According to Bloomberg, the Mid-Size Bank Coalition of America, which includes several Illinois banks, has asked federal regulators to fully insure all deposits for the next two years.
In its letter, Mid-Size Bank Coalition of America stated that the FDIC insurance guarantee for all deposits will help stabilize the banking system and restore confidence in it to avoid further bank ruin.
At the moment, deposits in FDIC-insured banks are covered for up to $250,000.
MBCA’s appeal came after the collapse earlier this month of Silicon Valley Bank and Signature Bank. A third bank, First Republic, last week received a $30 billion bailout from America’s 11 largest banks after a week of turmoil in the U.S. banking sector.
Coalition banks have assets of an average of $20 billion, but can reach $100 billion. About 110 participating banks are located in all 50 states and Washington, DC, as well as in three US territories. According to the MBCA website, each coalition bank employs an average of 2,500 people.
Among the participating banks located in Illinois are:
- Byline Bank, Chicago;
- Wintrust Financial, Rosemont;
- QCR Holdings, Moline;
- Busey Bank, Champaign.
The extension of the deposit guarantee “will immediately stop the outflow of deposits from smaller banks, stabilize the banking sector and significantly reduce the likelihood of new bank failures,” reads a letter sent to Treasury Secretary Janet Yellen.
After the banks went bankrupt, customers of regional banks transferred their money to larger banks that were considered too big to go bankrupt. The banking group is concerned about a chain reaction and further flight of depositors in the event of bankruptcy of other banks.
However, in the case of Wintrust Bank, the bank’s representatives stated that the financial institution has always been part of a coalition of regional banks and has a long tradition of deposit insurance. Jennifer Morris, Wintrust’s marketing director, said Monday that the Rosemont-based bank is financially stable and has guarantees to reassure customers.
“Wintrust remains financially stable with stable profitability and high credit quality, and customer activity to date has been ‘normal,'” Morris said.
The bank’s diverse customer base and structure of 15 charter banks ensure stability, as well as the ability of Wintrust, which has 15 charter bank branches in the Greater Chicago area, to offer a unique MaxSafe product that offers FDIC insurance for up to $3.75 million per account holder.
“Despite the general state and security of the banking industry, trust has been undermined in all but the largest banks,” the coalition group said in a letter. “Trust in our banking system as a whole must be restored immediately, and we must take all necessary measures for this.”
U.S. regulators have tried to calm concerns about threats to banking systems. The Federal Reserve said cash-strapped banks have borrowed about $300 billion dollars over the past week.
Separately, New York Community Bank has agreed to buy part of the bankrupt Signature Bank in a $2.7 billion deal, the FDIC said on Sunday. The FDIC also said that Signature Bank’s $60 billion loans are expected to be sold over time.
Traders expect that the turmoil in the banking system that occurred last week will force the Fed to limit the rate hike at this week’s meeting to 0.25 percentage points.
A survey published on Friday by the University of Michigan showed that the inflation expectations of American consumers are nevertheless declining.