2023 Options for Deposit Insurance Reform | 13

26The availability of deposit insurance is not limited to U.S. citizens and residents; any person or entity that maintains deposits in an insured bank receives 

deposit insurance coverage as provided under the Federal Deposit Insurance Act.

27 FDIC, “General Principles of Insurance Coverage,” https://www.fdic.gov/resources/deposit-insurance/diguidebankers/documents/general-principles.pdf.

28On January 21, 2022, the FDIC published a final rule to simplify the deposit insurance regulations for trust accounts. The changes, effective April 1, 2024, 

will reduce the number of ownership categories from 14 to 13.

29The level was set in 1933 and effective in 1934.

Section 3: History of Deposit Insurance 

in the U.S.

This section examines changes to deposit insurance 

coverage since the FDIC was established, including 

periodic changes to the standard maximum deposit 

insurance amount (SMDIA) and the periods when 

differential coverage was available for different 

account types. It includes a detailed discussion of the 

most recent differential deposit insurance coverage 

treatment by account type, the FDIC’s 2008 TAG 

program, and a similar program put in place under 

Dodd-Frank in 2010. The section then discusses 

changes in the composition of deposits since 1984 and 

provides information on uninsured depositor losses 

over the past three decades. The section ends by 

looking briefly at technological and recent regulatory 

changes, and relevant upcoming changes to the 

financial system.

The SMDIA applies to each depositor by ownership 

right and capacity, or ownership category, for each 

bank and is based on federal statutes and FDIC 

regulations.26 The FDIC’s “General Principles of 

Insurance Coverage” note that “All deposits held by a 

depositor in a particular ownership category—whether 

in one account or multiple deposit accounts—are 

aggregated and insured up to the SMDIA for that 

ownership category.”27 As of May 2023, there were 

14 ownership categories.28 In practice, the ability of 

depositors to open accounts under multiple ownership 

categories allows depositors to access deposit 

insurance coverage above $250,000 at a single bank. 

This section refers to the SMDIA as $250,000, rather 

than effective coverage, unless noted otherwise.

The History of FDIC 

Insurance Coverage 

Limits

Congress has increased the SMDIA for FDIC insurance 

seven times since it was originally set at $2,500 in 

193329 to keep pace with inflation, maintain depositor 

confidence, and help smaller institutions. Particularly 

during the mid-1960s to 1980, there was an added 

purpose of helping the thrift industry. The statutory 

changes to the SMDIA are presented in Table 3.1. 

Given the lengthy period with no increase to the 

SMDIA by the early 2000s, inflation-adjusted increases 

TABLE 3.1

Congress Has Increased the Standard Maximum Deposit Insurance Amount Seven Times Since 1934

Year Amount ($)

1934*

1934

1950

1966

1969

1974

1980

2008†

2,500

5,000

10,000

15,000

20,000

40,000

100,000

250,000

Source: FDIC.

*The initial coverage limit was $2,500 from January 1 to June 30, 1934. †

Temporary increase; made permanent in 2010.
14 | 2023 Options for Deposit Insurance Reform

to the SMDIA were anticipated under a provision of 

the Federal Deposit Insurance Reform Act of 2005 

(FDIRA).30 These increases were to begin in 2010, but 

the increase to $250,000 in 2008, first temporary and 

then permanent, effectively superseded any such costof-living adjustment; it likely will continue to do so for 

a considerable period absent new legislation, since by 

statute the adjustment is based upon the prevailing 

$100,000 level in 2005.31 Figure 3.1 compares the 

nominal SMDIA to the coverage level in 2008 dollars 

(the last time the SMDIA was raised) to illustrate 

how inflation has affected the SMDIA over time. In 

addition to changes to the standard coverage amount, 

Congress has made three changes to the coverage 

levels of particular types of accounts that increased 

their coverage above the then-standard coverage level 

(see below for more details).

30See 12 U.S. Code Sec. 1821(a)(1)(F). For a description of this change, see Van Roosebeke and Defina (2022), p. 9.

31 FDIRA provided that the SMDIA be adjusted every five years and rounded down to the nearest $10,000. Under that provision, in 2010 the inflation-adjusted 

coverage level would have been $109,716, and it would have rounded down to $100,000; in 2015, the inflation-adjusted coverage level would have been $119,259, 

and it would have rounded down to $110,000; in 2020, the inflation-adjusted coverage level would have been $130,548, and it would have rounded down to $130,000; 

as of February 2023, the inflation-adjusted coverage level was $152,271, but under the statute the coverage level would not have been due to reset until 2025. 

