Statement for the Record on the Full Committee Hearing on "The Future of Deposit Insurance: Exploring the Coverage, Costs, and Depositor Confidence"

Dear Chairman Hill and Ranking Member Waters:

Thank you for holding this full committee hearing to explore the deposit insurance framework in the Unites States as well as potential reforms and key policy considerations. Deposit insurance has been a cornerstone of the U.S. banking system for nearly a century and protects customers, strengthens communities, and enhances the stability of the banks that fund it. The bank resolution process helps mitigate the costs of failures and ensure depositors have timely access to their funds. The Federal Deposit Insurance Corporation (FDIC), which oversees and manages deposit insurance and resolutions,is fully funded through assessments paid by banks, not taxpayers.

Despite the historical success of the deposit insurance system, there have been renewed questions in recent years about whether deposit insurance coverage levels are keeping pace with the needs of all depositors, whether the FDIC needs a more modern set of tools that allow swifter action to manage modern stress events, and whether there needs to be a more transparent process surrounding systemic risk determinations and special assessments. In particular, the 2023 failures of Silicon Valley Bank and Signature Bank, and a more recent failure of a community bank in Oklahoma, raised questions about whether the system could be better prepared to handle the realities of modern banking. The American Bankers Association (ABA) has actively solicited input from member banks on potential changes to the deposit insurance framework that could bolster public confidence in the system. In 2023, ABA formed a working group of more than 300 banks of varying sizes to discuss possible reforms. Those discussions revealed a simple truth: every option, including maintaining the current system, involves trade-offs that must be acknowledged.

Beginning in January of this year, ABA's current Chairman Kenneth Kelly of First Independence Bank based in Detroit, Michigan, led a smaller ABA Task Force on Deposit Insurance Modernization. The Task Force, which was comprised of a banks with diverse sizes and business models, produced a series of final recommendations that were approved unanimously by the ABA Board of Directors in July. The recommendations include a number of changes, some that only Congress can enact through statute and some actions the FDIC can take under its current authority. Attached is a summary of ABA's ten recommendations for deposit insurance modernization, which are divided into three broad categories: 1) Emergency Actions and Authority, 2) Deposit Insurance Coverage, the Deposit Insurance Fund, and Assessments, and 3) Bank Resolutions.

Since ABA does not have a witness testifying on our behalf at today's hearing, we respectfully request that this letter and the attached report highlighting our deposit insurance modernization recommendations be included as part of the record. We look forward to working with you and Members of the Committee on this important issue.

Download the letter to read the full text and attachment.