Midsize Banks in US Demand FDIC Insurance on All Deposits for 2 Years
- The Mid-Size Bank Coalition of America (MBCA) has asked the FDIC to extend the insurance of all the deposits in midsize US banks for the next 2 years.
- The MBCA seeks to extend the insurance on “all deposits,” which would “immediately halt the exodus” of deposits from smaller banks.
- The entity claims that the two-year period would “stabilize” the US banking industry, along with decreasing the chances of “more bank failures.”
- The MBCA asked the FDIC to make sure that the insurance program was funded by the banks themselves.
Amid a domino effect created by the collapse of Silicon Valley Bank (SVB) in the United States (US), many banks and their customers are worried about the future of their money. As a result, the Mid-Size Bank Coalition of America (MBCA) has asked federal regulators in the region to extend the insurance on all the deposits in midsize banks for the next two years.
As per a report from Bloomberg on March 18, the coalition of all the midsize banks in the US, MBCA, wrote a letter to the Federal Deposit Insurance Corporation (FDIC) asking the agency to extend the insurance on “all deposits,” which would “immediately halt the exodus” of deposits from smaller banks.
The midsize banks’ coalition noted in the letter that, as per their beliefs, insuring all the deposits for the two-year period would build users’ trust, stabilize” the banking industry, and decrease the chances of “more bank failures.”
Interestingly, the US midsize banks coalition also asked the FDIC to make sure that the insurance program be funded by the banks themselves. This can be done by raising the deposit-insurance assessment on lenders who opt to participate in the increased coverage.
It is crucial to note that, as per a prediction from John Deaton, founder of legal news outlet Crypto Law Lawyer, on March 19, up to 300 banks could go under if the FDIC fails to provide a guarantee.
This letter from US midsize banks comes almost a week after research from economists confirmed that a large number of banks are at risk from uninsured deposit withdrawals. The report pointed out that “even if only half of uninsured depositors decide to withdraw, almost 190 banks are at a potential risk of impairment to insured depositors, with potentially $300 billion of insured deposits at risk.”
Economists believe that the monetary policies that have been written by central banks can hurt long-term assets such as government bonds and mortgages and therefore, create significant losses for banks in the US.
“Recent declines in bank asset values significantly increased the fragility of the US banking system to uninsured depositors runs,” the study concluded.
As reported earlier by BitcoinWisdom, the collapse of Silicon Valley Bank (SVB) and Signature Bank has jeopardized the US economy and banking system. Interestingly, both banks had exposure to crypto assets and companies.
The crypto community believes that the US government plans to weaponize the collapse of both Signature Bank and Silicon Valley Bank in its fight against crypto. However, a FDIC spokesperson recently confirmed that the acquirers of these banks are free to decide which former clients of the banks they want to keep, including crypto firms.
A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.
