Congressman Frank Lucas said the country’s banking system needs targeted deposit insurance reform during a House Financial Services Committee hearing on the future of deposit coverage, costs, and depositor confidence.
Lucas said the system is healthy and well-capitalized but treats banks differently depending on their size. He pointed to the FDIC’s use of the Systemic Risk Exception to protect depositors when several large banks failed in 2023, compared to the lack of such protection when a small Oklahoma bank failed last year.
“When people hear that their deposits may be safer in a larger institution because of that implicit guarantee by the government, our smaller banks are left at a competitive disadvantage,” Lucas said.
He focused his questions on President Trump’s community banking agenda, including a proposal to expand deposit insurance coverage for non-interest-bearing transaction accounts. Lucas noted Acting FDIC Chair Travis Hill has testified that the FDIC would not need to raise assessments to support the expanded coverage.
Lucas also referenced the FDIC’s 2023 report on deposit insurance, which identified expanded coverage for business payment accounts as the “most promising option” to improve financial stability.
James Ryan, chairman and chief executive officer of Old National Bancorp, said broader coverage would strengthen the country’s diverse banking system.
“America needs banks of all sizes,” Ryan told lawmakers. “Having an increased deposit insurance limit reinforces the stability and strength of this very diverse system we have today.”
You can watch Lucas’ Q&A during the House Financial Services Committee hearing below.
