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Deposit insurance reform likely, but not change in coverage level

WASHINGTON-While many banking regulators and lawmakers have applauded most of the proposals from the Federal Deposit Insurance Corporation (FDIC) for its revamping, most have taken a position against doubling the deposit insurance coverage. With such opposition to this aspect, that provision of the reform process is expected to be dropped....

By Staff Writer | Updated on August 21, 2001

WASHINGTON-While many banking regulators and lawmakers have applauded most of the proposals from the Federal Deposit Insurance Corporation (FDIC) for its revamping, most have taken a position against doubling the deposit insurance coverage. With such opposition to this aspect, that provision of the reform process is expected to be dropped. Credit unions have remained largely out of the limelight of this discussion, only advocating if the banks receive an increase in deposit insurance coverage so should credit unions. Two key players, Senate Banking Committee Chairman Paul Sarbanes (D-Md.) and Ranking Member Phil Gramm (R-Texas), have both noted their concerns about raising the coverage level. Of the banking regulators, the only one who seems to support it is Clinton administration hanger-on Ellen Seidman, director of the Office of Thrift Supervision. Other provisions in the FDIC’s proposal include: * merging the Bank Insurance Fund (BIF) and the Savings Association Insurance Fund (SAIF); * creating a risk-based pricing system for deposit insurance coverage; * allowing the FDIC greater flexibility in setting fund targets and insurance premium levels; and * permitting the FDIC to offer rebates when conditions result in lower than expected insurance losses; While the issue seemed to be losing steam, one key happening that brought deposit insurance reform back into the spotlight was the failure of Superior Bank FSB, with $2.3 billion in assets, which had fingers pointing back and forth among the regulators as to which allowed such a failure to happen.

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