The banking coalition reportedly argued in a letter to federal regulators that it would bring stability to the banking industry and reduce the chances of “more bank failures.”
The Mid-Size Bank Coalition of America (MBCA) has reportedly asked United States federal regulators to extend insurance on all deposits for the next two years.
According to a March 18 Bloomberg report, the MBCA — a coalition of mid-size U.S. banks — sent a letter to the U.S. Federal Deposit Insurance Corporation (FDIC), asserting that extending insurance on “all deposits” would “immediately halt the exodus” of deposits from smaller banks.
The MBCA also reportedly noted that this action would “stabilize” the banking industry and significantly decrease the chances of “more bank failures.”
The MBCA proposed that the banks themselves fund the insurance program by raising the deposit-insurance assessment on lenders who opt to participate in the increased coverage.
Related: Marathon Digital: Deposits held at Signature Bank are secure and available
John Deaton, the founder of legal news outlet Crypto Law Lawyer, predicted in a March 19 tweet to his 250,000 followers that up to 300 banks could go under if the FDIC fails to provide “some guarantee.”
I bet 2-300 banks will go under if there isn’t some FDIC guarantee. And this crisis has NOTHING to do with Crypto. https://t.co/JPRjXEwVVW
This comes after a recent analysis by economists, published on March 13, revealed a large number of banks are at risk from uninsured deposit withdrawals.
The report revealed that “even if only half of uninsured depositors” decided to withdraw, “almost 190 banks are at a potential risk” of impairment to insured depositors, with “potentially $300 billion of insured depositors at risk.”
Meanwhile, Representative Tom Emmer, the majority whip in the United States House of Representatives, questioned reports that the FDIC is “weaponizing recent instability” in the banking sector to “purge legal crypto activity” from the U.S. in a March 15 letter to FDIC chair Martin Gruenberg,
Emmer warned that these actions are “deeply inappropriate” and could lead to “broader financial instability.”
Today, I sent a letter to FDIC Chairman Gruenberg regarding reports that the FDIC is weaponizing recent instability in the banking sector to purge legal crypto activity from the U.S. pic.twitter.com/fDmaA0XGWv
Furthermore, the U.S. Federal Reserve announced on March 13 that the vice chair for Supervision, Michael Barr, is “leading a review of the supervision and regulation” of Silicon Valley Bank in “light of its failure,” with the review set for public release by May 1.