Mid-Size Banks Urge Regulators to Offer Insurance for All Deposits for 2 Years – Analysis


Mid-Size Bank Coalition of America has petitioned federal regulators to offer FDIC insurance to cover all deposits for the following two years. The group insists that this step would help allay depositors’ fears of bank failures, thereby preventing a further crisis.

Stabilizing the Banking Sector

The Mid-Size Bank Coalition of America (MBCA) has recently called upon federal regulators to extend Federal Deposit Insurance Corporation (FDIC) insurance to all deposits for the next two years. This coalition, which represents about 110 banks, including those with assets of about $100 billion, believes that this action would help stabilize the banking sector and reduce the chances of more bank failures.

In a letter to the FDIC, the Comptroller of the Currency (OCC), the Federal Reserve, and Treasury Secretary Janet Yellen, the MBCA argued:

Doing so will immediately halt the exodus of deposits from smaller banks, stabilize the banking sector and greatly reduce chances of more bank failures.

The recent collapses of major banks such as Silicon Valley Bank and Signature Bank have caused many customers to withdraw their funds from local banks and transfer them to the largest banks in the country, such as JPMorgan Chase and Bank of America. Customers are looking for a safe haven in institutions they perceive as too big to fail.

The MBCA letter asserted:

It is imperative we restore confidence among depositors before another bank fails, avoiding panic and a further crisis.

The coalition believes that covering all deposits for the next two years would be a cost-effective way to reduce the likelihood of needing insurance and to restore confidence in the banking industry.

However, U.S. Treasury Secretary Janet Yellen said in a Senate hearing on Thursday that not all uninsured deposits will be protected in future bank failures. Meanwhile, Congressman Blaine Luetkemeyer warned that if the government does not guarantee all bank deposits, “there’s going to be a run” on smaller banks.

Do you think the FDIC should provide deposit insurance for the next two years? Share your thoughts in the comments section below.

Kevin Helms

A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.

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