32 Information on events from the 1930s through 1980 is largely based on Bradley (2000).

33Pub. L. 73-66.

34Pub. L. 73-362.

35Pub. L. 74-305.

1930s32

Before the FDIC was made permanent in 1935, 

Congress originally set the coverage limit for deposit 

insurance at $2,500 effective January 1, 1934, in the 

Banking Act of 1933.33 The limited guarantee was 

important to ensure passage of the deposit insurance 

provisions of the law. The temporary plan was to last 

six months, but Congress extended it for an additional 

year and in June 1934 raised the coverage level to 

$5,000.34 The FDIC supported the increase, and when 

the Banking Act of 193535 made the FDIC permanent, 

Dollars

Sources: FDIC and Bureau of Labor Statistics (Haver Analytics).

Note: The deposit insurance limit was increased temporarily to $250,000 in 2008; the increase was made permanent in 2010. 

FIGURE 3.1

The Real Value of Deposit Insurance Has Fluctuated Over Time and Decreased 

in Recent Years

0

50,000

100,000

150,000

200,000

250,000

300,000

1934 1941 1948 1955 1962 1969 1976 1983 1990 1997 2004 2011 2018

Nominal Insurance Coverage

Insurance Coverage in 2008 Dollars
2023 Options for Deposit Insurance Reform | 15

the FDIC recommended retaining the $5,000 limit, 

which fully insured 98 percent of depositors.36

1950–1969

The insurance coverage limit was raised from $5,000 

to $10,000 in 1950 in the Federal Deposit Insurance Act 

(the FDI Act).37 This increase was viewed as keeping 

up with inflation and restoring coverage to the same 

percentage of depositors as had been the case in 1935. 

The increase was expected to benefit smaller banks 

and increase public confidence in the banking system. 

There was consideration of raising the coverage limit 

to $25,000 in 1963, an increase that the FDIC favored, 

but Congress did not act. The coverage level was 

increased to $15,000 in 1966; at the time, the thrift 

industry was having difficulty attracting depositors 

and maintaining mortgage financing.38 An increase 

in market interest rates had led to reductions in 

household savings in depository institutions, which 

was particularly problematic for thrifts. The increase 

in the limit also accounted for inflation and promoted 

confidence in the banking system. Just three years 

later, in 1969, Congress increased the coverage limit to 

$20,000. Again, the increase helped the thrift industry 

as it made savings accounts more attractive and so 

provided liquidity for housing.39

1974

The insurance coverage level was raised from 

$20,000 to $40,000 in 1974.40 Against the backdrop of 

significant inflation and tight Federal Reserve policy, 

rates on open-market instruments increased well 

above rates paid by insured depository institutions. 

Both the FDIC and Federal Home Loan Bank (FHLB) 

Board supported an increase in the coverage level. 

The FDIC considered the increase a way to help 

insured banks compete in an increasingly competitive 

market for savings, with businesses seeking higher 

returns outside insured banks. The House bill favored 

an increase to $50,000, while the Senate bill set the 

36The original permanent deposit insurance plan in the Banking Act of 1933, which was never implemented, created a co-insurance system, with full coverage 

to $10,000, 75 percent coverage on deposits from $10,000 to $50,000, and 50 percent coverage on deposits over $50,000. The FDIC believed that this plan would 

have increased the FDIC’s liability for a very small increase in the proportion of depositors covered.

37Pub. L. 81-797.

38Pub. L. 89-695.

39Bradley (2000).

40Pub. L. 93-495.

41Bradley (2000).

42Pub. L. 96-221.

43Bradley (2000).

44Pub. L. 110-343.

45Pub. L. 111-22.

