Biden urges US regulators to restore strict rules on midsize banks | World News - Hindustan Times
close_game
close_game

Biden urges US regulators to restore strict rules on midsize banks

AFP | | Posted by Shobhit Gupta
Mar 30, 2023 11:36 PM IST

Pointing a finger at Donald Trump, who eased rules for banks, Biden urged regulators to reinstate rules that would not require congressional support.

President Joe Biden called on US banking regulators on Thursday to reinstate tougher rules on midsized banks, asserting that the measures would prevent future failures like that of Silicon Valley Bank.

US President Joe Biden.(AP)
US President Joe Biden.(AP)

Pointing a finger at predecessor Donald Trump, who eased rules for banks between $100 and $250 billion in assets, Biden urged regulators at the Federal Reserve and Federal Deposit Insurance Corporation to reinstate rules in a step that would not require congressional support.

Hindustan Times - your fastest source for breaking news! Read now.

A White House official called the measures common-sense steps that can be taken under existing authority and without congressional approval, in a briefing with journalists.

The announcement comes as regulators, lawmakers and other stakeholders continue to investigate the speedy demise of SVB and two other midsized US banks earlier in March. Those failures spurred fears of widespread financial contagion that have eased somewhat in recent days.

While the largest US banks such as Citigroup and JPMorgan Chase are subjected to the strictest capital and liquidity requirements, midsized banks saw an easing of standards under Trump.

The original Dodd-Frank law passed in the wake of the 2008 financial crisis imposed stricter standards on banks with at least $50 billion in assets.

But a 2018 reform signed into law by Trump removed tougher standards on banks with assets of $50 billion to $100 billion.

For banks with assets between $100 billion and $250 billion, the tougher rules would not automatically be adopted unless regulators imposed them on a case-by-case basis.

Under Thursday's announcement, Biden called for annual stress tests for banks of this size; so-called living wills laying out how assets would be wound down in case of failure; and strong capital requirements.

The White House fact sheet did not specifically mention the Federal Reserve or the Federal Deposit Insurance Corporation (FDIC) but was addressed at federal banking agencies, in consultation with the Treasury Department.

SVB bank was taken over by the FDIC on March 10 following a bank run of depositors after the California lender disclosed losses on assets sold quickly to raise liquidity.

Some of the lender's problems were due to its heavy exposure to a single sector technology and weak risk management practices that left it exposed to unfavorable interest rate changes.

At congressional hearings this week, the Fed vice chair for supervision Michael Barr called SVB's failure a textbook case of mismanagement, while also acknowledging deficiencies in oversight.

I think that any time you have a bank failure like this, bank management clearly failed, supervisors failed and our regulatory system failed, Barr said Wednesday.

Barr also said that Fed examiners called out risk management deficiencies at SVB during the course of banking examination, but that the issues were not addressed in time.

Regulators from the Fed, which oversees the stress tests, and FDIC have told congressional panels they were reviewing oversight of SVB and would address any regulatory failings.

Their reports will be released by May 1.

Unlock a world of Benefits with HT! From insightful newsletters to real-time news alerts and a personalized news feed – it's all here, just a click away! - Login Now!

Get Latest World News along with Latest News from India at Hindustan Times.
SHARE THIS ARTICLE ON
Share this article
SHARE
Story Saved
Live Score
OPEN APP
Saved Articles
Following
My Reads
Sign out
New Delhi 0C
Friday, March 29, 2024
Start 14 Days Free Trial Subscribe Now
Follow Us On