February 6, 2012

Extend Unlimited FDIC Coverage on Business Checking Accounts

The Dodd-Frank legislation extended until the end of this year the FDIC unlimited coverage for traditional non-interest bearing transaction accounts, and eliminated the ability of banks to opt out of the program.

It is critical to see that this coverage is extended.  Recently, I spoke before the Federal Reserve Bank of Richmond’s annual Supervision and Regulation Conference.  I expressly raised this point and the significance it has for all community banks, their depositors and businesses who wish to borrow from their local banks.  

Large banks will use the sunset provision as an opportunity to effectively opt-out — by supporting the scheduled expiration of the coverage –- disadvantaging business customers who wish to keep their deposits at community banks.

As the economy recovers and community banks respond to increasing market demand, and loan originations continue to grow, it is essential that community banks maintain and build upon their deposit bases.  The recovery of the economy is dependent upon community banks providing loans to small businesses.  More deposits means greater funding ability for making loans.

The real advantage we offer customers is having their assets fully insured while being able to deal with a community bank rather than a megabank.

It is necessary for community banks to have this unlimited protection to avoid even the possibility of a depositor’s perception that a local bank is not strong enough to be worthy of such accounts.  (I’d put EagleBank up against the big banks any day!)

I urge all Senators and Representative to support the extension of the unlimited FDIC coverage permanently.