Kenneth Kelly, chairman and CEO of Detroit-based First Independence Bank and chair-elect of the American Bankers Association, testified this month before the U.S. Senate Banking Committee on the future of deposit insurance. Representing the ABA, Kelly outlined ten recommendations from a task force he chaired beginning in January that call for modernizing a system created in 1933 and tested anew by the failures of Silicon Valley Bank and other institutions in 2023.
Kelly told lawmakers that deposit insurance has been one of the most important stabilizing forces in U.S. financial history. Created during the Great Depression after thousands of banks failed and wiped out the savings of everyday Americans, the Federal Deposit Insurance Corporation was designed to restore trust. For more than 90 years, the FDIC has guaranteed deposits up to a set limit, currently $250,000, ensuring that families and businesses could keep their money in banks without fear of losing it overnight. The system, Kelly noted, is not taxpayer funded but is fully financed by bank assessments.
“The deposit insurance system has served the nation well, and Americans appreciate the peace of mind they receive from having their hard-earned funds in an FDIC-insured bank,” Kelly said. “We recognize, however, that recent events have raised legitimate questions about whether the system can be improved to reflect the realities of banking today.”
Those questions came into sharp focus in March 2023, when Silicon Valley Bank collapsed after a sudden run drained tens of billions in deposits in less than 48 hours. The bank’s failure was the second-largest in U.S. history and was followed by the closure of Signature Bank days later. While regulators stepped in to guarantee all deposits and stabilize markets, the events shook public confidence and forced policymakers to consider whether deposit insurance was keeping pace with an economy where technology allows panic to spread in seconds.
Kelly pointed to that moment as the catalyst for the ABA’s internal review. The association convened more than 300 member banks to debate reforms. A smaller task force, chaired by Kelly, translated those discussions into ten recommendations. He told senators the goal is to make the system more transparent, more flexible in moments of stress, and fairer across institutions of different sizes.
One of the most significant proposals calls for Congress to give the FDIC standing authority to back deposits or other liabilities during a crisis, without having to seek emergency approval in real time. Similar measures were granted during the pandemic, and Kelly argued that codifying this authority would allow regulators to act faster and prevent contagion from spreading across the financial system.
Transparency is another priority. Kelly testified that the FDIC should be required to explain the criteria it uses to determine systemic risk and how it calculates special assessments on banks after a failure. Following Silicon Valley Bank’s resolution, many community banks argued they were unfairly burdened by assessments despite having no role in the crisis.
On coverage levels, Kelly said the ABA is not ready to endorse a specific increase beyond the $250,000 cap. While most individual accounts fall within the current limit, many businesses, nonprofits, and municipalities hold balances far higher. Additional coverage, Kelly said, could enhance stability, but policymakers need better data to understand the tradeoffs. The ABA recommends the FDIC collect that information and, if a new limit is set, index it to inflation so it does not lag behind economic realities.
Kelly also pressed for a reassessment of the Deposit Insurance Fund, which paid for Silicon Valley Bank’s resolution. No taxpayer dollars were used; the costs came entirely from the fund, which is bank-financed. The ABA is calling for changes that include restoring the tax deductibility of bank assessments, which ended in 2018, and studying whether banks should be allowed to offer targeted excess deposit insurance for customers who regularly hold balances above the federal cap.
On the issue of resolving failed banks, Kelly testified that current law prioritizes the “least cost” method. He urged Congress to broaden that test to also weigh community impact, especially when small banks serving specific neighborhoods are at risk. The task force further recommended opening FDIC asset auctions to a wider set of investors and requiring the agency to publicly release the resolution strategies it considered, along with projected costs.
“The deposit insurance and resolution framework, which lies at the core of money and banking in the United States, is complex, multifaceted and foundational to our financial system and the U.S. economy,” Kelly said. “These recommended changes would make the existing system more responsive in moments of financial stress, more transparent and fairer to the institutions participating in the system and the customers they serve.”
The testimony also carried weight beyond financial policy. First Independence Bank, founded in 1970, is one of the nation’s largest Black-owned banks and has long been a financial anchor in Detroit. Kelly’s leadership role as both a community banker and the incoming head of the ABA signals the importance of ensuring reforms do not solely serve the largest institutions but also protect smaller banks that provide access in historically underserved communities.
That perspective matters in Detroit, where access to fair and reliable banking has been a longstanding challenge. Black-owned institutions like First Independence have played an outsized role in supporting small businesses, churches, and families who often faced discrimination at mainstream banks. As the Senate weighs reforms, Kelly’s testimony positioned community banks as central to maintaining confidence and equity in the system.
While some of the ABA’s recommendations would require congressional action, others could be adopted directly by the FDIC. Lawmakers on the Banking Committee are expected to continue discussions in the coming months, but Kelly’s testimony has already established a blueprint for debate.
The question now is how Congress and regulators will act on the lessons of the past two years. For Kelly, the task is to ensure that a system built in the depths of the Great Depression can meet the speed and scale of modern banking while protecting both Wall Street institutions and neighborhood banks in Detroit.
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