Senate Deposit Insurance Hearing
September 16, 2025
Last week, the Senate Banking Committee held a hearing to consider proposals to expand and reform bank deposit backstops, including for business accounts. The Sept. 10 hearing entitled Evaluating Perspectives on Deposit Insurance Reform was broadly bipartisan on the need for modernization, though divisions remained over scope and scale.
Why it matters: The 2023 regional bank crisis and Treasury’s implementation of emergency measures to guarantee all deposits at Silicon Valley Bank, Signature Bank, and Silvergate Bank have spurred bipartisan calls for deposit insurance reform.
- The bank failures, along with First Republican, had ripple effects across regional and small banks deposits.
- Amid higher interest rates and a downturn in the business cycle, commercial real estate lending became a frequent talking point among policymakers when examining the health of regional and small banks.
What they’re saying: Senators debated reforms to deposit insurance with particular focus on a bipartisan proposal from Sens. Bill Hagerty (R-TN) and Angela Alsobrooks (D-MD) to expand coverage for business checking accounts held by small businesses at community and regional banks.
- Republicans emphasized that any changes must be narrowly tailored and indexed to inflation, while Democrats called for broader protections to level the playing field with large banks.
- Both parties agreed community and regional banks face unique pressures, but differed on whether targeted expansion would curb or accelerate deposit flight.
- Members raised concerns about moral hazard and systemic risk, while also pointing to liquidity backstops, reciprocal deposits, and CDFIs as complementary tools.
Hagerty–Alsobrooks Proposal
- Sens. Hagerty and Alsobrooks highlighted their bipartisan bill to insure business checking accounts, particularly payroll accounts, up to $20 million at small banks. Senators examined whether the $250,000 deposit insurance cap remains appropriate, with discussion centered on targeted coverage for payroll and business operating accounts.
- Committee Chair Tim Scott (R-SC) argued that any reform should be indexed to inflation and narrowly designed to deter destabilizing runs without creating blanket guarantees, while warning of the cost to smaller banks.
- Ranking Member Elizabeth Warren (D-MA) strongly supported expanding coverage for small-business transaction accounts, stressing that local firms should not be left exposed while venture-backed corporations like Silicon Valley Bank were made whole.
- Witnesses Bob Harrison, CEO, First Hawaiian Bank and Peter Rice, CEO, Hanscom Federal Credit Union, endorsed a $20 million payroll account cap as a workable threshold. Nicholas J. Podsiadly, a partner at Jones Day, cautioned that such a level may be excessive.
- Overall, members agreed depositor confidence is essential, though Republicans leaned toward targeted, indexed reforms while Democrats pressed for broader coverage to protect communities and workers.