Dallas Fed President discusses increasing limits on business accounts

Dallas Fed President Lorie Logan has been on a statewide listening tour and the comments she provided today demonstrate that she has heard what many Texas bankers have said.

At a conference today co-hosted by the Dallas Fed and Atlanta Fed entitled, “Exploring Conventional Bank Funding Regimes in an Unconventional World,” President Logan focused her opening address on deposit insurance reforms.

“My starting principle is that deposit insurance policies, like all banking policies, should support a level playing field and fair competition among banks,” Logan said. “While large depositors could theoretically provide helpful market discipline, they also often perceive—rightly or wrongly—that some banks are too big to fail and that the government will bail out those banks or their depositors in a crisis.”

Logan says one way to help restore balance for community and regional banks would be increased deposit insurance limits on business accounts, which have not been updated since 2008.

“If the limit had increased since then in line with nominal gross domestic product, it would be nearly half a million dollars today,” Logan said.

Logan said invoking systemic risk exceptions to SVB and Signature Banks in 2023 was the right thing to do but added that it highlighted another reason limits require another hard look.
“The need to provide insurance after the fact to depositors who weren’t supposed to receive it and whose banks had not been regulated as systemically important suggests the insurance limit was too low in the first place,” she said.

Read President Logan’s complete remarks on this topic.