Wells Fargo CEO Says Deposit Insurance Shouldn’t Go Too Far

Raising the level of deposit insurance for banks should not go too far.

So said Wells Fargo CEO and President Charlie Scharf on Tuesday (May 2) during a panel discussion at the Milken Institute Global Conference.

Banks are independent enterprises, are highly regulated and are insured not by the government but by the banking industry, Scharf said during the discussion.

“There’s no reason why the banks should subsidize the ills that happen at all of the banks across the system unconditionally,” Scharf said. “There’s a point at which that’s just not the right thing.”

Scharf said he is all for raising the level of Federal Deposit Insurance Corp. (FDIC) premiums and thinks it is right to ask the question of what the right level of FDIC insurance is, but added that people must also have confidence in the institutions in which they put their money.

“I personally don’t think the right answer is to have had everything insured across the FDIC, but to ask the question: Why were these managements allowed to do the things that they did? Where did they go wrong? Why wasn’t it solved?” Scharf said. “That should solve the problem, and then people have to make their own determination as to the level of safety that they feel in the institutions in which they leave deposits.”

Scharf’s comments come at a time when the FDIC has become front-page news as debate rages over what went wrong at banks that have failed, how much it will cost and how much deposit insurance protection bank customers need.

A day before his comments at the panel discussion, the FDIC released a report in which it said it favors “targeted coverage” among the options for deposit insurance reform.

In that option, different deposit insurance limits would be offered across account types, with business payment accounts receiving “significantly higher” coverage than other accounts, the FDIC said Monday (May 1).

“Of the three options outlined in this report, the FDIC believes targeted coverage best meets the objectives of deposit insurance of financial stability and depositor protection relative to its costs,” the FDIC said.