The Federal Deposit Insurance Corporation's Deposit Insurance Fund minimum reserve ratio should be higher in order to increase the probability that the insurance fund will remain positive during a crisis, FDIC Chairman Sheila Bair said in prepared testimony for the Senate Banking Committee obtained by CNBC in advance.
The Deposit Insurance Fund's (DIF) minimum reserve ratio – measuring the insurance fund's balance versus the insured deposits – was raised to 1.35 percent from 1.15 percent when the Dodd-Frank Act financial reform legislation came into force.
But raising the rate even further, to 2 percent, would ensure that banks will not have high deposit insurance assessment rates when they are "strained by a crisis and least able to pay," Bair said in her testimony.
Banks that are covered by the DIF pay a fee to support the fund, which in turn covers their depositors.