The US Plans to Reform Deposit Insurance System to Mitigate Risks of Bank Run

On Monday, Eastern Time, the Federal Deposit Insurance Corporation (FDIC) released a comprehensive overview of the deposit insurance system and reform plans to address financial stability issues stemming from recent bank failures. The FDIC has outlined three options for deposit insurance reform, the first of which would be to raise the insurance cap for all bank accounts above the current $250,000 limit. But the FDIC argued that raising the deposit insurance cap would not, by itself, address the run risk associated with high concentrations of uninsured deposits. The second is comprehensive insurance on all deposits, which would effectively eliminate the risk of a run, but could have a big impact on banks' risk-taking behaviour. Banks could be more reckless without fear of a run. The third item is to increase the insurance coverage in a targeted manner, that is, to provide different deposit insurance limits for different account types, and the insurance coverage of corporate accounts will be significantly higher than that of other accounts.