Academic journal article ABA Banking Journal

Deposit Insurance Reform: What Bankers Are Saying

Academic journal article ABA Banking Journal

Deposit Insurance Reform: What Bankers Are Saying

Article excerpt

MORE THAN 200 BANKERS HAVE responded to my fax memo of January 3 to share their opinions on the benefits and costs associated with increasing federal deposit-insurance levels. And comments are still arriving. What impresses me about the responses is that virtually all of them are informed, thoughtful and articulate. Several responses included reference to director or management team discussions. Many bankers favor holding the current level at $100,000. Many others want to see deposit insurance levels doubled. And still others favor something in-between. (One or two suggested that perhaps we might do away with FDIC altogether.)

If you remember my memo, I wrote:

"There has been a great deal of discussion this year about deposit insurance reform in general and raising the insurance limit in particular. The issue is a top priority for ABA, and we've worked closely with the FDIC as it develops its recommendations. We are exploring all aspects of FDIC insurance--insurance coverage and premiums, municipal coverage, capping the funds and rebates, giving banks an ownership interest in the fund and the problem of some banks growing their deposits dramatically without paying premiums. As we work to finalize our strategy, I would like some specific input from you."

Based on the letters I've received so far, many bankers have given this topic a great deal of thought. Of course, deposit insurance reform is not new to ABA or our industry. We've long supported broad, versus piecemeal, reform.

We've said, for example, that such reform should include capping the fund itself and rebating excess premiums back to banks. As one banker wrote, "If you really want to help America's banks, we should push hard to get the excess reserves the FDIC is holding so that we can better use those reserves in our communities. …

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