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Regional and community banks rally to call for FDIC backup
Banking crisis is absolutely stabilizing: Sonenshine
Barron’s markets reporter Jacob Sonenshine discusses whether the banking sector is on the brink of a 2008-style bailout on “Varney & Co.”
Mid-sized regional banks and their community banking counterparts around the country are calling on the Federal Deposit Insurance Corporation (FDIC) to insure all bank deposits to prevent bank runs like those that toppled Silicon Valley Bank and Signature Bank.
The FDIC ordinarily insures deposits up to a cap of $250,000 per depositor, which leaves balances in excess of that being vulnerable in the event of a bank failure. In response to the recent collapse of Silicon Valley Bank and Signature Bank, federal regulators granted systemic risk exceptions and guaranteed all deposits at those banks – including those that would typically be uninsured.
However, the Treasury Department has signaled that regulators aren’t planning to backstop uninsured deposits at banks that aren’t granted systemic risk exceptions. The uncertainty created by the bank failures along with federal regulators’ response has prompted some customers of mid-sized and community banks to withdraw funds from smaller banks and move them to larger, systemically important banks considered "too big to fail" – a dynamic that could worsen if additional banks fail.
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