According to reports, US officials are exploring the possibility of temporarily extending Federal Deposit Insurance Corporation (FDIC) coverage to all deposits in response to concerns raised by a group of banks about a potential financial crisis.
The Treasury Department staff are examining whether federal regulators have the necessary emergency authority to provide such coverage without formal consent from Congress.
Although the FDIC currently maintains a deposit insurance cap at $250,000, there have been requests to raise it following the failure of multiple banks in March.
On March 17, 2023, the Mid-Size Bank Coalition of America, an organization of banks with assets up to $100 billion, asked regulators to remove the current limit on deposit insurance. They are worried that if another regional bank fails, more customers will move to the largest banks, regardless of their financial stability, which could negatively impact smaller competitors.
Some legislators, including Republicans, have also shown interest in revising the $250,000 limit, but a group of conservative representatives in the House has opposed a complete 100% guarantee.
During a press briefing on March 20, Press Secretary Karine Jean-Pierre was asked directly whether the federal government supported the efforts of small and mid-size banks to extend FDIC insurance coverage beyond $250,000.
Jean-Pierre did not disclose the Biden Administration’s stance on extending FDIC coverage beyond $250,000. Instead, they emphasized the importance of maintaining stability in the financial system and creating a level playing field for all banks.
Jean-Pierre stated:
“And as you saw, due to our actions this week at the direction of the President, Americans should be confident about their deposits.”
Meanwhile, White House spokesman Michael Kikukawa stated that they would use available resources to support community banks but did not confirm whether they are considering this action. Kikukawa also noted that deposits at regional banks have stabilized, and some outflows have been reversed following swift action from the administration and regulators.
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