The regulator, the FDIC, has proposed three options for reform. One is to maintain the existing insurance framework and may raise the existing deposit insurance limit of $250,000. The other is to expand the insurance coverage to all depositors. The third is to provide targeted protection and provide different deposits. The insurance limit provides more protection for the payment account of the enterprise. The FDIC believes that the third option best meets the objectives.
Drawing lessons from the banking crisis detonated by Silicon Valley Bank in March, US regulators are seeking a comprehensive reform of bank deposit insurance.
On Monday, May 1 local time, the U.S. regulator, the Federal Deposit Insurance Corporation (FDIC), released a report titled “Options for Deposit Insurance Reform” in an attempt to address financial stability concerns stemming from recent bank failures. In the report, the FDIC listed three options for deposit insurance reform:
1. Limited coverage: Maintain the current deposit insurance framework, providing deposit insurance for depositors up to some cap, possibly higher than the existing $250,000 deposit insurance cap, based on ownership and capacity.
2. Unlimited protection: expand the scope of deposit insurance without upper limit to all depositors.
3. Targeted protection: Different deposit insurance limits are provided for different account types, and corporate payment accounts of enterprises are much more protected than other types of accounts.
The FDIC believes that among the above three options, targeted protection can best meet the financial stability of deposit insurance and the goal of protecting beyond the cost. While some of the report’s proposals are within the purview of the FDIC to make regulations, all of the report’s proposals require action by Congress.
In a simultaneous statement Monday, FDIC Chairman Martin Gruenberg said the collapse of Silicon Valley Bank and Signature Bank in March, and the subsequent approval by U.S. government agencies such as the FDCI to protect uninsured deposits at those banks, initiated Systemic Risk Exceptions. ) mechanism, which makes the impact of deposit insurance in the US banking system fundamentally questionable. The above report attempts to place recent developments in the context of the history, evolution and purpose of deposit insurance.
Media commented that although the FDIC did not commit to which method to choose, the report on Monday has opened the prelude to the heavy policy reform in the United States triggered by the banking crisis.
Wall Street News mentioned last Friday that the Federal Reserve released an internal review report reflecting on the failure of the Silicon Valley bank that day. In the report, Federal Reserve Vice Chairman Barr, who is in charge of financial industry supervision, summarized the four major causes of the collapse of Silicon Valley banks, three of which were related to the Fed’s ineffective supervision. Barr said the Fed’s inspectors identified risks but did not do enough to ensure Silicon Valley Bank addressed the problem quickly enough.
The report sent a strong signal that regulation will be strengthened. Barr revealed that the Federal Reserve is considering strengthening a series of supervision of banks with assets of hundreds of billions of dollars, strengthening the supervision of banks’ risk control over interest rate liquidity risks, and possibly increasing capital requirements for banks, restricting repurchases, dividends, and executive compensation.
Risk Warning and Disclaimer
Market risk, the investment need to be cautious. This article does not constitute personal investment advice, nor does it take into account the particular investment objectives, financial situation or needs of individual users. Users should consider whether any opinions, opinions or conclusions expressed herein are applicable to their particular situation. Invest accordingly at your own risk.