Lawmakers on the House Financial Services Committee today heard from bankers and other experts on possible ways to modernize the deposit insurance framework, with committee members offering a variety of perspectives and potential paths. The committee is currently considering at least eight possible bills that propose changes to the deposit insurance and resolutions system.
Committee Chairman French Hill (R-Ark.) said lawmakers need to keep in mind several questions as they consider reforms, such as the costs of the proposals and possible unintended consequences. He also noted that deposit insurance was not the cause of the failures of Silicon Valley Bank and other institutions in 2023.
“They were the result of poor risk management by certain regional banks and the failure of federal and state supervisors to identify and fix problems that had already been focused upon by the examiner force,” Hill said. “No level of deposit insurance would have made up for the erosion of the failed banks’ identified deficient management decisions and the resulting impact on capital.”
Among the witnesses was ABA Vice Chair and Old National Bancorp CEO James Ryan, who was testifying on behalf of his bank. He said that deposit insurance reform is no substitute for poor management. But deposit insurance reform “can certainly slow down a crisis and give the FDIC and other regulators more time to correct whatever systemic problems exist,” he said.
ABA’s Task Force on deposit insurance modernization released a set of 10 recommendations in August.
