The news: President-elect Trump’s team has discussed eliminating the Federal Deposit Insurance Corporation (FDIC) and transferring its deposit insurance role to the Department of the Treasury, per the Wall Street Journal.
What this would mean for banks: The FDIC plays a major role in stabilizing the banking system, especially during crises. Critics argue that dismantling or weakening the FDIC could leave banks without adequate support during future economic downturns, increasing risks for banks and depositors, per Reuters.
Restructuring the FDIC could lead to disruptions in handling bank failures, because other regulators may lack the same level of expertise.
In addition, this move would likely mean rollbacks and relaxation of banking regulations, such as the updated capital requirements, which banks have lobbied against.
Is it really possible? Bank stocks haven’t reacted to this news—likely because stakeholders believe it would be a difficult feat to pull off. Major restructuring would have to get past the filibuster, which Republicans could pull off in the Senate but probably not in the House.
Plus, eliminating the FDIC could anger consumers. It covered customers’ funds beyond the $250,000 insurance limit following the 2023 banking collapses—a move that kept consumers’ anxieties at bay. And the regulator’s absence was noticed from the Synapse collapse, which was outside of its purview.
Our take: Banks should proceed as though the FDIC will remain in place. But if Trump manages to eliminate the regulator, banks must be prepared with communications explaining how customers’ money will remain safe.
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