Financial Services provides insight on deposit insurance reform

<p>WASHINGTON-The House Financial Services Committee staff held a meeting January 24 with industry leaders regarding federal deposit insurance reform. Financial Institution Subcommittee Chairman Spencer Bachus (R-Ala.) is expected to introduce deposit insurance reform legislation this year. Financial Services majority staff has also been meeting with Senate Banking Committee majority staff on potential legislation, according to NAFCU Director of Legislative and Political Affairs Brad Thaler. So far the committee only had a rough outline worked out to present to the interested parties. Provisions in the possible legislation could include merging the Bank Insurance Fund and the Savings Association Insurance Fund while leaving the National Credit Union Share Insurance Fund untouched; increasing coverage to either $110,000, $120,000, or $130,000 with a tendency toward more coverage; indexing coverage according to the Consumer Price Index every 10 years beginning in 2010; doubling coverage for certain retirement accounts; consideration of increasing municipal deposit insurance coverage; and commissioning a study of whether to establish additional, voluntary deposit insurance coverage for higher premiums and the feasibility of complete privatization of insurance coverage. Thaler said the committee staffers considered the latter part of the study an unlikely avenue but wanted to study the possibility. NAFCU said total privatization could be “disastrous,” while CUNA Vice President and Senior Legislative Counsel Gary Kohn said they would like to see the results of the study before weighing in on the privatization issue. Kohn added that the level of coverage might not be the only sticking point. He pointed out that the banking industry was not even unanimous on whether a coverage increase is necessary. The deposit insurance reform bill could move at a fairly quick pace by Washington standards. According to Kohn, the Financial Institutions Subcommittee is looking at marking up the bill by the end of February or beginning of March. The full House Financial Services Committee could then mark it up by the end of March or early April. While Kohn said CUNA did not necessarily want a deposit insurance coverage increase, it would result in a “competitive problem” if banks received it and not credit unions. “Everybody we talked to without exception said that would be an unacceptable situation,” he said. [email protected]</p>