The Federal Deposit Insurance Corp may need to seek temporary guarantees for all uninsured U.S. bank deposits to stem a drain of funds from small and regional U.S. lenders following deposit bailouts for failed banks SVB Financial and Signature Bank, former FDIC chair Sheila Bair said on Wednesday.
A Reuters review of company filings and FDIC data showed that San Francisco-based First Republic had uninsured deposits of $119.5 billion, or 68% of its total.
Bair said she did not view Silicon Valley Bank or Signature Bank as systemically important institutions, adding that they could have been resolved through FDIC's normal takeover process, with a "haircut" for uninsured deposits. But a "supermajority" of the Federal Reserve and FDIC boards plus Treasury Secretary Janet Yellen and President Joe Biden made the determination that the two banks qualified for systemic risk exceptions, qualifying them for the backstops.
Bair said it wasn't "realistic" for similar one-off determinations to be made for other banks, particularly those that fall below the revised "systemically important institutions" threshold of $250 billion in assets. Bair also said she believed that the Federal Reserve should "hit pause" on interest rate hikes to better assess impacts on the financial system as well as the broader economy."
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