On Monday, a top U.S. banking regulator will publish a thorough analysis of the federal deposit insurance system, sparking new discussion about whether and how much the government should guarantee bank accounts.

After Silicon Valley Bank and Signature Bank collapsed in March, regulators backed up all deposits, including those above the Federal Deposit Insurance Corp.’s $250,000 per person per bank, to prevent banking system contagion. The review will be the third.

Now, the FDIC is planning to lay out policy options for changing the way deposits are guaranteed amid calls from some lawmakers to raise the cap, or even eliminate it, to stem large and lasting outflows from small and regional lenders in the wake of the March bank failures and more recent troubles at First Republic Bank, which regulators seized on Monday and sold to JPMorgan Chase & Co (JPM.N).

FDIC Chair Martin Gruenberg has said the report, to be released at 2:00 p.m. EDT (1800 GMT) on Monday, will discuss deposit insurance coverage levels, excess deposit insurance, risk-based pricing, and the regulator’s deposit insurance fund, which will take a $20 billion hit from SVB’s failure and a $2.5 billion hit from Signature Bank. First Republic’s failure will cost the FDIC $13 billion, the FDIC warned Monday.

FDIC’s deposit insurance fund guarantees bank deposits up to $250,000 per individual. If an insured bank fails, the FDIC reimburses under-limit account holders from the deposit insurance fund.

After the 2008 financial crisis, the 2010 Dodd-Frank reform bill raised the $100,000 threshold to $250,000.

After SVB and Signature collapsed, some suggested rethinking the limit.

In March, Federal Reserve Chair Jerome Powell advised Republican legislators to reconsider federally guaranteed bank deposit limitations.

Democratic Senator Elizabeth Warren told CBS’s “Face The Nation” in March that increasing the ceiling would be “a good move,” while Republican Senator Mike Rounds has questioned whether the $250,000 maximum is still acceptable.
Eliminating the cap will undoubtedly harm banks’ customers. Critics warn that banks may take more risks with more stable deposit bases, undermining financial stability.

The restriction should be lifted since the government guarantees all bank deposits by fully backing SVB and Signature deposits. Their approach is to make it clear, along with any lending limitations or capital requirements needed to curb risk-taking.

Some analysts suggest raising the insurance cap for payroll and other small business accounts.

FDIC’s original statement of its March 10 seizure of SVB stated that accounts exceeding the insurance limit would not be made whole, forcing local IT CEOs who banked at SVB to hustle to make payroll and mass withdrawals at all but the biggest banks.

Small firms, organizations, and local governments often have accounts above $250,000 to make payroll.

Changes would require legislation from a severely divided Congress. In March, the Republican House Freedom Caucus declared it would oppose any blanket federal guarantee on bank accounts exceeding $250,000.

On Friday, the Fed slammed its inability to identify and remedy Silicon Valley Bank before its collapse and pledged greater bank monitoring and standards.

In a second assessment, the FDIC said Signature Bank failed due to poor management and fast development. However, the regulator suffered from personnel constraints and might have escalated supervisory steps sooner.