BMO, Northern Trust, and Wintrust to Pay for SVB and Other Banking Failures

If the assessment is completed — there is 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 starting in 2024.

Much of that will be shouldered by BMO, which is now among the nation’s 15 largest banks by assets thanks to its $16.3 billion acquisition of San Francisco-based Bank of the West in February.

Assuming BMO is liable for uninsured deposits on West Bank’s balance sheet as of December 31, the bank would have to pay the FDIC $302 million over two years.

The Chicago-based Northern Trust will be on the hook for more than $92 million at the time. Rosemont-based Wintrust will owe the FDIC approximately $35 million over that period.

Martin J. said: FDIC Chairman Gruenberg: “The proposal applies the special assessment to the types of banking institutions that have benefited most from uninsured depositor protection, while ensuring fair, transparent and consistent treatment based on amounts of uninsured deposits.” press release. The proposal also encourages the preservation of liquidity, which will allow institutions to continue to meet the credit needs of the US economy.

The FDIC allows 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 and Signature Bank were due to uninsured exposure coverage for depositors at those banks. The agency expects another $13 billion to be affected by the failure of the San Francisco-based First Republic Bank. JPMorgan Chase handles most of First Republic’s assets and deposits.

The special assessment the FDIC is proposing is based on uninsured deposits at affected banks as of Dec. 31. The agency proposes a tax of 0.125% on total uninsured deposits, excluding the first $5 billion of those deposits.

The proposal excludes from fees any bank with less than $5 billion in assets. This was met with unsurprising approval from the community banks.

Effectively, the FDIC estimates that only 113 banks will be affected and those with assets of $50 billion or more will bear more than 95% of the cost. Wintrust just exceeds that threshold, with $52 billion. Northern Trust had US$151 billion as of March 31st. The U.S. banking operations of Toronto-based, Chicago-based BMO Bank were valued at approximately $287 billion when Bank of the West was included.

Wintrust CEO Tim Crane said the bank is grasping the proposal and will have more to say later.

A Northern Trust spokesman declined to comment. A BMO spokesperson did not respond to a request for comment.

The private fee would be material to the banks if it were finalized in its present form. Wintrust, for example, had $510 million in net income in 2022. $17.5 million in a one-year valuation is 3% of that.

Northern Trust’s $46 million fee for one year comes to more than 3% of the $1.34 billion it earned in 2022. It’s hard to quantify BMO’s impact because it has yet to report earnings with Bank West contributions included.

It is also unclear whether the private appraisal will be tax deductible. This would mitigate the impact on banks’ profits.