FDIC proposes increases to insured business deposit limit


The FDIC has suggested easing the current deposit insurance limit for U.S. businesses, allowing bank deposit insurance for accounts holding more than $250,000, in an effort to address the industry's instability that led to three bank failures in the last two months. The regulator recommended the change to raise the insurance limit for business accounts used to pay for company operations, such as payroll, as these accounts pose the most significant risk to financial stability. The FDIC noted the need for more flexibility in targeting higher deposits in the banking system.

Following the recent bank failures, including First Republic Bank, which became the second-largest failure in history, the FDIC believes that raising the insurance limit for targeted business accounts would shore up the system and prevent further failures. This comes after a consortium of large lenders pooled $30 billion in cash to stabilize First Republic in March, however, the bank still suffered a significant deposit run that led to its collapse.

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