FDIC proposes sweeping deposit insurance reforms in response to bank failures.

The FDIC has proposed three options for deposit insurance reform, including raising the limit, eliminating the cap entirely, or raising the insurance cap only for banks’ business accounts. The regulator would need Congress to pass legislation to make any of those changes. FDIC Chairman Martin Gruenberg acknowledged that expanding deposit insurance has the potential to “create moral hazard by providing an incentive for banks to take on greater risk,” but he said strong regulation and supervision could alleviate those concerns. The collapse of First Republic Bank has led regulators to seek to stem the crisis of confidence in the banking system.