Credit unions and banks end unlimited deposit coverage
As of December 31, 2012, many credit unions and banks in and around Northwest Indiana are ending the unlimited deposit insurance coverage for all accounts that do not bear any interest. All financial institutions that are insured either by the National Credit Union Administration or Federal Deposit Insurance Corp are all set to end this coverage just as the year comes to an end. From the start of the year 2013, the maximum coverage for all such accounts will be limited to just $250,000. In case the credit unions or the banks fail to provide insurance to such accounts, the government agencies will offer them coverage.
The Transaction Account Guarantee Program was implemented by the FDIC in the year 2008 in order to limit the potential risk of the banking industry by giving a boost to the liquidity and also increase the confidence in the depositors so they can place their funds in this system. However, ever since, this program has been evolving with time. The most notable changes came in when the Dodd-Frank financial reforms were implemented in the year 2010 which is when these accounts were given complete coverage till the year 2012 came to an end.
Dave Rose, the president for the Horizon Bank from Northwest Indiana, told that the bank has informed all its customers who are going to be affected by the upcoming change. He also said that, considering this change, many of the bank’s customers were not planning on moving their accounts to other financial institutions. Rose said that most of the customers understood liquidity and know its significance. Over the last 24 months, a lot of customers have not been looking at other investment options because they fear losing their liquidity.
A number of banking groups in addition to the American Bankers Association are proposing an extension of another 24 months to ensure consistency with the monetary policy by the Federal Reserve. At the start of this month, CEO Frank Keating and the American Bankers Association expressed their displeasure over the fact that the Senate did not approve their request for a temporary extension for the next two years. The association said that this program was funded by the banks and customers would have been pleased to have complete coverage.
