The news: A banking industry trade group asked US financial regulators to expand deposit insurance to cover all deposits for two years, per Bloomberg. The group received a vague and not very confidence-instilling response.
Fully insured: The Mid-Size Bank Coalition of America (MCBA) submitted a letter to financial regulators asking to federally insure all deposits for the next two years.
Sticking to her guns: At an American Bankers Association conference, in prepared remarks that seemed to address the coalition’s request, Treasury Secretary Janet Yellen emphasized the stability of the US banking system.
Her statements don’t differ much from the message she delivered last week in her first appearance since SVB and Signature collapsed. Unfortunately, those statements haven’t been enough to quell on-edge customers and stop the rapid outflow of deposits from smaller banks.
What are regulators’ options? While the banking sector nervously awaits additional fallout, regulators are contemplating their options.
The big takeaway: The banking system may be calming down, but it’s far from quiet. Any further sign of distress could spook customers again and spark a series of bank runs that could put a lot of stress on small and midsize banks. Yellen’s vague remarks have also created uneasiness, as regional banks fear financial regulators have the power to pick and choose which banks win and lose. Regulators seem to be playing it by ear and hoping the panic blows over. But their lack of a clear plan may come back and bite them in the form of more bank collapses.
This article originally appeared in Insider Intelligence’s Banking Innovation Briefing—a daily recap of top stories reshaping the banking industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.
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