level at $25,000, so the amount in the law was a 

compromise. The increase accounted for inflation and 

a concern that there might have been some decline in 

confidence in the U.S. banking system with the notable 

failure of Franklin National Bank in 1974.41

1980

The insurance coverage level was raised from 

$40,000 to $100,000 by the Depository Institutions 

Deregulation and Monetary Control Act of 1980.42

In a period of very high inflation and record high 

interest rates, the increase in the deposit insurance 

coverage level was both a response to inflation and an 

attempt to help depository institutions, particularly 

the increasingly troubled thrifts, in fighting deposit 

outflows. The Federal Reserve Board in testimony 

before Congress supported the increase. However, 

unlike the other changes to the SMDIA, the FDIC 

was concerned about the size of the increase and 

suggested that $60,000 would better serve as an 

adjustment for inflation, or that if the $100,000 level 

were chosen it should come with a change in the 

assessment rate to maintain the adequacy of the DIF.43

2008–2010

The SMDIA was increased temporarily from $100,000 

to $250,000 in October 2008 by the Emergency 

Economic Stabilization Act of 2008.44 The increase 

was to be in effect until December 31, 2009. In May 

2009, the temporary increase was extended from 

December 31, 2009, to December 31, 2013.45 But 

before that extension was passed, Congress had heard 

from interested parties about making the increase 

permanent. In both House and Senate hearings in 

February and March 2009, the industry (both the 

American Bankers Association and the Independent 

Community Bankers Association) advocated making 

the increase to $250,000 permanent, stating that the 

higher limit increased public confidence and helped 

community banks garner deposits. Both trade groups 
16 | 2023 Options for Deposit Insurance Reform

argued that adjusting for inflation, the $250,000 limit 

approximately restored the coverage that the $100,000 

limit provided in 1980. The National Credit Union 

Administration was also in favor of the permanent 

increase and said a reversion to the old limit would 

destabilize the industry and affect public confidence.46

The FDIC stated that any permanent increase in the 

coverage limit was a decision by Congress but that the 

FDIC should be allowed to account for any increase 

in setting insurance premiums.47 The Dodd-Frank 

Act made the increase to $250,000 permanent. That 

increase did not generate significant comment in 

testimony before Congress, and the provision was not 

included in the legislation until it reached the HouseSenate conference.

Differential Treatment of Accounts

Congress has several times set the deposit insurance 

coverage limit for certain types of accounts above the 

SMDIA. The first time was in 1974 when the statute 

set the SMDIA at $40,000 and increased coverage for 

public unit time and savings deposits held by state 

and political subdivisions to $100,000. This increase 

benefited banks by allowing them to better compete 

for public deposits and by freeing pledged assets 

associated with public deposit accounts. Through the 

enactment of the Financial Institutions Regulatory 

and Interest Rate Control Act of 1978,48 Congress 

authorized another differential treatment of deposits, 

increasing to $100,000 the coverage limit for time and 

savings deposits of individual retirement accounts 

(IRAs) and KEOGH funds (funds in retirement plans 

for self-employed individuals, small businesses, and 

partnerships). Differential coverage for retirement 

accounts was extended further under the Federal 

Deposit Insurance Reform Act of 2005, when coverage 

for those accounts was increased to $250,000, leaving 

the SMDIA at $100,000 though providing for future 

periodic inflation adjustments to the SMDIA. The FDIC 

46Typically, the changes in the SMDIA for FDIC-insured accounts are also adopted for credit unions.

47See U.S. House, Committee on Financial Services, Promoting Bank Liquidity and Lending Through Deposit Insurance, Hope for Homeowners, and Other 

Enhancements, 111th Cong. 1st sess. (Feb. 3, 2009), and U.S. Senate, Committee on Banking, Housing and Urban Affairs, Current Issues in Deposit Insurance, 

111th Cong., 1st sess. (Mar. 19, 2009).

48Pub. L. 95-630.

49See U.S. House, Subcommittee on Financial Institutions and Consumer Credit, Viewpoints of the FDIC and Select Industry Experts on Deposit Insurance Reform, 

107th Cong., 1st sess. (Oct. 17, 2001), 7.

50This section is largely based on the discussion of the TAG program in FDIC (2017), chapter 2. 

51 FDIC, “FDIC Announces Plan to Free Up Bank Liquidity,” press release, October 14, 2008, https://archive.fdic.gov/view/fdic/3381.

supported the increase to retirement account coverage 

and suggested that it be similar to the 2.5 times 

multiple adopted in 1978.49

The Transaction Account 

Guarantee Program50

The most recent instance of differential coverage 

occurred in response to the financial crisis that 

began in 2008 and the recession that followed. The 

FDIC created the TAG program under a systemic risk 

exception. The program was in effect from October 

2008 to year-end 2010. This program provided 

unlimited deposit insurance coverage to certain 

transaction accounts for institutions that chose to 

participate. Congress enacted a similar program, but 

for all institutions, under the Dodd-Frank Act in 2010. 

That program ended at year-end 2012. 

