The Coalition of America’s Midsize Banks has asked federal regulators to extend FDIC insurance to cover all deposits for the next two years. “Doing so will immediately stop the exodus of deposits from smaller banks, stabilize the banking sector and greatly reduce the chances of further bank failures,” the group stated. “It is imperative that we restore confidence among depositors before another bank fails, avoiding panic and a new crisis.”
Prevention of ‘panic and more crisis’
The Midsize Banks of America Coalition (MBCA) has reportedly asked federal regulators to extend Federal Deposit Insurance Corporation (FDIC) insurance to all deposits for the next two years. The MBCA currently represents some 110 banks, including those with assets of around $100 billion.
In a letter to the FDIC, the Comptroller of the Currency (OCC), the Federal Reserve and Treasury Secretary Janet Yellen, seen by Bloomberg News, the group explained:
Doing so will immediately stop the exodus of deposits from smaller banks, stabilize the banking sector, and greatly reduce the chances of further bank failures.
The recent bankruptcies of major banks, including Silicon Valley Bank and Signature Bank, have caused many depositors to withdraw their funds from regional banks and transfer them to the country’s largest banks, such as JPMorgan Chase and Bank of America. Clients, concerned about bank failures, seek safety in institutions perceived as too big to fail.
“Despite the general health and safety of the banking industry, trust has eroded in all but the largest banks,” the group emphasized. “Confidence in our banking system as a whole must be restored immediately,” the letter continues, noting that the flight of deposits would accelerate if another bank failed.
His MBCA letter emphasizes:
It is imperative that we restore confidence among depositors before another bank fails, avoiding panic and a new crisis.
“While the cost of deposit insurance is not negligible, it is much less likely to be needed if all deposits are temporarily insured,” the coalition wrote.
However, US Treasury Secretary Janet Yellen told a Senate hearing on Thursday that not all deposits not insured they will be protected in future bank failures. Meanwhile, Congressman Blaine Luetkemeyer has warned that if the government does not guarantee all bank deposits, “there will be a run” on smaller banks.
Do you think the FDIC should cover all deposits for the next two years? Let us know in the comments section.
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