The House Financial Services Committee has unanimously approved legislation to make permanent the temporary increase to $250,000 in deposit insurance coverage. 

 

The call to make the increase permanent has grown as the economic crisis has continued.  This would impose significant costs on the banking industry, however.  The FDIC estimates that the increase in coverage from $100,000 to $250,000 will increase insured deposits by about 15 percent, or $680 billion.  This reduces the Deposit Insurance Funds's (DIF) reserve ration by about 10 basis points. To minimuze the impact on deposit insurance premiums, the House bill includes a provision authorizing the FDIC to restore the DIF to its 1.15 percent required minimum over an eight-year period.

 

The measure also delays by five years - from 2010 to 2015 - the start of periodic adjustments to deposit coverage to reflect inflation.  Included in the bill is an expansion of the FDIC's authority to borrow from the Treasury from $30 billion to $100 billion.  Finally, the bill authorizes special assessments agains holding companies as well as insured institions where necessary to recoup the FDIC's losses from the rescue of any institution that poses a particular risk to the entire banking system.