Background

As the financial crisis deepened in October 2008, the 

then-administration and bank regulators, as part 

of efforts to stabilize the financial system, used the 

systemic risk exception to put in place the Temporary 

Liquidity Guarantee Program (TLGP).51 The TLGP 

included both a debt guarantee program and the TAG 

program. The TAG program provided unlimited deposit 

insurance on certain types of transaction accounts; 

this was the first time the FDIC insured deposits above 

the statutory coverage limit.

Although at the time no signs existed of large-scale 

runs on insured depository institutions, anecdotal 

evidence suggested that deposits were leaving banks 

viewed as troubled, and that even healthy banks were 

having deposit outflows. The TAG program was meant 

to alleviate potential runs and liquidity pressures that 

might particularly affect smaller banks if concerned 

business and municipal depositors withdrew funds 

and transferred them to larger banks. 
2023 Options for Deposit Insurance Reform | 17

The TAG Program’s Coverage and Participation

The TAG program was voluntary but was first extended 

to all insured institutions for 30 days without cost, 

after which they could opt out.52 After the initial 

period, more than 7,200 banks and thrifts, or 87 

percent of FDIC-insured institutions, remained in the 

program. The TAG program was initially supposed 

to guarantee accounts until December 31, 2009, but 

given the financial crisis and recession, the FDIC was 

concerned that removing the guarantee too quickly 

might disrupt deposit funding and cause needless 

failures from sudden deposit withdrawals. Therefore, 

the FDIC extended the program twice, first through 

June 30, 2010, and then through December 31, 

2010, when the program ended. Institutions could 

opt out each time the program was extended.53 The 

percentage of insured institutions participating in the 

program declined with each extension and was down 

to 74 percent during the final program period. Over 

time, the average size of institutions remaining in the 

TAG program declined, with the greatest shift in size 

occurring at the first extension of the program 

(Table 3.2). 

52 73 Fed. Reg. 64179 (Oct. 29, 2008).

53 74 Fed. Reg. 45093 (Sept. 1, 2009); 75 Fed. Reg. 36506 (June 28, 2010).

54 73 Fed. Reg. 64179, 64182 (Oct. 29, 2008).

55 73 Fed. Reg. 72244 (Nov. 26, 2008).

56 75 Fed. Reg. 36506 (June 28, 2010).

Figure 3.2 shows the amount of deposits covered by 

the TAG program. TAG coverage peaked at more than 

$800 billion at year-end 2009. A different transaction 

account guarantee program was enacted under the 

Dodd-Frank Act and ran for an additional two years, 

through December 31, 2012 (see below).

The initial rulemaking for the TAG program defined 

an eligible account as “a transaction account with 

respect to which interest is neither accrued nor paid 

and on which the insured depository institution does 

not reserve the right to require advanced notice of 

an intended withdrawal.”54 After receiving public 

comments, the FDIC extended the TAG to other 

accounts deemed important to cover: Interest of 

Lawyers Trust Accounts (IOLTAs) and negotiable order 

of withdrawal (NOW) accounts, which paid a rate no 

higher than 0.5 percent.55 When the TAG program was 

extended for the second time, the FDIC lowered the 

allowable interest rate to 0.25 percent.56

TABLE 3.2

Over Time, an Increasing Proportion of Participating Banks Opted Out of the FDIC’s TAG Program,

and the Average Size of Those Banks Increased

Initial Opt-Out Second Opt-Out Third Opt-Out

Total Number of Institutions

Number of Institutions Remaining in TAG

Number of Institutions Not in TAG

Number of Institutions Newly Opting Out

Percentage of Institutions Not in TAG

Average Size of Institutions in TAG

Average Size of Institutions Not in TAG

8,305

7,200

1,105

1,105

13.3%

$1.9B

$292.5M

8,012

6,406

1,606

514

20.0%

$796.4M

$5.0B

7,830

5,801

2,029

441

25.9%

$535.0M

$5.0B

Source: FDIC.

Note: The TAG program is the Transaction Account Guarantee Program. Data are for insured institutions; data for first opt-out as of 12/31/08, for second opt-out 

as of 12/31/09, and for third opt-out as of 6/30/2010.
18 | 2023 Options for Deposit Insurance Reform

$ Billions

Source: FDIC.

Note: The TAG program is the FDIC's Transaction Account Guarantee Program. 

FIGURE 3.2

Amounts Guaranteed by the FDIC’s TAG Program Peaked at Over 

$800 Billion at Year-End 2009

0

100

200

300

400

500

600

700

800

900

Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010

$ Billions

Source: FDIC.

