FDIC recommends overhauling US insurance deposit system

The Federal Deposit Insurance Corp. is recommending the U.S. rethink its decades-old policy of insuring only as much as $250,000 in bank deposits

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The Federal Deposit Insurance Corp. is recommending the U.S. rethink its decades-old policy of insuring up to $250,000 in bank deposits and replace it with an overhaul that would allow regulators to cover higher amounts on a “targeted” basis.

The proposed change appears to openly acknowledge that the FDIC is looking for ways to calm both depositors and markets as the organization contends with the third U.S. bank failure this year. First Republic Bank became the second largest failure in history Monday when regulators seized it and JP Morgan Chase stepped up as a buyer.

“The recent failures of Silicon Valley Bank and Signature Bank, and the decision to approve Systemic Risk Exceptions to protect the uninsured depositors at those institutions, raised fundamental questions about the role of deposit insurance in the United States banking system,” FDIC Chairman Martin J. Gruenberg said in a statement Monday accompanying the regulator’s recommendations.

Under the proposal, the FCIC would offer business account coverage a higher levels than ordinary consumer deposits receive, the FDIC said.