U.S. Officials Study Ways to Expand Deposit Insurance Cap Amid Banking Crisis
The deposit insurance cap under the FDIC is $250,000, but recent banking collapses have started discussions about increase that amount.
Calls for increasing deposit insurance cap
Recent banking collapses have resulted in calls to increase the current deposit insurance cap under the Federal Deposit Insurance Corporation (FDIC) from $250,000.
The Mid-Size Bank Coalition of America has called for the cap to be lifted for the next two years, citing the need to protect depositors and prevent capital from being pulled from smaller banks.
Expanding the current deposit insurance beyond max cap
The current deposit insurance cap protects deposits up to $250,000, but the FDIC states domestic U.S. bank deposits totaled $17.7 trillion as of December 31.
After some intense "studying" they realised that they needed $17 trillion to guarantee all bank deposits. pic.twitter.com/Z15HLiBp23
— Coin Bureau (@coinbureau) March 21, 2023
According to Bloomberg, Treasury Department staff members are discussing expanding the current deposit insurance beyond the max cap to cover all deposits. However, the move ultimately depends on federal regulators’ level of emergency authority and whether the insurance cap can be increased without formal consent from Congress.
Drastic мove unnecessary at the moment
Bloomberg’s sources indicate that U.S. authorities do not currently see the need for such a drastic move, as recent steps taken by financial regulators are likely to be sufficient. The Federal Reserve rolled out the $25 billion Bank Term Funding Program on March 13 to stem any further contagion after Silvergate, Signature Bank, and Silicon Valley Bank went bust recently.
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Federal government’s view on expanding FDIC insurance
White House Press Secretary Karine Jean-Pierre was recently asked if the federal government supported small- and mid-size banks’ push to expand FDIC insurance beyond $250,000. Jean-Pierre did not disclose the Biden Administration’s view but emphasized that the focus of the Treasury and the bank regulators was to create a fair playing field and ensure the financial system’s stability.
She also stated that recent actions taken by the government should give Americans confidence in their deposits, and the government would be there for them when needed.