US studies ways to guarantee all bank deposits if crisis expands
TUE, MAR 21, 2023 - 11:11 AM
One legal framework under discussion for expanding FDIC insurance would use the Treasury Department’s authority to take emergency action and lean on the Exchange Stabilisation Fund.
PHOTO: BLOOMBERG
US officials are studying ways they might temporarily expand Federal Deposit Insurance Corporation (FDIC) coverage to all deposits, a move sought by a coalition of banks arguing that it’s needed to head off a potential financial crisis.
Treasury Department staff are reviewing whether federal regulators have enough emergency authority to temporarily insure deposits greater than the current US$250,000 cap on most accounts without formal consent from a deeply divided Congress, according to people with knowledge of the talks.
Authorities don’t yet view such a move as necessary, especially after regulators took steps this month to help banks keep up with any demands for withdrawals, the people said, asking not to be named describing confidential talks. Still, they are developing a strategy out of due diligence in case the situation worsens.
“We will use the tools we have to support community banks,” White House spokesperson Michael Kikukawa said, without directly addressing whether the measure is being studied. “Since our administration and the regulators took decisive action last weekend, we have seen deposits stabilise at regional banks throughout the country and, in some cases, outflows have modestly reversed.”
Still, the behind-the-scenes deliberations show there are concerns in Washington’s corridors of power as midsize banks call for broader government intervention after three lenders collapsed this month when uninsured depositors pulled their money, and as a fourth firm strives to avoid a similar fate. Shares of that one, First Republic Bank, tumbled an additional 47 per cent on Monday (Mar 20) as industry leaders tried to find a way to bolster the company’s finances.
One legal framework under discussion for expanding FDIC insurance would use the Treasury Department’s authority to take emergency action and lean on the Exchange Stabilisation Fund, the people said.
https://www.businesstimes.com.sg/in...guarantee-all-bank-deposits-if-crisis-expands
