President Joe Biden is calling on federal banking regulators to take a set of reforms to safeguard the banking industry in the wake of the collapse of Silicon Valley Bank and Signature Bank. The White House is urging regulators to provide more oversight on large regional banks and reduce the risk of a future banking crisis. Biden plans to urge regulators like the Federal Reserve and the Federal Deposit Insurance Corporation to enforce the “enhanced prudential standards” that lawmakers made optional for mid-sized banks in 2018. The White House is calling for reinstating rules on liquidity requirements and stress testing for banks with assets between $100 and $250 billion. Additionally, it proposed the implementation of yearly evaluations to assess the adequacy of supervisory capital under stressful conditions, and mandated that medium-sized banks provide strategies outlining their ability to dissolve without causing strain on the broader banking network.
The President, in recommendations laid out in a White House fact sheet, is urging federal banking regulators to re-institute rules rolled back in the previous administration for banks with assets between $100 billion and $250 billion. The requirements encompass liquidity and stress testing improvements that were first introduced by the Dodd-Frank Act in 2010, as well as yearly capital stress tests for supervisory purposes. Also included are orders for comprehensive resolution plans and the implementation of robust capital requirements for banks, to be implemented at an appropriate time following a significant transition period.
The Trump administration is being held responsible by the White House for loosening regulatory standards for mid-sized and regional banks.[0] Part of that came through a 2018 law that eased some of the Dodd-Frank rules for banks.[1] The White House is urging regulators to expand long-term debt requirements to a broader range of banks and ensure that community banks will not have to pay the costs of replenishing the Deposit Insurance Fund after the recent bank failures.[2]
The President wants to “reduce the transition periods for applying common-sense safeguards to growing banks that are projected to exceed the $100 billion threshold” and “strengthen supervisory tools, including stress testing, to make sure banks can withstand high interest rates and other stresses,” according to the fact sheet.[3] Additionally, the President wants to expand long-term debt requirements for a broader range of banks and ensure that community banks will not have to pay the costs of replenishing the Deposit Insurance Fund after the recent bank failures.[3]
According to the White House, banking regulators hold independence and have the final say on any modifications and the schedule for implementing them.[1] According to a White House official, many of the regulators were chosen by the president because they share his perspective on the desired banking regulations, raising hopes that they will implement necessary measures.[4] President Biden believes that the weakening of common-sense bank safeguards and supervision during the Trump administration for large regional banks should be reversed in order to strengthen the banking system and protect American jobs and small businesses.[5]
0. “Biden asks banking regulators to toughen some rules after recent bank failures” NPR, 30 Mar. 2023, https://www.npr.org/2023/03/30/1167140976/biden-banks-regulators
1. “Biden asks banking regulators to toughen some rules after recent bank failures” WBUR News, 30 Mar. 2023, https://www.wbur.org/npr/1167140976/biden-banks-regulators
2. “White House calls on federal banking agencies to reverse Trump administration’s regulatory rollbacks” CNN, 30 Mar. 2023, https://www.cnn.com/2023/03/30/politics/biden-large-regional-banks-recommendations/index.html
3. “Biden moves to roll back Trump-era bank deregulation” Washington Examiner, 30 Mar. 2023, https://www.washingtonexaminer.com/news/white-house/biden-moves-to-roll-back-trump-era-bank-deregulation
4. “Biden steps up pressure on Fed to toughen rules for regional banks” POLITICO, 30 Mar. 2023, https://www.politico.com/news/2023/03/30/biden-fed-regional-banks-svb-00089686
5. “White House pushing banking rule changes that don’t need congressional action” NBC News, 30 Mar. 2023, https://www.nbcnews.com/politics/white-house/white-house-pushing-banking-rule-changes-dont-need-congressional-actio-rcna77456