The FDIC recommended increasing the insured deposit limit for businesses

In a report released Monday, the Federal Deposit Insurance Corporation (FDIC) recommended raising the insured deposit limit for businesses, which currently covers $250,000.

The initiative arises after the recent bankruptcy of First Republic Bank which was acquired by JPMorgan Chase. The bank runs by Silicon Valley Bank and Signature Bank in the first week of March generated strong uncertainties in the banking sector, causing depositors to withdraw their money from the entities.

For Martin J. Gruenberg, Chairman of the FDIC, “the recent bankruptcies of Silicon Valley Bank and Signature Bank, and the decision to approve Systemic Risk Exceptions to protect uninsured depositors in those institutions raised fundamental questions about the role of deposit insurance in the banking system of the United States,” he said.

The change proposed by the FDIC seeks to make the coverage of the highest deposits even more flexible. Therefore, by increasing the deposit insurance limit for companies, it would prevent companies from running the risk of financial instability at the time of a bank run.

During the failure of Silicon Valley Bank, more than 94% of national deposits were not insured, for Signature Bank the figure reached 90% and First Republic Bank, which was recently seized, more than 67% of deposits were not insured either.

According to a report by S&P Global Market Intelligence in the United States, 47% of deposits in large banks are not insured.