Sen. Scott seeks more info from FDIC on deposit insurance reform

As lawmakers consider deposit insurance reform, Senate Banking Committee Chairman Tim Scott (R-S.C.) is asking the FDIC to provide additional information about the amount of uninsured deposits in the U.S. banking system and the cost to banks should the deposit insurance limit be increased.

The committee last month held a hearing on deposit insurance reform during which American Bankers Association Chair Elect and First Independence Bank CEO Kenneth Kelly shared 10 policy recommendations for reform developed by an ABA task force. As a follow-up to the hearing, Scott yesterday sent a letter to FDIC Acting Chairman Travis Hill requesting answers to eight questions. The letter was first reported by Politico.

“A common theme throughout the hearing was the need for Congress to carefully evaluate deposit insurance reform proposals and – at the least – consider indexing FDIC deposit insurance to inflation,” Scott said. “However, as I have said before, reform is not simple; it comes with trade-offs. That is why I am requesting more information from the FDIC, particularly on the cost of deposit insurance reform and the effectiveness of the current system, to help evaluate reform proposals.”

Among the questions, Scott asked about the current proportion of uninsured deposits versus insured deposits in the U.S. banking system, what types of bank accounts have the most uninsured deposits, the costs to banks should the insurance limit be increased, and how increasing the limit would change market behavior and incentives for banks and depositors. He requested answers be provided by Oct. 20.