Note: TAG is the Transaction Account Guarantee Program under Dodd-Frank. 

FIGURE 3.3

Amounts Covered by the Dodd-Frank Act TAG Peaked at Over 

$1.5 Trillion at Year-End 2012

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012
2023 Options for Deposit Insurance Reform | 19

Fees and Costs

The TAG program imposed fees for opting in; it 

initially applied a 10 basis point annual surcharge on 

qualifying accounts over $250,000. When the FDIC first 

extended the program for an additional six months, 

the surcharge was changed to a risk-based rate. 

Depending on an institution’s deposit assessment 

category, it was charged 15, 20, or 25 basis points. At 

this extension, participating institutions could opt 

out, effective January 1, 2010. More than 6,400, or 93 

percent of participating institutions at year-end 2009, 

continued in the TAG through June 30, 2010. The 

program collected approximately $1.2 billion in fees, 

and as of year-end 2022 TAG losses were estimated to 

be approximately $1.46 billion.

The Dodd-Frank Transaction Account 

Guarantee Program

The Dodd-Frank Act (Section 343) created a statutory 

version of TAG, which was in effect from December 

31, 2010, when the FDIC’s TAG program expired, 

to December 31, 2012. Unlike the FDIC’s program, 

institutions had no ability to opt out, and initially 

only noninterest-bearing transaction accounts were 

provided with unlimited deposit insurance coverage. 

IOLTAs (but not NOW accounts) were added by using 

a provision in a law enacted on December 29, 2010. 

Also, unlike the FDIC’s TAG program, there was no 

separate fee, but the FDIC stated it would consider 

the cost for the additional insurance coverage in 

determining deposit insurance assessments under 

its risk-based assessment system.57 Banking industry 

groups advocated for the TAG program to be extended 

yet again, seeking to prevent accounts from moving 

to large banks or money market mutual funds. But an 

extension did not have sufficient support in Congress, 

and the program expired at year-end 2012. The 

amount insured peaked at the program’s end in 2012 

at more than $1.5 trillion (Figure 3.3).

The Dodd-Frank Act provided that going forward, a 

debt guarantee program like the one created by the 

TLGP in 2008 should be permitted only following the 

determination of a “liquidity event” under the act 

and with congressional approval. But Section 1105 of 

57 75 Fed. Reg. 69577 (Nov. 15, 2010).

58Pub. L. 116-136.

59Congressional Research Service (2020). 

60 Insured depository institutions report transaction accounts on the Call Report; transaction accounts are generally defined as a deposit or account from which 

the depositor is permitted to make transfers or withdrawals, either immediately on demand or with at least seven days’ notice. Savings accounts are a subset of 

nontransaction accounts, which also include money market deposit accounts and time deposits (certificates of deposit).

the statute specifically stated that a debt guarantee 

program could not extend to a guarantee of deposits. 

However, in 2020, as part of the pandemic-related 

provisions related to economic stabilization, Section 

4008 of the CARES Act58 gave the FDIC authority 

to back up deposits to any limit and preemptively 

granted congressional approval for such a program so 

long as the FDIC guarantee terminated by December 

31, 2020.59 The FDIC did not put such a guarantee in 

place. However, the statute changed the Dodd-Frank 

Act provision stating that a debt guarantee program 

could not extend to a guarantee of deposits, and the 

law now allows such a program to include a guarantee 

of deposits.

Composition of Deposits 

Deposits serve two primary functions. First, 

deposits serve a critical role in the payment system. 

Households and businesses use deposits to transfer 

monetary value to settle financial transactions. 

Second, deposits are a store of value used by 

households and businesses for saving and investment. 

Although deposit accounts are not distinguished 

directly along these dimensions, transaction accounts 

are generally associated with the payment system 

function, and savings and time deposits are generally 

associated with the saving and investment functions. 

Figure 3.4 plots the proportion of deposits by account 

type from 1984 to 2022. In 1984, deposits primarily 

served an investment function for depositors, as 

about 72 percent of domestic deposits were held as 

time deposits (54 percent) or as savings accounts (18 

percent). Meanwhile, transaction accounts comprised 

about 22 percent of deposits.60 By 2000 and into the 

financial crisis in 2008, savings accounts more than 

doubled their share of domestic deposits, largely at 

the expense of time deposits and, to a lesser degree, 

transaction accounts. Following the financial crisis, 

time deposits constituted a diminishing share of 

domestic deposits in the system, comprising just 15 

percent in 2019, while transaction accounts continued 

to account for less than 18 percent until the COVID-19 
20 | 2023 Options for Deposit Insurance Reform

pandemic. Savings accounts have accounted for most 

of all domestic deposits every year since 2003, except 

2008 when they accounted for 49 percent of domestic 

deposits. 

