US lawmakers consider raising FDIC bank deposit insurance ceiling According to Reuters
© Reuters. FILE PHOTO: A sign that says “FDIC Insured” on the door of a First Republic Bank branch in Boston, Massachusetts, U.S., March 13, 2023. REUTERS/Brian Snyder/File Photo
By David Lawder
WASHINGTON (Reuters) – Three prominent U.S. lawmakers on banking affairs said on Sunday they would consider whether it was necessary to increase federal insurance limits on bank deposits. to avert a financial crisis marked by the withdrawal of large, uninsured deposits from regional and smaller banks.
Senator Elizabeth Warren, a Democrat, said on CBS’s “Face The Nation,” referring to the Federal Deposit Insurance Corporation’s current $250,000 limit per depositor : “I think raising the FDIC insurance ceiling is a good move.
When asked how much the new, higher level should be, Warren, a member of the Senate Banking Committee, said: “This is a question that we have to address. Is it $2 million, yes? Is it $5 million? Is it $10 million? Small businesses need to be able to get their money to pay salaries, pay utility bills.”
Warren declined to discuss conversations she has had with the Biden administration about such a move, but said increasing coverage limits “is one of the options that must be made right now. “
Republican Representative Patrick McHenry, chairman of the House Financial Services Committee, said he would work to address the adequacy of FDIC deposit insurance, but added that he hasn’t had any conversations yet. with Biden administration officials about raising the limit.
McHenry told the same CBS show, “What I’m going to do, though, legislatively and in a supervisory function, is determine if we need to address the FDIC margin.”
During the financial crisis that broke out in 2008, the FDIC increased the deposit limit from $100,000 to $250,000 and temporarily stopped all deposits to protect smaller banks.
Pressure on small and mid-sized banks due to outflows continued on Friday despite a move by some large banks to deposit $30 billion on Friday. Bank of the First Republic (NYSE:), an institution rocked by the failure of Silicon Valley and Signature.
Several former officials, including former FDIC director Sheila Bair, have said that regulators may need to repeat temporary full guarantees on all US deposits. Under the Dodd-Frank financial reform law, such a move requires Congress to pass a ratification resolution on an expedited schedule.
The US Treasury did not immediately respond to requests for comment. Last week, Treasury Secretary Janet Yellen told Senators last week that uninsured bank deposits would be more secure in addition to those at SVB and SVB. signature bank (NASDAQ:) will ask her, President Joe Biden and the “majority” of the Federal Reserve and the FDIC panel to make a decision on systemic risk.
McHenry said he wanted to look at the trade-off of higher deposit insurance limits, “the moral hazard of taking more risk in the financial sector, and also its impact on public banks.” copper.”
McHenry added that he is concerned about the impact that further decline in community banks will have on overall banking competition.
Senator Chris Van Hollen, a Democrat on the Senate Finance Committee, also told Fox News Sunday that Congress and regulators need to address the $250,000 limit, but not banks. also “rescued”.
“There will be a question about how we handle deposits over $250,000 as covered here,” says Van Hollen.