HYDE-SMITH, COLLEAGUES ACT TO SHORE UP SUPPORT FOR COMMUNITY LENDERS
Bipartisan Legislation Offers FDIC Deposit Insurance to Enhance Financial Stability for Community & Mid-sized banks, Credit Unions
WASHINGTON, D.C. – U.S. Senator Cindy Hyde-Smith (R-Miss.) on Wednesday signed as a primary sponsor of bipartisan legislation to strengthen small and mid-sized lenders like community banks and credit unions – institutions that drive local economic growth.
Hyde-Smith joined U.S. Senators Bill Hagerty (R-Tenn.) and Angela Alsobrooks (D-Md.) in introducing the Main Street Depositor Protection Act (S.4198). The measure would direct the Federal Deposit Insurance Corporation (FDIC) to provide up to $5.0 million of deposit insurance coverage to deposits in noninterest-bearing transaction accounts, which are primarily used by small and medium-sized enterprises and non-profits for operational funds such as payroll.
“Community banks and credit unions represent a cornerstone for upholding most small businesses and start-ups in Mississippi and other states. This bipartisan legislation authorizing the FDIC to raise the deposit insurance cap will protect not only these financial institutions, but also the small businesses that rely on access to their capital,” Senator Hyde-Smith said. “Enacting this bill would be a win for small business growth, rural America, and our economy.”
“The banks that serve Main Street must have the same chance to succeed as the banks that serve Wall Street. This bipartisan, bicameral bill advances the Administration’s priority of preserving the central role of regional and community banks in the financial system of the future. It’s narrowly targeted to address a very specific concern that manifested itself during the Silicon Valley Bank collapse — a run on noninterest-bearing transaction accounts typically used to make payrolls by small businesses that are very important customers for our local and regional banks,” said Senator Hagerty.
“I am proud to have worked with Senator Hagerty to introduce our updated Main Street Depositor Protection Act with Senators Cortez Masto, Hyde-Smith, Gallego, and Banks. This bipartisan legislation would require a data driven process to increase deposit insurance coverage levels for business checking accounts at most banks and credit unions. Our small businesses are the backbone of the American economy, and they often rely on community banks and credit unions. Responsibly raising the deposit insurance threshold will protect employees and businesses in times of crisis and strengthen our overall financial system,” said Senator Alsobrooks.
S.4198 is related to the Trump administration and financial community’s call to support small and mid-sized lenders to improve the overall stability and resilience of the U.S. banking system in the aftermath of March 2023 bank failures. Those failures resulted in depositors moving away from the regional and community lenders that fuel small businesses and local economies and toward the largest global banks.
Expanded FDIC coverage would apply to U.S. insured banks and credit unions, except for the very largest banks that already benefit from a perceived government guarantee. Current limits leave many business transaction accounts—such as payroll—exposed during times of financial stress, which can contribute to bank runs and instability.
The legislation offering expanded insurance coverage would not automatically require banks to pay new Deposit Insurance Fund (DIF) assessments, which would only be required if the DIF fell below its statutory minimum reserve ratio. The DIF currently exceeds that minimum and has been trending upward.
The Main Street Depositor Protection Act, which is supported by the Mississippi Bankers Association, is also cosponsored by U.S. Senators Jim Banks (R-Ind.), Catherine Cortez Masto (D-Nev.), Ruben Gallego (D-Ariz.), and Roger Wicker (R-Miss.).
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