A Quiet Revolution: Rethinking Deposit Insurance in a Digital Age

DUBLIN, Ohio – June 10, 2026 – In the quiet corridors of finance, a debate nearly a century old is finding new voice. A study released today by American Share Insurance (ASI) and authored by Grace College Professor Glenn Grossman is challenging the foundational assumptions of how America protects its savings. It asks a question made urgent by the financial tremors of 2023: Is a deposit insurance system born from the Great Depression the right fit for the digital 21st century?

The report lands amidst a period of intense reflection. The rapid, digitally-fueled collapses of Silicon Valley Bank and Signature Bank three years ago exposed critical vulnerabilities in the federal safety net, primarily the massive pools of uninsured deposits that fled at the tap of a screen. The crisis forced regulators to invoke a “systemic risk exception,” effectively guaranteeing all deposits at the failed institutions to stave off a wider panic. While perhaps necessary, the move ignited a firestorm of debate about moral hazard and the future of the Federal Deposit Insurance Corporation (FDIC).

Professor Grossman’s research argues that while Washington debates expanding the federal mandate, a proven, market-based alternative has been operating successfully for over 50 years. It suggests the future of financial stability may not lie in a bigger federal backstop, but in a more diversified, disciplined, and modern approach.

A System Forged in Crisis, Re-examined in Turmoil

The 2023 banking crisis was a stress test the system barely passed. At institutions like SVB, over 85% of deposits exceeded the FDIC’s $250,000 insurance limit, creating an inherent instability that federal regulators are still grappling with. In response, the FDIC itself published a report outlining potential reforms, including targeted increases or even unlimited coverage. The discussions reveal a regulator acutely aware that the speed of modern finance has outpaced its Depression-era architecture.

This is the landscape into which the new study arrives. It posits that the federal model, with its one-size-fits-all premiums and implicit promise of government bailouts, may inadvertently encourage risk. In contrast, the private model, as exemplified by ASI, offers a different philosophy.

“The risk profile of depository institutions today differs from that of a century ago,” states Grossman in the report. “Moreover, the capacity to offer private deposit insurance that effectively addresses known risks and supports financial stability now far surpasses that of earlier private insurance programs.”

His analysis suggests that instead of simply insuring against failure, a private system can actively promote soundness, a crucial distinction in an era of complex financial instruments and lightning-fast capital flows.

The Private Alternative: A Model of Discipline and Choice

For over half a century, American Share Insurance has provided primary deposit insurance to state-chartered credit unions across ten states. It is a quiet history, but a powerful one: since its founding in 1974, no member has ever lost money in an ASI-insured account. This track record is not built on the backing of the U.S. Treasury, but on a foundation of disciplined underwriting and rigorous oversight.

Unlike the federal system where membership is often a default, ASI is selective. It only insures credit unions that meet its stringent capital standards and operational criteria. This isn't just a gatekeeping function; it’s a continuous partnership. Insured credit unions must submit detailed financial statements quarterly, allowing ASI to act as a proactive monitor, identifying and mitigating risks long before they can fester into crises.

This creates a powerful dual-oversight structure. A privately insured credit union is supervised by its state regulator and independently monitored by its insurer. This multi-layered scrutiny stands in contrast to a monolithic federal system and fosters a culture of accountability. For the credit unions that choose this path, it is a deliberate strategic decision, often reflecting a belief that this model provides a more tailored and robust form of protection.

The strategy appears to be working. The report highlights that privately insured credit unions consistently maintain strong capital positions, a direct result of the high standards required for entry and continued membership.

How a Market-Based Approach Creates Lasting Value

The core of the argument for private insurance lies in its market-based incentives. By pricing risk appropriately and being selective about its members, a private insurer encourages financial institutions to operate more prudently. It replaces the moral hazard of a perceived government backstop with the clear-eyed accountability of a business relationship.

This structure delivers lasting value not just for the financial system, but for individual consumers. The disciplined framework fosters healthier, more resilient credit unions. For the members of these institutions, the result is the confidence that their savings are protected by an insurer whose own survival depends on preventing failures, not just cleaning up after them. It’s a shift from a reactive safety net to a proactive system of financial wellness.

The report concludes that private insurance is not a retreat from safety, but a modern evolution of it. It promotes choice and innovation, allowing states and credit unions to select the insurance model that best fits their needs. In a financial world that is becoming more complex, this flexibility could be a critical component of a more resilient national financial architecture.

As policymakers in Washington continue to debate the lessons of 2023, the study from ASI serves as a timely reminder that the conversation should not be limited to simply raising the FDIC's limits. The more profound question is how to build a system that encourages strength and discourages the very risks that led to the last crisis. The answer may involve looking beyond the federal monolith and embracing a diversified ecosystem where disciplined, private alternatives play a recognized and vital role in protecting consumers and strengthening financial stability.