U.S. House Financial Services Committee holds hearing and circulates discussion drafts on deposit insurance reform

The U.S. House Financial Services Committee held a hearing on “The Future of Deposit Insurance: Exploring the Coverage, Costs, and Depositor Confidence”, positioning it as a comprehensive review of the U.S. deposit insurance framework and potential reform options. Chairman French Hill framed the Committee’s approach as “thoughtful, deliberative, and data driven” and noted that witness views are wide-ranging with no consensus, with multiple discussion drafts noticed for the hearing to illustrate the breadth of proposals. Hill argued that consideration of deposit insurance changes should be paired with “much-needed improvements” to the resolution framework, citing lessons from the spring 2023 bank failures and calling for policy work on measures including the Least Cost Resolution mandate and national concentration limits. He said deposit insurance was not the cause of the 2023 failures, attributing them instead to poor risk management at certain regional banks and supervisory failures to address identified problems, and noted that the Federal Deposit Insurance Corporation insures deposits up to USD 250,000 with fewer than one percent of deposit accounts above that level. The remarks also set out questions to guide reform design, including who benefits, how costs are allocated, potential unintended consequences, and whether sufficient data exists to support decisions, alongside principles such as maintaining stability and depositor confidence, preserving market discipline, and reducing moral hazard.