Despite their distinctions on regulatory filings, 

regulatory changes and the economic environment 

have blurred the distinctions between deposit 

accounts over time. Historically, regulatory 

restrictions—such as interest rate caps and 

withdrawal limits—delineated between the payment 

and investment functions of deposits. However, 

amendments to Regulation D and the repeal of 

Regulation Q have removed some of the historical 

differences.61 The repeal of Regulation Q, which limited 

the rates that banks could pay on demand deposits, 

evolved over decades. From 1978 to 1986, laws and 

regulation phased out many of the rate restrictions 

on deposits that had been in place since the Banking 

Acts of 1933 and 1935.62 The remaining limits on rates 

paid on demand deposits were subsequently repealed 

61Cook (1978).

62Gilbert (1986).

63See 76 Fed. Reg. 42015 (July 18, 2011).

in 2011.63 As a result, some banks today offer interestbearing checking accounts, with interest rates that 

rival the industry’s average savings account rates. 

Under the Federal Reserve’s Regulation D, depositors 

with savings accounts were limited in the ways 

they could access savings account deposits. Under 

Regulation D, there was a limit of six transactions per 

month on certain types of withdrawals from savings 

accounts, such as automatic transfers including 

overdraft payments. One important distinction 

between account types is that depository institutions 

must hold reserves against certain accounts

(a transaction account) but not against others 

(for example, a money market savings accounts). 

However, beginning in 1994, banks began 

implementing retail sweep programs in which 

customer reservable transaction accounts were 

swept into accounts that did not require reserves. By 

reducing the bank’s reserve requirement, the bank 

was able to invest those funds into interest-earning 

Percent

Source: FDIC.

FIGURE 3.4

The Share of Domestic Deposits Held in Savings Accounts Increased Prior to 2020 

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

Savings Time Deposits <= Insurance Limit Time Deposits > Insurance Limit

Transaction Accounts All Other Domestic Deposits
2023 Options for Deposit Insurance Reform | 21

assets.64 Although sweeps restructure transaction 

accounts into two legally separate accounts 

(a demand deposit account and a savings account), 

account holder liquidity is unaffected. Debits and 

credits are posted directly to the depositor’s account. 

If the depositor requires more than five withdrawals to 

meet liquidity needs, the entire balance of the savings 

account is swept back into checking to comply with 

Regulation D.65 Thus, many savings account deposits 

operate with the liquidity of a transaction account.

Further, as a result of the COVID-19 pandemic, the 

six-transaction rule in Regulation D was temporarily 

suspended (and it is still suspended as of April 2023),66

allowing banks to raise that limit on their savings 

accounts (if the banks so choose). Consequently, some 

banks lifted the limit entirely, allowing some savings 

accounts to serve in practice as checking accounts. In 

some cases, for example, customers can open both 

checking and savings accounts at the same bank and 

set the checking account’s overdraft transactions 

to withdraw money from the savings account. This 

allows customers to have a checking account through 

which they can obtain payment services but keep all 

their funds in the savings account earning the savings 

account rate. 

In addition to changes in regulation, low interest 

rates following the 2008 financial crisis may have 

contributed to changes in the compositional function 

of deposits. Absent the ability to earn yield on deposit 

investments, the deposit base may have shifted to 

meet primarily payment services needs. More recently, 

increased interest rates may influence depositors to 

seek higher yield on transaction or savings accounts in 

response to competition, as is now permitted.

Though they may have led to benefits like increased 

modernization and innovation, regulatory changes 

like those mentioned above can complicate deposit 

insurance reform. For example, they make it more 

difficult to tailor the deposit insurance limit based on 

depositor needs by targeting specific account types 

(e.g., as in the original TAG program, which generally 

covered noninterest-bearing transaction accounts). 

If more distinctions between accounts are needed, 

64Edwards (1997).

65Gonzalez (2008).

66See 85 Fed. Reg. 23445 (Apr. 24, 2020). 

deposit insurance reform may require additional 

restrictions for different deposit account types. 

