On April 11, 2023, Consumer Financial Protection Bureau Director Rohit Chopra spoke with the Washington Post regarding the banking industry after the failure of Silicon Valley Bank. Director Chopra, who is also a board member of the Federal Deposit Insurance Corporation, focused his messaging on the need to better educate consumers regarding when their deposits are and are not insured by the FDIC. Pointing to consumer confusion over whether or not funds held at crypto-currency exchanges or in peer-to-peer money transmission apps is covered by FDIC deposit insurance, Director Chopra stressed it was on the CFPB and other regulators to ensure consumers understand that these funds may not be insured or otherwise fully insured. Specifically in regards to peer-to-peer money transmission applications, Director Chopra stated that he advises consumers not to keep excess funds in the apps when unnecessary.
In response to calls to raise the FDIC insurance limit, Director Chopra urged patience until the Federal Reserve’s report regarding the failure of Silicon Valley Bank is released. However, Director Chopra argued that individuals should not assume all deposits beyond the FDIC deposit insurance limit will always be covered. Instead, such determinations will continue to be made on a case-by-case basis. Further, Director Chopra urged caution regarding providing consumers with the impression that all deposits at big banks (regarded as too big to fail) would always be covered, as he felt that would inherently disadvantage small banks. Instead, Director Chopra proposed raising the insurance limits on non-interest bearings accounts, specifically payroll accounts used by businesses. To the extent the FDIC and Congress look to raise the deposit insurance limits, Director Chopra argued that banks must be the ones to pay for the privilege.
Lastly, Director Chopra discussed the need to look at executive compensation when bank failures occur. Stating that Congress had previously provided regulators the ability (via GLBA) to draft rules that better provide for individual accountability and restrict stock options, Director Chopra noted it was on regulators to draft rules that would it allow it to better address the issues that arose from the failure of Silicon Valley Bank.
More information about the talk with Director Chopra can be found on the Washington Post’s website.