FDIC Proposes Raising Deposit Insurance Limit to Prevent Bank Failures
The US Federal Deposit Insurance Corp. (FDIC) has proposed raising the $250,000 limit on bank deposit insurance for accounts holding more than the current cap. The FDIC suggested the decades-old limit be rethought to provide greater flexibility to cover higher deposits. The proposal comes after three bank failures in two months, including that of First Republic Bank, the second-largest failure in history. FDIC Chairman Gruenberg suggested that insuring more deposits could encourage banks to take on more risk, so targeted business coverage may be necessary. As of December, over 99% of US deposit accounts held less than $250,000 and were automatically covered by existing FDIC insurance.