Federal Reserve Evaluating Tougher Rules for Midsize Banks Following Bank Failures

The Federal Reserve is evaluating tougher rules for midsize banks following the sudden collapse of Silicon Valley Bank (NASDAQ:SIVB) and Signature Bank (NASDAQ:SBNY) last week.[0] Representatives from the Federal Deposit Insurance Corporation and Federal Reserve will be testifying before the United States House Financial Services Commission in a newly announced hearing on the matter.

Chairman of the House Financial Services Committee, Patrick McHenry (NC-10), and the Ranking Member, Maxine Waters (CA-43), announced a bipartisan hearing with federal financial regulators in response to the failures of Silicon Valley Bank and Signature Bank to be held on March 29, 2023.[1] Martin J. Gruenberg, chairman of the FDIC board of directors, and Michael S. Barr, vice chair for supervision for the Federal Reserve board of governors, are scheduled to testify at the hearing. The committee stated that additional witnesses may be included.[2]

The regulator is looking at tougher capital and liquidity requirements and is looking to beef up annual “stress tests” that assess banks’ ability to weather a hypothetical recession.[3] These rules may target firms with $100 billion to $250 billion in assets.[4] The Fed is also considering easing the terms of banks’ access to its discount window, giving firms a way to turn assets that have lost value into cash without the kind of losses that toppled SVB Financial Group.[5]

The Chair of the Committee, Patrick McHenry (R-N.C.), and the ranking Democrat, Maxine Waters (D-Calif.),[6]House Financial Services stated that they are “committed to getting to the bottom of the failures” of the banks.[7]

As Chairman and Ranking Member, we take our oversight duties seriously, and this hearing will enable us to start to comprehend why and how these banks collapsed. “We are working around the clock to deliver answers to the American people in order to protect depositors, promote the safety and soundness of America’s banks, and strengthen our financial system. We will conduct this hearing without fear or favor to get the answers the American people deserve.”

Rulemaking procedures are currently in progress for various regulatory modifications within the Federal Reserve’s jurisdiction.[8] The Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) are currently seeking feedback on resolution planning requirements for mid-sized banks.[8] Additionally, Barr is leading a “holistic capital review” of the central bank’s various capital standards and requirements.[9]

0. “Fed Considers New Rules for Midsize Banks After SVB Collapsed With 90% Deposits Uninsured” 24/7 Wall St., 16 Mar. 2023, https://247wallst.com/investing/2023/03/15/fed-considers-new-rules-for-midsize-banks-after-svb-collapsed-with-90-deposits-uninsured

1. “House Panel Schedules First Hearing on SVB, Signature Failures” Bloomberg, 17 Mar. 2023, https://www.bloomberg.com/news/articles/2023-03-17/house-panel-schedules-first-hearing-on-svb-signature-failures

2. “Fed, FDIC officials to testify before Congress on bank failures” American Banker, 17 Mar. 2023, https://www.americanbanker.com/news/fed-fdic-officials-to-testify-before-congress-on-bank-failures

3. “Crypto News: FED Wants Tougher Rules As Crypto Friendly US Banks Collapse” CoinGape, 15 Mar. 2023, https://coingape.com/crypto-news-fed-wants-tougher-rules-as-crypto-friendly-us-banks-collapse

4. “Fed to consider tough rules for midsize banks following SVB failure- report” Seeking Alpha, 14 Mar. 2023, https://seekingalpha.com/news/3947461-fed-to-consider-tough-rules-for-midsize-banks-following-svb-failure-report

5. “The Fed is Considering Easing the Terms of Banks’ Access to Its Discount Window, Giving … – Latest Tweet” LatestLY, 12 Mar. 2023, https://www.latestly.com/socially/business/the-fed-is-considering-easing-the-terms-of-banks-access-to-its-discount-window-giving-latest-tweet-by-bloomberg-4938972.html

6. “House Financial Services Committee schedules first hearing on collapse of SVB, Signature Bank” The Hill, 17 Mar. 2023, https://thehill.com/homenews/house/3905993-house-financial-services-committee-schedules-first-hearing-on-collapse-of-svb-signature-bank/

7. “Congress announces March 29 hearing into failures of SVB and Signature Bank” Cointelegraph, 17 Mar. 2023, https://cointelegraph.com/news/congress-announces-march-29-hearing-into-failures-of-svb-and-signature-bank

8. “The Fed has a lot of options for adjusting midtier bank regulation” American Banker, 14 Mar. 2023, https://www.americanbanker.com/news/the-fed-has-a-lot-of-options-for-adjusting-mid-tier-bank-regulation

9. “Fed Mulls Stricter Rules And More Oversight For Midsize Banks After SVB Collapse, Report Says” Forbes, 15 Mar. 2023, https://www.forbes.com/sites/siladityaray/2023/03/15/fed-mulling-stricter-rules-and-more-oversight-for-midsize-banks-after-svb-collapse-report-says/