CRS Raises Policy Questions on Failed Bank Resolution Processes
Commentary by Steven Lofchie
The Congressional Research Service (“CRS”) reviewed the FDIC’s process for resolving failed FDIC-insured banks and identified related policy issues.
In its report, CRS examined U.S. bank failures from 2001 through 2023. CRS said that the 561 bank failures between 2001 and 2020 had in total $721 billion in assets and $522 billion in deposits. The only two bank failures occurring between 2021 and 2023 were Silicon Valley Bank (“SVB”) and Signature Bank, and SVB and Signature Bank collectively had $319 billion in assets and $264 billion in deposits.
CRS, said that the recent bank failures raise policy questions on:
Deposit Insurance - Should Congress "give all deposits in the United States insurance coverage or should it be limited? Should banks of smaller size, including community banks, be temporarily provided the systemic risk exception to provide guarantees on all deposits?
Monitoring and Examination of Problem Banks - How should the large bank regulatory regime be tailored to address the systemic risks posed by medium- size banks?
Commentary
How can the Government justify protecting the uninsured depositors of one bank, but not of another? The social policy and logic of the deposit insurance scheme just went down in flames.
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