Mid-size banks want all deposits insured for 2 years to avoid ‘panic’ and restore confidence, report says

• A coalition of more than 100 mid-sized banks is calling for deposits to be insured for two years.

• The Mid-Size Bank Coalition of America asked regulators to extend protection, Bloomberg reported.

• It said action was needed to “restore confidence among depositors before another bank fails.”

Federal regulators have been urged to protect all deposits for the next two years to prevent a wider run on banks following recent collapses, Bloomberg reported.

The Mid-Size Bank Coalition of America, which represents more than 100 lenders, called on the Federal Deposit Insurance Corporation to put backstops in place and broaden its protection for smaller banks.

“It is imperative we restore confidence among depositors before another bank fails, avoiding panic and a further crisis,” the MBCA wrote in a letter to regulators, per Bloomberg.

The group said the FDIC should extend its cover to “reduce chances of more bank failures,” according to the outlet, which obtained a copy of the letter that was also sent to the Comptroller of the Currency, Treasury Secretary Janet Yellen and the Federal Reserve.

Only the first $250,000 in accounts are protected by the FDIC under existing rules.

The MBCA said the increased protection would stop the “exodus” of deposits from smaller banks and help “stabilize” the financial sector.

If the FDIC did extend its insurance to all deposits for two years, banks could pay for it themselves by expanding the deposit-insurance risk assessment on lenders that chose to opt in, the MBCA suggested.

The coalition also said that confidence has “eroded” in smaller banks and that more cash could be taken out of regional lenders if more banks failed, per the report.

Silicon Valley Bank and Signature Bank collapsed this month following a run by depositors, while First Republic Bank was bolstered by deposits to the tune of $30 billion from a number of bigger lenders.

After taking control of SVB, regulators said they would “fully protect” all of its deposits in the bank.

The FDIC, OCC, Treasury and Federal Reserve all declined to comment to Bloomberg.

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