# Depositor Protection Act of 2023: What It Actually Does

This bill makes several changes to how bank deposits are insured and how the government handles failing banks. The most significant change is temporary protection for checking accounts that don't earn interest. For two years, if you have a non-interest-bearing checking account (the kind most people use for everyday expenses), the government will insure up to $100 million in that account instead of the current $250,000 limit. This is a huge increase, though realistically, almost no individual depositor has anywhere near that much in a single checking account. After two years, the protection drops back to the standard $250,000 limit. Smaller banks with less than $250 billion in assets can opt out of providing this extra protection without facing penalties, which means some customers at smaller banks might not get this benefit.

The bill also makes it easier for healthy banks to acquire struggling banks. Normally, bank mergers require multiple regulatory approvals that can take months. This bill temporarily waives those approval requirements for 90 days if a bank is buying a competitor that has lost at least 20 percent of its stock value since March 2023. The acquiring bank just has to notify the Federal Reserve and meet certain financial health standards. The goal is to speed up rescues of troubled banks before they fail completely, potentially preventing depositor losses and financial instability.

Additionally, the bill increases insurance for certain types of business deposits called "reciprocal deposits" and gives the Federal Deposit Insurance Corporation more flexibility when handling large bank failures. Specifically, if a massive bank fails and following normal liquidation rules would cause other banks to fail as a domino effect, the FDIC can now take alternative actions to prevent that cascade—like arranging a merger or sale instead. However, any such action must still be the cheapest option for taxpayers, and Congress must be notified within three days with a full explanation of why this extraordinary step was taken.

Depositor Protection Act of 2023

Kustoff, David

Depositor Protection Act of 2023 This bill expands Federal Deposit Insurance Corporation (FDIC) protections and the actions the FDIC is allowed to take, including in the event of an institutional failure.First, the bill expands for two years FDIC deposit insurance for an amount up to $100,000,000 that a depositor maintains at an insured depository institution in a noninterest-bearing transaction account. (Currently, the FDIC insures deposits up to $250,000.)The bill also increases the reciprocal deposit limit applicable to depository institutions. (Reciprocal deposits are used by institutions to increase the availability of deposit insurance by splitting large deposits using a reciprocal network of institutions.)For 90 days after the date of enactment, the bill allows for the acquisition of distressed banks by a bank holding company without regulatory approval under certain circumstances.The bill also allows the FDIC to facilitate a merger, sale, assumption of liabilities, or stock acquisition involving the failure of a large institution using an adjusted least-cost resolution calculation.