The Midsize American Banks Alliance (MBCA) has reportedly asked US federal regulators to extend insurance to all deposits over the next two years.
According to a March 18 Bloomberg a reportMBCA – a coalition of mid-sized US banks – sent a letter to the US Federal Deposit Insurance Corporation (FDIC), asserting that extending insurance to “all deposits” would “immediately stop the outflow” of deposits from smaller banks.
The MBCA also reportedly noted that this measure would “stabilize” the banking industry and significantly reduce the chances of “further bank failures”.
It was added that MBCA suggested that the insurance program be financed by the banks themselves, by raising the assessment of deposit insurance on lenders who choose to participate in the increased coverage.
Related: Digital Marathon: Deposits kept at a signature bank are safe and available
John Deaton, founder of the legal news outlet Crypto Law Lawyer, predicted in a March 19 tweet to his 250,000 followers that up to 300 banks could go bankrupt if the FDIC fails to provide a guarantee.
This comes after a recent analysis by economists, published on March 13, revealed that a large number of banks are at risk of withdrawing uninsured deposits.
The report revealed that “even if only half of uninsured depositors” decided to opt out, “nearly 190 banks are at potential risk” from the vulnerability of insured depositors, with “a potential $300 billion of insured depositors at risk.”
Meanwhile, U.S. House Majority Whip Tom Emmer, in a March 15 letter to Martin Gruenberg, the head of the FDIC, said he was skeptical of reports he’s received that the FDIC is “weaponizing recent instability.” in the banking sector in order to “clean up legal cryptocurrency” activity from the United States
Emmer warned that these measures are “deeply inappropriate” and could lead to “wider financial instability”.
Furthermore, the Fed announced on March 13 that its vice president of oversight, Michael Barr, is “leading a review of supervision and regulation” of Silicon Valley Bank, “in light of its failure,” with a review to be made public by May 1.
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