The Biden administration proposed a limited list of new measures Thursday to strengthen mid-sized banks that it saidcould be pushed through without having to go to Congress.
Banks with between $100 billion and $250 billion in assets should hold more liquid assets, increase their capital, submit to regular stress tests and write “living wills” that detail how they can be wound down, the White House said.
“These are all actions that can be taken under existing law and as a result, there’s no need for congressional action to authorize the agencies to take any of these steps,” said a senior White House official.
The White House’s push for more regulation comes after days of turmoil in the banking industry that included the collapse of institutions Silicon Valley Bank and Signature Bank and Switzerland’s Credit Suisse getting a government lifeline.
“Today, the president is urging the federal banking agencies to consider a set of reforms that will reduce the risk of future banking crises,” the official said.
“This … is really about making sure that we are protecting the resilience and stability of the banking system going forward,” the official added.
A 2018 law that eased requirements from the post-financial crisis Dodd-Frank Act, pushed by Republicans and some moderate Democrats, raised the threshold at which banks are considered systemically risky and subject to stricter oversight to $250 billion from $50 billion. Silicon Valley bank had $209 billion in assets at the end of last year.
The administration also called on regulators to require mid-sized institutions to undergo annual stress tests bigger banks face, and to submit so-called “living wills,” or resolution plans.
Partially reinstating the rules rolled back under former President Donald Trump’s administration would affect fewer than two dozen firms out of a total of more than 4,000 FDIC-insured U.S. banks.
According to Federal Reserve data, about 30 banks had assets of more than $100 billion at the end of last year, a list that included Silicon Valley Bank and Signature Bank.
Nearly half of those were already subject to tougher scrutiny because they had more than $250 billion in assets, and a handful of banks were on the cusp of crossing that threshold.
The Federal Reserve’s top regulator told Congress this week that Silicon Valley did a “terrible” job at risk management, but Republicans and Democrats have criticized regulators and the agency for lax oversight.
The Fed and other bank regulators have indicated they are already looking to strengthen bank rules, particularly for firms between $100 billion and $250 billion in assets.
Some Democrats, including Senator Elizabeth Warren, have called for the repeal of the 2018 changes entirely. But the prospects of legislation in a divided Congress are unlikely, according to analysts.
The White House official said senior administration officials had been in close touch with regulators about the proposed changes, but said the timing of any action would be up to the agencies, which are independent.
[Written in collaboration with other media outlets with information from the following sources]