The distinctions between savings accounts and 

transaction accounts, combined with the comparative 

amount of time deposits, suggest that deposits 

primarily functioned as investments into the 1990s. 

As of 2023, the ability to pay interest on transaction 

accounts and the ability to withdraw on savings 

accounts obscure the extent to which depositors use 

deposits for payments, investment, or both. 

Finally, although time deposits are more commonly 

viewed as investment vehicles, withdrawal penalties 

are often inconsequential, especially to the extent 

that depositors have solvency concerns about their 

bank. If time deposits can be withdrawn with little or 

no penalty, they may also serve multiple functions. If 

deposit insurance reform evaluates the protection of 

payment accounts differently from that of investment 

accounts, clear delineation between account types is 

warranted (see Targeted Coverage in Section 6).

History of Uninsured 

Depositor Losses

As of December 31, 2022, estimated uninsured 

deposits held by insured depository institutions 

totaled about $7.7 trillion, which is 43 percent of 

domestic deposits. Historically, losses to uninsured 

depositors have been small. In many bank failures, 

uninsured depositors do not incur a loss, and for the 

failures in which uninsured depositors incur a loss, the 

dollar amount of the loss was small in aggregate. The 

FDIC has many options to resolve failed institutions. 

Most commonly, the FDIC identifies an acquiring 

institution to assume some of the failed institution’s 

assets and liabilities. Often, to maintain franchise 

value, the acquiring institution assumes all of the 

failed bank’s deposits regardless of insurance status 

and uninsured depositors incur no loss. When the 

acquiring institution does not assume the uninsured 

deposits, uninsured depositors receive a claim on the 

receivership and are paid dividends on that claim from 

the proceeds of selling any assets that the acquiring 

institution does not assume.
22 | 2023 Options for Deposit Insurance Reform

Table 3.3 highlights historical losses to uninsured 

depositors over the past three decades divided into 

two periods. The first period, 1992–2007, covers the 

post-FDICIA period until just before the 2008 global 

financial crisis. The second period, 2008–2022, covers 

the period starting with the 2008 global financial 

crisis.67 From 1992 to 2007, when banks failed, 

uninsured depositors often took losses (43 percent 

of the time).68 When uninsured depositors took a 

loss, the losses were 24 percent from 1992 to 2007. 

In contrast, from 2008 to 2022, uninsured depositors 

took a loss in only 6 percent of failures and, when 

they took a loss, uninsured depositor losses were 43 

percent. The differences across periods may reflect 

differences in deposit insurance coverage: with higher 

insurance coverage, paying out insured depositors 

became a more costly resolution option, and failures 

with uninsured losses were more likely to represent 

extreme cases such as fraud. Taking into consideration 

the failures in which uninsured depositors incurred 

no loss (the unconditional loss rate), uninsured 

depositors lost 10 percent in the first period and 3 

percent in the second period, or about 6 percent 

overall.69

It is important to note that uninsured depositors at 

Indymac, with $28 billion in assets at failure, incurred 

losses on their uninsured deposits. 

67As discussed earlier in this section, in October 2008, the deposit insurance limit increased to $250,000. Thirteen banks failed in 2008 before the deposit 

insurance limit increased but were retroactively covered up to the $250,000 limit when the limit was raised. The remainder of the 536 banks that failed from 2008 

to 2022 did so when the $250,000 deposit insurance limit was in effect.

68 Failed banks exclude failures resolved through assistance transactions in which institutions remain open.

69 Loss rates are averages across failed institutions and are unweighted by bank size or deposit exposure.

What’s Different Today?

Changes since the 2008 financial crisis have meant 

that banks, bank customers, and banking regulators 

face a different financial environment than in the past. 

Some differences are relevant for understanding the 

full implications of deposit insurance design or reform.

Social Media and Financial Technology

Information sharing today is much easier, faster, and 

scalable than in the past. At the click of a button, 

information can be shared with thousands or millions 

of people. Information that garners attention spreads 

exponentially, as interested individuals share it further 

and automated algorithms promote it to viewers. 

In parallel, technological advances in the financial 

sector allow for large financial transactions to occur 

with unprecedented ease. Depositors can easily set 

in motion the transfer of millions of dollars, open and 

close accounts, link bank accounts with other financial 

accounts, and move funds across asset classes. (In 

addition, see the discussion below on the upcoming 

FedNow real-time payment system.)

