Banking crisis on the horizon? U.S. move to expand deposit insurance – Cryptopolitan

The United States is reportedly considering expanding the scope of deposit insurance to guarantee all bank deposits in the event of a worsening banking crisis.

According to Bloomberg, the U.S. Treasury Department is currently discussing the possibility of expanding deposit insurance beyond the current cap of $250,000.

Is the move necessary?

While no formal decision has been made, the move is being considered as a potential strategy in case the current situation gets worse. Calls for an increase in the deposit insurance cap have been growing since the collapse of several banks in March.

The Mid-Size Bank Coalition of America has called for the cap to be lifted for the next two years to protect depositors and prevent capital from being pulled from smaller banks for supposedly safer-looking heavyweights.

The move would ultimately depend on the level of emergency authority federal regulators have, and whether the insurance cap can be increased without formal consent from Congress.

While U.S. authorities do not deem such a drastic move necessary at the moment, recent steps taken by financial regulators are likely to be sufficient.

Federal Reserve rolled out the $25 billion Bank Term Funding Program (BTFP) on March 13, as the government pushed to stem any further contagion after the collapse of Silvergate, Signature Bank, and Silicon Valley Bank in recent weeks.

Expanding deposit insurance beyond the max cap to cover all deposits would be a significant move that would have far-reaching implications.

Bank crisis on the horizon?

According to the FDIC, domestic U.S. bank deposits totaled $17.7 trillion as of December 31. The move would provide much-needed reassurance to depositors, who have become increasingly nervous about the safety of their money in the current climate.

While the move to expand deposit insurance beyond the current cap is being considered, it is not deemed necessary at present. Recent steps taken by financial regulators, such as the Bank Term Funding Program (BTFP), are likely to be sufficient.

The move to increase the deposit insurance cap would depend on what level of emergency authority federal regulators have and whether it can be increased without formal consent from Congress.

The White House Press Secretary, Karine Jean-Pierre, was asked in a March 20 press briefing whether the federal government was supportive of a push from small- and mid-size banks to expand FDIC insurance beyond $250,000.

Jean-Pierre was tight-lipped on the Biden Administration’s view, stating that the government’s focus was on ensuring a stable financial system and creating a fair playing field for all banks.

She emphasized that recent actions taken by the government would ensure that Americans can have confidence in their deposits.

While the move to expand deposit insurance beyond the current cap is being considered, it is not deemed necessary at present. Recent steps taken by financial regulators are likely to be sufficient.

The move would depend on what level of emergency authority federal regulators have and whether it can be increased without formal consent from Congress.

Regardless, the move would provide much-needed reassurance to depositors, who have become increasingly nervous about the safety of their money in the current climate.