CFPB Head Says Large Banks Should Pay for Insuring ‘Uninsured’ Depositors

The head of the Consumer Financial Protection Bureau (CFPB) says big banks should pay for insuring “uninsured” depositors.

CFPB Director Rohit Chopra, who is a member of the Federal Deposit Insurance Corporation (FDIC) board of directors, said in a Thursday (May 11) statement that he supports the FDIC’s proposal to require banks to pay the extra cost for protecting “uninsured” depositors of Silicon Valley Bank and Signature Bank.

“I support the proposed special assessment because it makes large banks — the firms that overwhelmingly benefited from this action — foot the bill,” Chopra said in the statement.

The FDIC announced Thursday that it plans to extract $15.8 billion in extra fees over two years to recoup its losses after the rescues of Silicon Valley Bank and Signature Bank.

The regulator said that 113 banks would pay this “special assessment,” with those that have at least $50 billion in assets covering 95% of the cost and those with less than $5 billion in assets being exempt from the assessment.

Chopra said in his statement that the federal government’s actions in response to the two banks’ troubles showed that their failures would affect the broader financial system, and that the flight of “uninsured” depositors raised concerns that the troubles would spread to larger banks.

He added that the largest banks gained a surge of new depositors amid the flight of the “uninsured” from smaller banks because many depositors believe they would be safer at banks that are “too big to fail.”

“The assessment is a small fraction of the $540 billion the banking sector earned in net income over the last two years,” Chopra said in the statement. “Many large banks paid out much of those profits to executives and shareholders in bonuses, buybacks and dividends.”

As PYMNTS reported March 29, the bank runs that happened during that month may have been the first time in more than a decade that consumers focused attention on what measures are in place to protect their money.

The bank runs also set off a debate over how to stop contagion in the banking sector, who’s protected and who’s not.