The deposit insurance system has served the nation well, but recent events have raised questions about whether the system can be improved to reflect the modern realities of banking, American Bankers Association Chair Elect Kenneth Kelly told senators today.
Kelly, who is chairman and CEO of Detroit-based First Independence Bank, testified on behalf of ABA before the Senate Banking Committee for a hearing on deposit insurance reform. Kelly chaired an ABA task force formed last year to explore ways to modernize the deposit insurance system, which has come under increased scrutiny following the 2023 failure of Silicon Valley Bank and two other institutions. The task force developed 10 policy recommendations that Kelly shared with committee members.
The recommendations will not answer all the policy questions surrounding the deposit insurance framework, Kelly said in prepared remarks. “Taken as a whole, however, we believe these recommended changes would make the existing system more responsive in moments of financial stress, more transparent and fairer to the institutions participating in the system and the customers they serve. Importantly, we also believe these recommendations can win support from a wide range of stakeholders, including banks of all sizes.”
Among other things, ABA is recommending that the issue of coverage limits be further studied, arguing there is not enough data to recommend a specific increase or to fully understand the cost of a change.
“We don’t know what that number should be,” Kelly said when asked about coverage limits. “We think it should be empirically based. We had a task force – individuals from G-SIBs all the way down to small banks – who had a fierce debate on how to approach this. And what I can tell you is that, unanimously, we believe that there is more data that we need to look at.”
Read Kelly’s ABA Banking Journal column on the 10 recommendations.
