NEW YORK -(Dow Jones)- American businesses are paying some banks' bills for re-stocking the nation's deposit insurance fund.
In May, amid a rash of costly bank failures tied to the depressed U.S. housing market, the Federal Deposit Insurance Corp. decided to charge the nation's banks $5.6 billion to re-stock the FDIC's deposit insurance fund. Banks, rather than taxpayers, foot the bill for cleaning up failed institutions and paying back stranded depositors.
In many cases, large banks are passing the cost of that emergency FDIC assessment along to some of their business customers.
Banks' fee policies have drawn scrutiny from lawmakers and a cash-strapped public after the U.S. Treasury Dept. spent hundreds of billions to support the nation's largest banks.
Mike Moebs, founder of Moebs Services Inc., which collects fee data from nearly every U.S. bank and credit union, calls the FDIC-related account fees a "double whammy" for affected taxpaying businesses. As taxpayers, they fund the Treasury's ability help banks with billions in capital, "and then they get hit with higher fees with these assessments," Moebs said.
Each bank's recent FDIC assessment was mostly determined by its level of assets, and the charges in many cases were hefty. JPMorgan Chase & Co. (JPM), for example, paid $675 million out of second-quarter earnings and Wells Fargo & Co. (WFC) paid $565 million.
But those two banks, along with many others, are passing their FDIC bills to some business customers.
"We decided to pass along the FDIC insurance increase," said Thomas Kelly, a JPMorgan spokesman. He noted the New York bank, which has 5,000 branches across the country, offers a program under which affected customers, including some small businesses, can earn account credits to offset the fee.
San Francisco-based Wells Fargo, which has more than 10,000 branches, confirmed that it's passing along FDIC fees to some business customers, including some small businesses.
"Customarily, we pass this fee on," said Julia Tunis Bernard, a Wells Fargo spokeswoman. She said the fees affect business customers that account for "a very small portion of our total deposit customer base."
A spokesperson for Fifth Third Bancorp. (FITB) said the Cincinnati bank began passing along its $55 million in special assessment costs along to commercial customers in March.
Representatives from Bank of America Corp. (BAC), Citigroup Inc. (C), KeyCorp (KEY), SunTrust Banks Inc. (STI), BB&T Corp. (BBT) and Capital One Financial Corp. (COF) could not immediately say whether they'd raised account fees to offset the FDIC's special assessment.
In addition to one-time assessments from the FDIC, banks must also pay ongoing insurance premiums based on deposits. Those rates had fallen near zero in recent years, but have more recently soared to offset current and projected losses from failed banks.
Banks don't usually charge personal or small business customers with FDIC-related account fees. Moreover, longtime industry players say the practice of passing along FDIC insurance costs to business customers has been in force at most banks for years.
Not all big banks are passing along the costs of the FDIC's latest one-time charge.
U.S. Bancorp (USB) said it has not passed the costs for its $123 million special assessment onto business customers. The Minneapolis bank, which has nearly 2,900 branches, recently launched a $10 million nationwide ad campaign to attract new customers.
A spokesman for Birmingham, Ala.-based Regions Financial Corp. (RF), which has nearly 1,900 branches in 16 states, said: "We have not implemented any new fees or increased any fees to offset the FDIC special assessment."
Pittsburgh-based PNC Financial Services Group Inc. (PNC) passes along FDIC fees for certain types of accounts, but not personal and small business accounts.
For affected accounts, the line-item details of the charges can be difficult to find. The information's typically included in "account analysis" or invoice documents, rather than printed on an account's statement.
What's more, banks use a whole host of methods to levy the charges, including fees charged based on average account balance and fixed fees that mirror a bank's assessment costs.
Regardless, observers say the charges are bound to go up, especially since banks' costs for ongoing insurance - not just special assessments - are rising quickly. That dynamic could make for uncomfortable relations between banks and their business customers.
"Neither the bank nor the business customer has control over the FDIC special assessment," Moebs said. "But the bank will get blamed for it and the business customer has to pay for it."