The FDIC has advanced the discussion on deposit insurance improvements considerably with its detailed options paper released today. We believe the options paper helps identify the key issues and will be a valuable addition to the on-going dialogue about comprehensive reform. ABA is pleased that a consensus is developing that a comprehensive approach is the way to go. As part of such an approach, the two insurance funds can be merged. We are pleased the options paper discusses various approaches to all these issues.
Considerable work is still ahead.
The options paper doesn't answer all the questions raised by bankers, including a detailed analysis of the costs and benefits of various options. To help fill this void, ABA commissioned an independent study to clarify both the cost to the banking industry of raising the deposit insurance limit and the potential for attracting net new deposits from such a change. We do want to raise an important concern about this paper. At several points, the FDIC paper talks about a 'zero' premium. Moreover, it is the capital of the banking industry that stands behind the FDIC funds.