The financial services industry welcomed the introduction of four bills aimed at reforming the federal deposit insurance framework. At least one of the bills, proposing to boost deposit insurance coverage limits on certain transaction accounts, has strong bipartisan support.
Each newly minted legislative piece aims to enhance overall financial stability and strengthen the small and mid-sized lenders that drive economic growth in local communities.
“ICBA and the nation’s community bankers thank members of Congress for introducing several bills that continue advancing the legislative debate over strengthening our nation’s deposit insurance system,” Independent Community Bankers of America (ICBA) President and CEO Rebeca Romero Rainey said in a statement. “These efforts will help ensure community banks continue to support the needs of consumers and small businesses in local communities across America.”
The “Main Street Depositor Protection Act,” which was previously introduced last year, would direct the Federal Deposit Insurance Corp. (FDIC) to increase the deposit insurance cap from $250,000 and $5 million of additional deposit insurance coverage for noninterest-bearing transaction accounts at eligible banks and credit unions.
The revised legislation was reintroduced by Sens. Bill Hagerty (R-Tenn.) and Angela Alsobrooks (D-Md.), Jim Banks (R-Ind.), Catherine Cortez Masto (D-Nev.), Cindy Hyde-Smith (R-Miss.) and Ruben Gallego (D-Ariz.).
“The banks that serve Main Street must have the same chance to succeed as the banks that serve Wall Street,” Hagerty said in a statement. “This bipartisan, bicameral bill advances the Administration’s priority of preserving the central role of regional and community banks in the financial system of the future. It’s narrowly targeted to address a very specific concern that manifested itself in the events surrounding the collapse of Silicon Valley bank — a run on non-interest bearing transaction accounts typically used to make payrolls by small businesses that are very important customers for our local and regional banks.”
“I am proud to have worked with Senator Hagerty to introduce our updated Main Street Depositor Protection Act with Senators Cortez Masto, Hyde-Smith, Gallego, and Banks,” Alsobrooks said. “This bipartisan legislation would require a data driven process to increase deposit insurance coverage levels for business checking accounts at most banks and credit unions. Our small businesses are the backbone of the American economy, and they often rely on community banks and credit unions. Responsibly raising the deposit insurance threshold will protect employees and businesses in times of crisis and strengthen our overall financial system.”
The other similar industry-backed bills proposing deposit insurance reforms include:
- Legislation sponsored Rep. Andy Barr (R-Ky.) instructing the FDIC and National Credit Union Administration (NCUA) to establish emergency transaction account guarantee programs to ensure the deposits that are maintained in noninterest-bearing transaction accounts.
- The Growing Deposit Insurance for the Future Act, sponsored by Rep. Dan Meuser (R-Pa.), which would update the inflation adjustment applicable to deposit insurance and share insurance.
- Legislation introduced by Rep. Marlin Stutzman (R-Ind.) to require the FDIC and NCUA to study whether insurance coverage limits should be raised on covered transaction accounts.