Deposit insurance

Sen. Elizabeth Warren, D-Mass., and Rep. Katie Porter, D-Calif., said that the Federal Deposit Insurance Corp. could do more to penalize banks that have downwardly revised their uninsured deposits as the agency looks to collect its special assessment.

Dream First Bank of Syracuse, Kan. is assuming all deposits and most of the assets of Heartland Tri-State Bank of Elkhart, Kan. following a purchase and assumption agreement with the Federal Deposit Insurance Corp., representing a $54.2 million hit to the Deposit Insurance Fund.

Both Senate Banking Committee Chairman Sherrod Brown, D-Ohio, and ranking member Tim Scott, R-S.C., said they would consider what reforms "if any" are necessary post Silicon Valley Bank failure.

The Federal Deposit Insurance Corp. board voted 3-2 to propose a special assessment of 0.125% on banks with uninsured deposits over $5 billion.

The FDIC's recent proposal to provide business accounts targeted deposit insurance coverage up to ten times the current rate is gaining traction among industry experts. But a great deal rests on the details, and any reform will probably have to wait until after 2024.

The resolutions of Silicon Valley Bank, Signature Bank and now First Republic are likely to drain $35 billion from the Deposit Insurance Fund. Odds are increasing that banks — even small ones — will pay higher premiums and perhaps a special assessment to replenish the fund.

The FDIC seems poised to let small banks off the hook for replenishing the deposit insurance fund after Silicon Valley Bank and Signature Bank's failures last month. But regulators should remember that small banks can still pose systemic risks.

The Federal Deposit Insurance Corp. said it will propose a special assessment to cover losses from Silicon Valley Bank and Signature Bank in May, and noted that bank deposit outflows are largely uninsured.

Treasury Secretary Janet Yellen's latest remarks reaffirming the government's willingness to shore up uninsured deposits at troubled banks seem to have calmed markets, but sooner or later regulators are going to have to articulate an official policy.

Depositors' trust in their banks — and banks' trust in their customers — is the cornerstone of finance. The demise of Silvergate, Silicon Valley and Signature has demonstrated how fragile that trust can be, and how difficult it will be for regulators and bankers to win it back.