WASHINGTON — President Biden on Thursday called on financial regulators to tighten oversight of mid-sized banks that have faced reduced scrutiny after a regulatory backlash during the Trump administration. .
Mr. Administration officials said Biden’s proposals would require no action from Congress and could be passed by regulators. Banks need to protect themselves against possible losses and maintain adequate access to cash to tide them over in times of crisis.
The plan would subject more banks to annual stress tests conducted by regulators to avoid events like the Federal Reserve raising interest rates too quickly, which was the catalyst for the Silicon Valley bank’s failure this month. They would broadly increase control over banks with $100 billion and $250 billion in assets, such as Silicon Valley Bank.
Many of those moves may have helped identify and prevent existing problems at the Silicon Valley bank, which has seen losses on its balance sheet mount rapidly as interest rates have risen over the past year. The bank was heavily invested in government bonds; As rates rose, the value of bonds fell, ultimately triggering the largest depositor flight in American history.
That chain of events culminated in the bank’s failure and an emergency government effort to bail out depositors in the bank and the likes of Signature Bank.
Mr. He specifically asked the Federal Deposit Insurance Corporation to exempt community banks from new fees to cover the costs of the recent depositor bailout, an administration official said, reflecting the importance of the community banking system to the U.S. economy.
White House officials characterized the proposals as requests, not presidential orders, and said they were made in consultation with relevant regulators. At a briefing on Thursday, an official briefed reporters on when the changes might take effect.
The measure seeks to update some of the requirements in the 2010 Dodd-Frank Act enacted in the wake of the 2008 financial crisis. Almost a decade later, Mr. Trump signed a bipartisan bill that allowed regulators to ease some of that oversight for small and medium-sized banks, which Mr. Biden and his aides have blamed it.
“Unfortunately, Trump administration regulators have weakened many important common sense requirements and oversight for large regional banks, such as Silicon Valley Bank and Signature Bank, whose recent failure led to the pandemic,” administration officials wrote in a fact sheet released to reporters Thursday.
Representatives for the Fed and the FDIC declined to comment. Testimony from their officers this week, Mr. They say they mostly agree with many of Biden’s recommendations. For example, Michael Barr, the Fed’s vice president for oversight, said the Fed was reviewing key rules that applied to liquidity — or liquidity — before the demise of Silicon Valley Bank. .
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The Banking Policy Institute, which represents top banks in Washington, has criticized the proposals.
“It would be unfortunate if, in response to poor management and misguided oversight at SVP, additional restrictions on all banks could impose meaningful costs on the U.S. economy,” the company’s chairman and chief executive, Greg Baer, said in a statement.
Thursday’s announcement was the president’s second attempt to strengthen financial regulation in the wake of the banking collapse, but it was too much.
Mr. Banks similar in size to Silicon Valley Bank.
Those proposals include giving regulators more power to fine failed executives at banks, claw back compensation they received after failures and bar them from working elsewhere in the financial system.
Those plans face a bleak future in Congress, where Republicans control the House and have shown little appetite for increasing banking regulation. Representative Patrick McHenry of North Carolina, chairman of the Financial Services Committee, said Thursday that Mr. Biden said he “continues to politicize the failure of SVB and Signature Bank to deliver on long-term progressive priorities unrelated to the causes of the declines.”
Top administration officials have also said that Congress needs to strengthen financial regulations.
“I absolutely think it’s appropriate to conduct a thorough review of what factors contributed to the failure of these banks,” said Treasury Secretary Janet L. Yellen told a Senate committee last week. “Certainly, we need to rethink what we regulate to prevent this.”
After giving brief comments the day after the depositor recovery was announced, Mr. At public events, she highlighted her administration’s efforts to invest in manufacturing and infrastructure, and Ms.
In an interview on Thursday, Mr. Cecilia Rouse, the outgoing chair of Biden’s Council of Economic Advisers, said the financial system was “stabilizing after being shaken up by Silicon Valley banking.”
“I think there’s clearly a lot of understanding about what happened to failed banks and how lawmakers can and should improve financial regulation,” Dr Roos said. “I don’t think we’re done yet. But there’s no doubt we’re seeing tremendous improvements from where it was a week or two ago.”
Gina Smialek Contributed report.