Bank of America CEO Says Deposit Insurance ‘Worked Pretty Well’
BY PYMNTS | APRIL 20, 2023
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The deposit insurance system “worked pretty well,” said Bank of America CEO Brian Moynihan.
Speaking Thursday (April 20) at a Bloomberg event, Moynihan said deposit insurance funded by banks succeeded in protecting customers during the “fair amount of disruption” recently seen among regional banks, Bloomberg reported Thursday.
“The industry pays for the deposit premiums. We insure ourselves,” Moynihan said, according to the report. “The government is the go-between to make sure people believe it’s there. And they get the money back from us.”
Any changes to the current deposit insurance process “ought to be carefully dealt with only because it’s been in place since the ’30s and it’s worked pretty well,” Moynihan said.
At the end of a quarter in which the collapses of three banks led investors to closely watch the deposit flows at other smaller banks, several regional banks reported their deposits were stable.
Regional banks were disproportionately affected by the collapse of Silicon Valley Bank that touched off a deposit flight to the presumed safety of financial giants thought to be “too big to fail.”
As PYMNTS reported in March, the recent turmoil around Silicon Valley Bank and Signature Bank touched off a larger debate over how to stop contagion in the banking sector, who’s protected and who’s not.
The current $250,000 cap on deposit insurance is not set in stone — regulators can make what is known as a “systemic risk exception” where the Federal Deposit Insurance Corp. (FDIC) lifts the ceiling — but the cap is still in place and at least some deposits are not safe.
So, the debate rages on about how to protect bank customers — and how much protection they need.
In the meantime, chief financial officers (CFOs) are pursuing cash diversification strategies to ensure stability and reassure their boards.
Karbon CFO Frank Colich told PYMNTS in early April, “Clearly, a microscope is now turned on treasury management. It creates a little bit more effort on our end to make sure we’re diversifying our risk as much as possible on how we’re managing our cash.”
