Bank / Credit Union

FDIC calls on Congress to increase deposit insurance limits

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May 2, 2023

The Federal Deposit Insurance Corp. has proposed boosting the deposit insurance limits for business payment accounts, according to a Yahoo! Finance report.

The news comes on the heels of recent bank collapses, such as Silicon Valley Bank, which fell apart after depositors withdrew $42 billion.

"The recent failures of Silicon Valley Bank and Signature Bank, and the decision to approve systemic risk exceptions to protect the uninsured depositors at those institutions raised fundamental questions about the role of deposit insurance in the United States banking system," the FDIC said in a report.

In particular, the FDIC identified large amounts of uninsured deposits as a threat to the banking system, as they increase the potential for bank runs where customers withdraw large amounts of money. In 2021, uninsured deposits account for nearly 47% of domestic deposits.

"The speed with which information is disseminated and the speed with which depositors can withdraw funds in response to information may contribute to faster and more costly bank runs," the FDIC said.

In the report, the FDIC gives three potential reforms, including raising deposit insurance for business accounts, fully insuring all deposits or raising the limit from the $250,000 based on the account. It also suggested clients with large uninsured accounts could post collateral with banks to reduce the risks of bank runs.

Congress would need to act to put into place any of the FDIC's suggestions.