News

• Mr. James Ryan, Chairman and Chief Executive Officer, Old National Bancorp
• Mrs. Jill Castilla, President and Chief Executive Officer, Citizens Bank of Edmond
• Mr. Chris Furlow, President and Chief Executive Officer, Texas Bankers Association
• Mr. Grover Norquist, Founder and President, Americans for Tax Reform
• Mr. Jarryd E. Anderson, Partner and Co-Chair, Financial Services Group, Paul, Weiss, Rifkind, Wharton & Garrison LLP

What they’re saying: Discussion centered on uninsured transaction balances, depositor behavior in crises, and potential impacts on community, regional, and large banks. 

• The issue of increasing deposit insurance largely fell along party lines, with support from Ranking Member Maxine Waters (D-CA), and disapproval from Chairman French Hill (R-AR). 
• Much of the discussion focused on the Hagerty-Alsobrooks proposal, also known as the Main Street Depositor Protection Act (S. 2999). This bill would:
  • Expand coverage for business operating accounts: If enacted, this bill would raise FDIC/NCUA insurance to $10M per depositor for non-interest-bearing transaction accounts at eligible banks and credit unions. The aim is to reduce run risk and help smaller banks compete with “too-big-to-fail” giants.
  • Cost shielding/structure: A 10-year transition period would prevent community banks with less than $10B in assets from higher assessments or increased premiums tied to the new coverage.
• Many members and witnesses supported a reimagining of the Temporary Liquidity Guarantee Program (TLGP). The temporary FDIC crisis program started in 2008 during the GFC and fully insured non-interest-bearing transaction accounts above the normal limit.
• ETAG: Members discussed creating a new similarly designed program called the Emergency Transaction Account Guarantee (ETAG), as that would let FDIC/NCUA quickly guarantee transaction accounts system-wide during a panic for a limited time. 
  • It was noted that with the speed of electronic transactions, this program would need be deployed at the beginning of a crisis to operate effectively.
  • The ETAG program had bipartisan interest, with many witnesses and members in favor of ETAG reform proposals.
  • Rep. Barr (R-KY) questioned Mr. Furlow as to how ETAG could be preferable to an increase in deposit insurance. Mr. Furlow noted that ETAG would apply to all banks equally and ensure they are safe during a crisis. he notes that it is a reactive measure to a crisis, while increasing deposit insurance is a measure taken beforehand.
• Data collection: Members on both sides of the aisle raised concerns that the FDIC does not collect enough data to monitor uninsured deposits and that a thorough review of the data that is needed will be crucial before reforms can be made.

What they’re saying: Witnesses split into two camps. Bank CEOs and trade groups supported targeted higher coverage for non-interest-bearing business transaction accounts used for payroll and operations.

• Old National’s James Ryan said about 30% of his bank’s deposits are uninsured and argued that $10M coverage for these accounts would protect most mid-sized bank relationships, helping community and regional banks compete against perceived “too-big-to-fail” large banks.
• Skeptics led by Grover Norquist argued coverage is sufficient. According to their testimony, nearly 99% of accounts have under $250K, and the 2023 failures were supervisory and management breakdowns, not insurance shortfalls.
• The skeptics warned that higher guarantees create moral hazard and act like an industry tax passed to consumers.

Deposit Insurance Level Raise: Chairman Hill (R-AR) questioned whether increasing the limit to $10M per depositor is needed noting that 99% of depositors fall under the current $250k limit. He also noted that the failure of Silicon Valley Bank was at its core a management problem.