (FDIC) on Monday asked banks to amend their financial statements that “incorrectly” indicate uninsured deposits. The FDIC's warning comes after banks objected to a fee that was imposed with an intention to recover losses from the failures of Silicon Valley Bank and other firms.

The special fee, proposed by the FDIC in May, would be calculated in accordance to the amount of uninsured deposits held by banks at the end of 2022. The regulator did not take the name of any bank but said that certain banks were “not reporting estimated uninsured deposits in accordance with the instructions".  

The FDIC was referring to decreases in the total amount of uninsured money held by banks at the end of 2022. According to an S&P Global report from July, 55 banks, more than double the average, lowered their fourth-quarter uninsured deposits in FDIC reports.

The regulator specifically reminded banks that they must report uninsured deposits maintained at their own subsidiaries as well as uninsured deposits secured by pledged assets. It further said, “If your institution incorrectly reduced the amount of reported uninsured deposits, for example, to reflect collateralisation of deposits by pledged assets or by excluding intercompany deposit balances of subsidiaries, those reports are inaccurate.”

Paul Burdiss, the chief financial officer of Zions Bancorporation, criticised the FDIC’s strategy in a letter of comment on July 17. 

In order to exclude intra-bank accounts as uninsured deposits, Bank of America amended its uninsured deposits reported to the FDIC in May downward by 13.8 per cent to $783.92 billion, according to the S&P report.

Bill Halldin, a Bank of America spokesman, said that the bank had identified some internal or intra-bank accounts that should not have been reported. The bank has no plans to alter the most recent figure it provided to the FDIC.

It was also noted in the S&P report that Huntington National Bank decreased its uninsured deposits by 39.9 per cent after review. This was the largest percentage decline that analysts noted. The bank refused to respond amid requests for comments.

Larger firms criticised the FDIC in comment letters saying that they would not benefit from the government’s efforts to backstop depositors at smaller lenders as the news fee would heavily fall on them.  

On 21st July, the Bank Policy Institute said there were flaws in the FDIC’s rationale for the special assessment methodology. It further stated that their assessment methodology could not be supported by the analysis by the FDIC.

(With inputs from agencies)

WATCH WION LIVE HERE