These changes allow depositors to monitor their banks 

more easily, potentially increasing the effectiveness 

of depositor discipline. However, they also exacerbate 

the potential for panic-driven runs. 

TABLE 3.3

Uninsured Depositor Losses and Loss Rates in Failed Banks Have Historically Been Low

Total Failures

Number of 

Failures With 

Losses to 

Uninsured

Percent of 

Failures With 

Losses to 

Uninsured

Uninsured 

Losses 

($ Millions)

Conditional

Uninsured

Loss Rate

Unconditional

Uninsured

Loss Rate

1992–2007

2008–2022

All

302

536

838

131

34

165

43%

6%

20%

148

137

285

24%

43%

28%

10%

3%

6%

Source: FDIC. 

Note: Failed banks exclude failures resolved through assistance transactions in which institutions remain open. Information about failed banks and failed bank 

losses are from the FDIC Bank Failures and Assistance Data at https://banks.data.fdic.gov/bankfind-suite/failures and from FDIC information on payments 

made to claimants in bank failures. Information about the dividends paid to claimants, including uninsured depositors, can be found in the Dividend 

Information section of the descriptions on the FDIC’s Failed Bank List at https://www.fdic.gov/resources/resolutions/bank-failures/failed-bank-list/.
2023 Options for Deposit Insurance Reform | 23

Institutional Changes

In response to the 2008 financial crisis, the COVID-19 

pandemic, and recent bank failures, the Federal 

Reserve introduced several lending facilities to provide 

liquidity to financial institutions and improve financial 

stability. The availability of loans to meet short-term 

liquidity needs increases confidence broadly, allowing 

banks to continue offering credit and alleviating 

depositors concern for the safety of their deposits.70

As part of its response to the 2008 financial crisis, the 

Federal Reserve also offered interest on reserves that 

it holds for banks.71 The interest provides some level 

of support for financial institutions and allows the 

Federal Reserve to better control short-term interest 

rates. Offering interest on reserves increases bank 

demand (and competition) for deposits and may result 

in banks offering higher deposit rates to customers. 

Relevant Upcoming Changes to the 

Financial System

Upcoming enhancements to the U.S. payment 

system (FedNow, launching in July 2023) will 

modernize transactions by offering instant payments.72

Customers will be able to send and receive money 

in seconds, 24 hours a day, 7 days a week, 365 

days a year, and funds will settle between financial 

institutions in near real-time. 

On some dimensions, the upcoming enhancements to 

payment systems are likely to have a positive effect 

70 Federal Reserve Board, “Federal Reserve Board Announces It will Make Available Additional Funding to Eligible Depositor Institutions to Help Assure Banks 

Have the Ability to Meet the Needs of All of Their Depositors,” press release, March 12, 2023, https://www.federalreserve.gov/newsevents/pressreleases/

monetary20230312a.htm.

71Originally authorized to begin in 2011 under a 2006 statute, the Emergency Economic Stabilization Act of 2008 authorized the Federal Reserve to pay interest on 

required and excess reserves held by depository institutions.

72 For more information on FedNow, see https://www.frbservices.org/financial-services/fednow.

73CFPB, “CFPB Kicks Off Personal Financial Data Rights Rulemaking,” press release, October 27, 2022, https://www.consumerfinance.gov/about-us/newsroom/

cfpb-kicks-off-personal-financial-data-rights-rulemaking/.

on financial stability. Banks that can receive instant 

payments may be better able to meet short-term 

liquidity needs. But processing transactions outside 

of normal business hours challenges the ability of 

supervisors to intervene promptly at the start of a 

run, possibly diminishing financial stability. Instant 

payments increase the speed at which changes to 

bank conditions and bank runs can occur, and the full 

implications of instant payments are yet to be seen. 

Movements toward open banking may also facilitate 

the likelihood that depositors withdraw funds in 

response to concerns about bank solvency. For 

example, as the Consumer Financial Protection 

Bureau seeks to implement Section 1033 of the 

Dodd-Frank Act, consumers will have greater access 

to, and control over, their financial data.73 Rules that 

increase customer control of their data are expected to 

increase competition by enabling customers to switch 

providers and transfer their account histories without 

the costs of having to start over. Open banking may 

improve customer welfare by reducing the monopoly 

power of providers who have access to consumer 

data. However, by reducing the barriers to switching 

providers, depositors may also be more inclined to 

withdraw funds in response to concerns about bank 

solvency. Thus, open banking also has the potential to 

increase the likelihood of bank runs.