Renewing his fight against the "too big to fail" doctrine, Federal Reserve Bank of Minneapolis President Gary H. Stern is urging lawmakers to require banks to privately insure some deposits.

Private insurers, which would cover up to 5% of deposits, would scrutinize a bank's investment strategies and set rates depending upon the amount of risk a bank has incurred, Mr. Stern said. This should discourage banks from acting recklessly, he said. Private companies or individual investors could provide the insurance, he said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.