2. Effective in 90 days, we are LOWERING the maximum insured deposit liability to $100,000 per account for derivative trading firms. Effective in 180 days, the insured maximum insured deposit liability will drop to $50,000 per account.
3. Effective one year from today, on May 23, 2016, we will no longer offer deposit insurance for any firm that engages in derivative trading or securities underwriting or that engages in investment banking.
4. Any bank with fewer than 1,000 depositors or less than $1 billion in assets may apply for a discretionary waiver of these rules.
We have been forced to make these changes because of the very real risks that your leveraged derivative trading has created. One or more of you may suffer an enormous loss, and that poses a risk to the DIF. Our governing statute requires the FDIC to act in such circumstances.
It is not our position to tell you what sort of non-depository banking activities you may engage in. Those are business choices you and your firm are free to make. However, it is our position not to engage in foolish insurance underwriting. We have elected to be more conservative in our risk management as well as the underwriting assumptions we make. Therefore, we cannot guarantee the kinds of risks that your firms have been undertaking.
This action should delight many of you. In the recent speeches of several bank CEOs, many of you have longed for a return to the days of less regulation and a truer free market. Once you no longer qualify for our insurance due to your other businesses, you will be freed up from all of the onerous bank reviews and regulations that are part and parcel of FDIC insurance.
As a bonus, without the intervention of government guarantees, those of you who continue to have depositors will finally be able to compete in a free and open market. Without FDIC insurance, your depositors will be making their decisions based on your reputation and their assessment of the safety and security of your operations — and not Uncle Sam’s willingness to continually bail you out.
You have the FDIC’s best wishes for success in the future — just not our insurance.
If you have any further questions, feel free to contact my office.
Chairman, Federal Deposit Insurance Corporation
Ritholtz is chief executive of FusionIQ, a quantitative research firm. He is the author of “Bailout Nation” and runs a finance blog, the Big Picture. You can follow him on Twitter: @Ritholtz