(Reuters) – The Federal Deposit Insurance Corporation is expected to propose next month how to get the U.S. banking sector to pay back the estimated $23 billion in insurance fund caused by the collapse of Silicon Valley and Signature Bank in March.

The agency has wide power to set the terms of what is known as a “special assessment” to fill the gap and what exactly that would look like is still an open question.

The commercial banking organizations told Reuters they had not yet heard details of the valuation. The Federal Deposit Insurance Corporation declined to comment.

Here’s what is known about the valuation and insurance fund:

What is a deposit insurance fund?

Deposit Insurance Fund (DIF) is a repository of cash maintained by the FDIC to guarantee up to $250,000 of depositors’ funds. As a premium, banks usually pay a quarterly “assessment” based on a specific methodology based on financial data and risk identification.

To stem the spread of panicked withdrawals throughout the banking system last month, the FDIC insured all deposits at SVB and Signature Bank, even those over $250,000. Such losses require the FDIC to impose a “Special Assessment” for DIF renewal.

The law does not specify the “base of valuation” for the private valuation or which banks will pay it. There is no refund time frame. Echoing testimony from FDIC President Martin Gruenberg, former FDIC President Sheila Bear told Reuters on April 6 that the agency had “wide latitude” in designing the private assessment.

What happened last time?

Currently, the law requires the FDIC to maintain $1.35 in the fund for every $100 of insured deposits. By the end of December, the balance of DIF was $128.2 billion, which means bank failures in March could account for about 18% of the fund.

During the 2008 financial crisis, the sheer scale of bank failures pushed the DIF fund nearly $20 billion into the red. After a period of public comment, the FDIC’s final May 2009 rule on private assessment places the cost burden more firmly on the largest financial institutions.

In the second quarter of 2009, for example, JPMorgan Chase & Co (JPM.N) booked a pre-tax fee of $675 million for a private evaluation, which it said cut 10 cents from its earnings per share. Wells Fargo (WFC.N) reported an 8 percent hit to its earnings.

Who will pay the private appraisal?

When the FDIC initially called for a special assessment of up to 20 basis points for banks’ insured deposits in the aftermath of the 2008 financial crisis, small-town bankers pushed back aggressively, letters written at the time showed.

Senior Washington officials have indicated that regulators likely won’t make smaller banks pay for last month’s failures this time either. This reflects a change that Congress and the FDIC made after the crash in 2008 to have bigger and riskier banks contribute more to preserving DIF.

An industry representative, speaking on condition of anonymity, told Reuters that bankers hope the final bill will be less than $23 billion after the FDIC completes sales of SVB and Signature Bank assets.

Additional reporting by Douglas Gillison and Hannah Lang in Washington; Editing by Anna Driver

Our Standards: The Thomson Reuters Trust Principles.

Hannah Lang

Thomson Reuters

Hannah Lang covers financial technology and cryptocurrency, including the companies driving industry developments and the policies that govern the sector. Hannah previously worked at American Banker where she covered banking regulation and the Federal Reserve. She is a graduate of the University of Maryland, College Park and lives in Washington, DC.

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