Senator Seeks Progress Update from Federal Regulators to Strengthen Banks

One year after the collapse of Silicon Valley Bank, U.S. Sen. Elizabeth Warren (D-MA) is seeking an update from federal banking regulators on steps taken to strengthen regulatory standards for banks with assets of $100 billion or more.

“A year ago on March 10, 2023, SVB – then the 16th-largest bank in the country – collapsed, making it the second-largest bank failure in American history at the time and the biggest bank failure since the 2008 financial crisis. SVB followed the sudden dissolution of Silvergate Bank on March 8, 2023, and triggered the collapse of Signature Bank, then the 29th-largest bank in the country, on March 12, 2023. First Republic Bank, the 14th-largest bank in the country, failed less than two months later on May 1, 2023,” Warren wrote in a letter to Michael Barr, vice chair for supervision of the Federal Reserve; Martin Gruenberg, chair of the Federal Deposit Insurance Corporation (FDIC); and Michael Hsu, acting comptroller of the Currency at the Office of the Comptroller of the Currency (OCC).

Warren is urging the regulators to follow through on the commitments made last March to implement President Joe Biden’s request for stronger capital and liquidity requirements, stress tests, and resolution planning for banks with at least $100 billion in assets.

At that time, Biden urged bank regulators to “(r)einstate rules that were rolled back in the previous Administration for banks with assets between $100 and $250 billion, including liquidity requirements and enhanced liquidity stress testing, annual supervisory capital stress tests, comprehensive resolution plans and strong capital requirements for banks.”

Biden was referring to the 2018 enactment of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which rolled back some Dodd-Frank protections. Specifically, it removed a set of strict rules applied to banks with $50 billion and $250 billion in assets – then covering about two dozen of the country’s largest banks, including SVB.

Post-mortem analyses, including a report by the Fed, identified the 2018 Dodd-Frank roll back, and the banking agencies’ further weakening of big bank regulations in response to that law, as a key contributing factor to last year’s bank failures. According to the Fed, the actions it took after passage of the 2018 law “impeded effective supervision by reducing standards, increasing complexity, and promoting a less assertive supervisory approach.”

Warren, a member of the Senate Banking, Housing, and Urban Affairs Committee (BHUA), is asking each regulator to answer a set of questions about their progress by March 25.

Courtesy of Dave Kovaleski, Financial Regulation News