Deposit insurance, DIF ratio and resolution tools debated as regulators seek more flexibility
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Summary
Members questioned FDIC and other regulators about the deposit insurance fund (statutory 1.35% minimum), the fund's reserve ratio, and whether Congress should grant temporary systemwide guarantees or modify least‑cost resolution rules to allow quicker responses during runs.
Lawmakers pressed the FDIC on the Deposit Insurance Fund (DIF) reserve ratio and the agency’s resolution toolbox following the failures of several banks in 2023.
Acting FDIC Chair Travis Hill explained the statutory minimum reserve ratio of 1.35% and described staff projections indicating the reserve ratio could ‘‘grow more slowly’’ under certain deposit‑insurance expansion scenarios. He cautioned that projections carry substantial uncertainty and that behavioral responses by depositors could change outcomes.
Members asked whether expanding insurance coverage or changing assessment mechanics would require higher assessments. Chair Hill said a bill that phases in higher insured limits over 10 years could attenuate short‑term assessment pressure, but emphasized uncertainty and the need for guardrails.
On resolution tools, regulators described steps to improve bidding processes for failed institutions (seller financing and expanding bidder pools) and said faster statutory tools could be useful in systemic scenarios. Chair Hill suggested Congress could consider time‑limited, guarded authorities to address rapid runs, while preserving least‑cost principles.
Several members pressed for more granular deposit data; Hill acknowledged limitations in FDIC data for deposits above and below various thresholds and said the agency has raised the matter at FFIC and with reporting entities.
What's next: FDIC and other agencies will provide written follow‑up on DIF modeling and deposit granularity; lawmakers signaled interest in drafting legislative fixes to resolution and deposit insurance processes.