Mid-Size Bank Coalition Requests Extension of Deposit Insurance Amidst Rising Bank Failure Concerns
The Mid-Size Bank Coalition of America (MBCA) has reportedly asked United States federal regulators to extend insurance on all deposits for the next two years.
In a letter to the U.S. Federal Deposit Insurance Corporation (FDIC), the MBCA stated that this action would “stabilize” the banking industry and significantly decrease the chances of “more bank failures.”
Banks urged to fund insurance program
The MBCA proposed that the banks themselves fund the insurance program by raising the deposit-insurance assessment on lenders who opt to participate in the increased coverage.
However, John Deaton, the founder of legal news outlet Crypto Law Lawyer, predicted in a tweet to his 250,000 followers that up to 300 banks could go under if the FDIC fails to provide “some guarantee.”
I bet 2-300 banks will go under if there isn’t some FDIC guarantee. And this crisis has NOTHING to do with Crypto. https://t.co/JPRjXEwVVW
— John E Deaton (@JohnEDeaton1) March 18, 2023
Economist warns of potential bank failures
This comes after a recent analysis by economists revealed that “almost 190 banks are at a potential risk” of impairment to insured depositors, with “potentially $300 billion of insured depositors at risk.”
The report also stated that “even if only half of uninsured depositors” decided to withdraw, many banks are at risk from uninsured deposit withdrawals.
Representative questions FDIC’s actions
Meanwhile, Representative Tom Emmer, the majority whip in the United States House of Representatives, questioned reports that the FDIC is “weaponizing recent instability” in the banking sector to “purge legal crypto activity” from the U.S.
Today, I sent a letter to FDIC Chairman Gruenberg regarding reports that the FDIC is weaponizing recent instability in the banking sector to purge legal crypto activity from the U.S. 👇 pic.twitter.com/fDmaA0XGWv
— Tom Emmer (@GOPMajorityWhip) March 15, 2023
In a letter to FDIC chair Martin Gruenberg, Emmer warned that these actions are “deeply inappropriate” and could lead to “broader financial instability.”
Federal Reserve to review Silicon Valley Bank’s supervision and regulation
In addition, the U.S. Federal Reserve announced that the vice chair for Supervision, Michael Barr, is “leading a review of the supervision and regulation” of Silicon Valley Bank in “light of its failure,” with the review set for public release by May 1.