Additional Contributors
The Main Street Depositor Protection Act is proposed federal legislation that would expand federal deposit insurance coverage for certain noninterest-bearing transaction accounts, such as payroll and operating expenses, at eligible banks and credit unions. The proposal is intended to protect business operating funds, but supporters and opponents disagree about its potential effect on financial stability, costs, and regulatory burden.
What is the Main Street Depositor Protection Act?
Under the proposed legislation, the maximum amount of insurance coverage for certain noninterest-bearing accounts could increase beyond the current $250,000 limit and be capped at $5 million. The Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA) would set the maximum amount by rule. Specifically, the maximum coverage amount would be an amount that is
- Not less than the standard maximum deposit insurance amount on the date the rule is issued;
- Not more than $5,000,000; and
- Based on considerations of enhancing the financial stability of the banking system, promoting economic growth, and providing for the safety of the Deposit Insurance Fund
Additionally, the act explicitly excludes certain foreign banks or insured branches of foreign banks.
Origins of the Main Street Depositor Protection Act
Many small businesses maintain funds in noninterest-bearing accounts to meet payroll and other operating needs. The 2023 collapse of Silicon Valley Bank helped prompt renewed discussion about whether existing deposit insurance limits adequately protect such business operating funds and the banks that manage the accounts. In response, the bipartisan Main Street Depositor Protection Act was reintroduced in Congress on March 25, 2026, with the intent to raise the FDIC and NCUA insurance coverage amounts for these accounts to help ensure that small business account holders and banks are better protected during periods of financial stress.
Opposition to the Main Street Depositor Protection Act
Taxpayer advocacy and free-market organizations have voiced opposition to the act. Per the National Taxpayers Union (NTU), there is a lack of clear evidence in the legislation that an increase in coverage is necessary or justified.
According to Tommy Aiello, Vice President of Federal Affairs at NTU, “There is no need to adjust FDIC insurance caps. Although the current $250,000 limit has remained unchanged for nearly two decades, it already covers the overwhelming majority of Americans, with roughly 99% of depositors holding balances well below that threshold….Markets work most efficiently when they are allowed to function without heavy-handed government intervention. That should be the guiding principle for helping taxpayers, small banks, and the financial industry at large.”
The organization states that any amount of coverage increase above the current $250,000 threshold would encourage risk-taking for weak or failing banks or credit unions, which would in turn increase the likelihood of failure for those entities and expose customers to greater risks.
Additionally, the bill delegates authority to the FDIC and the NCUA to set coverage limits, while the power currently resides with Congress. With this shift, opponents contend that implementation of the legislation could lead to additional compliance and reporting requirements for banks and credit unions, adding to the already significant regulatory burden faced by many financial institutions. Opponents also argue that expanding coverage could increase potential exposure of the Deposit Insurance Fund and may ultimately require higher insurance assessments on insured institutions to support the additional coverage.
Support of the Main Street Depositor Protection Act
Banking associations have spoken in favor of the act. The Independent Community Bankers of America (ICBA) states that the act would improve the nation’s successful deposit insurance system while minimizing costs for community banks. ICBA says this legislation would promote balanced deposit insurance coverage across the banking industry, further strengthen the deposit insurance system, and better support small businesses that use transaction accounts for recurring expenses, such as payroll.
According to Jeremy Callais, Peoples Bank of East Tennessee President, when asked for an opinion on the proposed legislation, “For community banks, this issue is about protecting the operating funds of local businesses, the payroll accounts and working capital that keep Main Street running in East Tennessee and across the country. Most small businesses are not sitting on excess liquidity; they are actively managing cash flow to meet payroll, maintain inventory, and serve their customers day in and day out. Providing greater confidence that those funds are secure strengthens not only those businesses but also the broader stability of the communities we serve,” he said. “At the same time, it is essential that any expansion of deposit insurance be thoughtfully structured, so it does not impose undue burden on community banks. These institutions are the backbone of local economies, and they play a critical role in putting deposits back to work through lending and reinvestment in the communities they serve.”
Looking Ahead
While the bill remains under consideration in Congress, it continues to attract attention from community banks, regulators, and small-business and taxpayer advocates. Whether the proposal ultimately advances, it has renewed discussion about whether the current deposit insurance framework adequately reflects the needs of today’s businesses.
Financial institutions are also monitoring other significant supervisory developments, including proposed changes to the CAMELS rating framework.
PYA Can Help
PYA will continue to watch the progress of the proposed Main Street Depositor Protection Act and provide updates on significant developments. Our Audit & Assurance specialists for financial institutions help community financial institutions navigate evolving regulatory and industry developments, assess potential implications for governance, risk management, financial reporting, and compliance, and prepare for changes that may affect their operations.
