FOR IMMEDIATE RELEASE
80 State Groups Urge Congress To Act Now on Expiring FDIC Coverage
Allowing $1.4 Trillion in Deposits To Expire Would Affect Small Business, Municipalities, Economy
Washington, D.C. (Aug. 29, 2012)—The Independent Community Bankers of America (ICBA) announced that 80 state banking and community banking associations reiterated their call for Congress to temporarily extend full Federal Deposit Insurance Corp. (FDIC) coverage of noninterest-bearing transaction accounts before it expires at year-end. In a joint letter to lawmakers, the organizations wrote that failing to extend full FDIC transaction-account coverage would disrupt the banking system and the ability of small businesses, municipalities, hospitals and other entities to meet payroll and operational expenses.
“Because the economic recovery remains fragile, the abrupt expiration of insurance coverage for noninterest-bearing transaction accounts carries the risk of sudden dislocation of funds and other unintended consequences for banks, credit availability, and the economy,” the associations wrote. “Notably, this coverage is not ‘free,’ nor is it supported by tax dollars. Banks fully pay to have this coverage through their FDIC insurance premiums and cannot pay interest on these accounts.”
Full coverage of noninterest-bearing transaction accounts was first established by the FDIC in October 2008 as the Transaction Account Guarantee (TAG) program, which helped stabilize the banking system and protect depositors. Congress voted in 2010 to modify and extend the program through 2012. However, because of continued economic and financial instability, the program should be extended beyond its Dec. 31 expiration date. Approximately $1.4 trillion in deposits would abruptly become uninsured if Congress does not extend the coverage.
Today’s letter exemplifies the widespread support for temporarily extending this coverage. ICBA and community banks nationwide, the ICBA Minority Bank Council, a broad coalition of the nation’s bankers’ banks, the American Bankers Association, the American Land Title Association, the Conference of State Bank Supervisors, the International Franchise Association, the National Association of Federal Credit Unions and others have expressed their support for continuing the coverage. The deposit coverage keeps many small-business and municipal accounts secure, maintains deposits in local communities and prevents dangerous deposit concentration in a handful of the largest financial institutions.