The Federal Deposit Insurance Corp. (FDIC) yesterday recommended that Congress consider expanding its regulatory powers to backstop certain deposits so that it could prevent bank runs, the New York Times reported. The proposal came the same day the FDIC orchestrated the seizure and sale of First Republic Bank to J.P. Morgan, and weeks after a run on Silicon Valley Bank helped sow its collapse. Right now, the FDIC insures bank deposits only up to $250,000. That has left banks that have a large share of uninsured deposits — particularly small- and midsize banks — vulnerable to runs. The FDIC estimates that as of the end of last year banks held $7.7 trillion of uninsured deposits, about 43 percent of total deposits in the U.S. “The report highlights that while the overwhelming majority of deposit accounts remain below the deposit insurance limit, growth in uninsured deposits has increased the exposure of the banking system to bank runs,” Martin Gruenberg, the chairman of the FDIC, said in a statement accompanying the report. “Large concentrations of uninsured deposits increase the potential for bank runs and can threaten financial stability.”
