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A12 HEALTH
Tuesday 2 May 2023
FDIC recommends raising insured

deposit limit for businesses

The Federal Deposit Insurance Corporation (FDIC) seal is shown outside its headquarters, March
14, 2023, in Washington.
Associated Press

By SHARON L. LYNCH Risk Exceptions to protect lic reported its first-quarter
Associated Press the uninsured depositors results, shocking investors
NEW YORK (AP) — U.S. busi- at those institutions, raised when it revealed that de-
nesses might be able to fundamental questions positors had withdrawn
secure bank deposit insur- about the role of deposit $100 billion, most in mid-
ance for accounts hold- insurance in the United March immediately after
ing more than $250,000 if States banking system," Silicon Valley Bank and
Congress agrees with the FDIC Chairman Martin J. Signature Bank failed. First
Federal Deposit Insurance Gruenberg said in a state- Republic's stock plunged
Corp.'s new proposal to ment accompanying the more than 50% the day
ease the industry turmoil regulator's recommenda- after the report. U.S. Rep.
that has sparked three tions. The FDIC is a govern- Patrick McHenry, who
bank failures in the past ment agency formed dur- leads the House Financial
two months. ing the Great Depression to Services Committee, issued
The FDIC recommended restore faith in U.S. banking a statement Monday not-
the change Monday, re- institutions. ing that the FDIC "used its
thinking the decades-old As of December, more available tools to resolve
limit and seeking more than 99% of U.S. deposit First Republic Bank" but
flexibility to cover higher accounts held less than the congressman didn't
deposits on a "targeted" $250,000, and so were au- immediately address the
basis. Raising the insurance tomatically covered by ex- agency's recommenda-
limit for business accounts isting FDIC insurance, Gru- tions for change. In seeking
that pay for company op- enberg said. additional powers to in-
erations such as payroll However, the system re- sure business accounts, the
would shore up accounts mains subject to the sort FDIC said technological
that pose the most risk to of bank runs that brought advances both hasten the
financial stability, the FDIC down First Republic, de- speed of information and
said. spite a consortium of big let depositors quickly take
The proposed change ap- lenders having pooled $30 their money elsewhere at
pears to openly acknowl- billion in cash to stabilize the first sign of trouble. Both
edge that the FDIC is look- the bank as recently as factors can spur "faster,
ing for ways to calm both March. and more costly, bank
depositors and markets as Last Monday, First Repub- runs," the agency said.q
the agency contends with
the third bank run this year.
First Republic Bank be-
came the second largest
failure in history Monday
when regulators seized
it and JP Morgan Chase
stepped up as a buyer.
"The recent failures of Sili-
con Valley Bank and Sig-
nature Bank, and the deci-
sion to approve Systemic