Banker Update: Shelby Suggests Compromise on Deposit Insurance Reform
In an interview this week, American Banker reported, Senate Banking Committee Chairman Richard Shelby suggested a way to break the deadlock on deposit insurance reform legislation.
Shelby said he would be open to indexing coverage levels prospectively but not retroactively and suggested that this might be the way to overcome the current stalemate. He said that he supports most of the other reforms in the legislation, including the merger of BIF and SAIF, allowing the FDIC to maintain the reserve ratio within a range, and removing restrictions on the FDIC's ability to set premiums.
Deposit insurance coverage has not been changed since 1980 when coverage was increased from $40,000 to $100,000. The 23-year span from 1980 until 2003 is the longest period in the history of the FDIC in which an adjustment to deposit insurance coverage has not been made. ICBA has pushed strongly for Senate Banking consideration of the legislation, which overwhelmingly passed the House and which lifts general coverage levels to $130,000 and doubles retirement account coverage, among other provisions. ICBA officers are seeking a meeting with Chairman Shelby.
The House has twice passed legislation to raise the coverage to $130,000 but no legislation has been passed in the Senate. House Financial Services Committee Chairman Michael Oxley has said he would be willing to compromise on coverage increases but has not commented on Shelby's proposal.
In the interview, Shelby also said that he would resist efforts to expand the powers of industrial loan companies, saying that he wanted to be careful about mixing commerce and banking. He also said that the Senate Banking Committee will hold hearings on February 5 concerning the recent OCC preemption rules and that he was reserving judgment on GSEs and mutual fund issues until the conclusion of hearings on those issues next month.