Demand for ‘insurance of deposits’ from medium-sized banks in the USA

The MBCA, whose members are banks with assets of up to $100 billion, has sent letters to US Treasury Secretary Janet Yellen, the US Federal Reserve, the Office of the Control of Money (OCC) and the FDIC, Bloomberg reported.

In its letter, MBCA asked federal regulators to expand FDIC insurance to cover all deposits over the next 2 years, arguing that this was necessary to avoid causing more deposit outflows from banks.

MBCA also said the regulation would stabilize the banking sector and reduce the possibility of further bank failures.

Pointing out that the banking sector is generally healthy, but the confidence in banks other than large banks has decreased, MBCA emphasized that confidence in the sector should be re-established.

MBCA stated that if another bank goes bankrupt, the outflow of deposits will accelerate.

Concern about the crisis in the banking sector

Last week, the bankruptcy of Silicon Valley Bank (SVB), the 16th largest bank in the United States, was one of the largest since the 2008 global financial crisis. After SVB, New York-based Signature Bank also went bankrupt.

The US Treasury Department, the Fed and the FDIC announced that depositors in bankrupt banks would have access to all of their money.

The difficulties experienced by the US First Republic Bank with the difficulties of Credit Suisse, the second largest bank in Switzerland, also caused concerns about the banking crisis.

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