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FDIC Weighs Change to Deposit Insurance Policy; League Monitoring Issue

Authored By: Lewis Wood on 5/2/2023

The FDIC is considering options to overhaul its deposit insurance coverage.

As part of its analysis of the deposit insurance system, the FDIC outlines three options for deposit insurance reform in a report released this week:

  1. Limited Coverage: Maintaining the current deposit insurance framework, which provides insurance to depositors up to a specified limit (possibly higher than the current $250,000 limit) by ownership rights and capacities.
  2. Unlimited Coverage: Extending unlimited deposit insurance coverage to all depositors.
  3. Targeted Coverage: Offering different deposit insurance limits across account types, where business payment accounts receive significantly higher coverage than other accounts.

Any change to the current deposit insurance structure would require Congressional action.

"Should Congress decide to change the insurance limits for banks, credit unions need parity," noted League President/CEO Carrie Hunt. "We hope this issue is studied carefully and Congress does not create a broad, potentially expensive policy that is designed to protect risky investments and not consumers.”

Currently, the FDIC insures up to $250,000 per depositor for each account ownership category. But the agency backed deposits exceeding that limit when Silicon Valley Bank and Signature Bank failed, in order to reduce the risk of further bank runs. It also provided temporary unlimited deposit insurance to non-interest bearing accounts in the wake of the Great Recession.

Related: FDIC Considers Change to Deposit Insurance Policy Following First Republic Bank Failure
Related: First Republic Bank collapse spurs fears for banking system, broader economy
Related: Regional bank stocks plummet as First Republic's demise weighs
Related: League Monitors Fall-Out from Bank Failures; Working with NCUA and Others
Related: Credit Unions Safe, Sound: Communication Resources Available for Recent Bank Failures

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