During the depths of the financial crisis in 2008, the FDIC established full deposit insurance coverage for non-interest-bearing transaction accounts to support community bank liquidity and stability and to prevent the sudden withdrawal of bank deposits which could have disrupted the entire banking system. In 2010, Congress modified and extended this FDIC insurance coverage through 2012. Because the banking system and the economic recovery remain fragile, a continuation of this FDIC insurance coverage is necessary to avert the risk of an abrupt dislocation of deposits for community banks. If the expanded insurance coverage is not extended, insurance coverage will revert to $250,000.00. An important political point is that this insurance coverage is not a government bank bail-out and that FDIC insurance is fully paid for by banks with their deposit insurance premiums.
Congress must act to extend insurance coverage by year-end and community bankers must make their voices heard. Leaving this important issue unaddressed will create a disruptive uncertainty for community banks and result in an additional regulatory burden to draft contingency plans in the event of significant reductions in deposits. Please click here to urge your members of Congress to support a five (5) year extension to the TAG program.