Saturday, May 25, 2024

FDIC posits ‘targeted’ coverage might be best option for deposit insurance reform

A “targeted” deposit insurance system in which additional coverage would be extended to business payment accounts would be the best option for balancing financial stability and depositor protection relative to its costs, the FDIC said earlier this week in review of the system.

The review, prompted by recent bank failures, considered three options for reforming the Deposit Insurance Fund: The limited coverage option that exists now, an unlimited option that would cover all deposits, and a targeted system with additional coverage for business payment accounts. The FDIC said the latter was the most promising option but acknowledged there are “significant, unresolved practical challenges” to implementing it. Any modification to the coverage level must be approved by Congress.