Biden calls for stricter banking regulations in the wake of SVB, Signature Bank failures


US President Joe Biden speaks during the Summit for Democracy virtual plenary on “Democracy Delivering on Global Challenges” in the Eisenhower Executive Office Building in Washington, DC, US, on Wednesday, March 29, 2023. Biden during the summit said he will seek $9.5 billion from Congress to promote democracy.
Yuri Gripas | Bloomberg | Getty Images

WASHINGTON — President Joe Biden on Thursday urged federal regulators to take up a set of reforms to safeguard the banking system, following the collapse of Silicon Valley Bank and Signature Bank.

The White House said in a fact sheet Thursday that Biden’s proposals fit into his recent effort “to strengthen oversight and regulation of larger banks so that we are not in this position again.” The administration wants regulators to take a range of steps to reinstate safeguards for banks with assets between $100 billion and $250 billion and bolster supervision over financial institutions.

“Each of these items can be accomplished under existing law,” the White House said.

The administration’s proposed reforms include:

  • Raising liquidity requirements for mid-sized banks.
  • Updating liquidity stress tests to take into account high-speed digital withdrawals, and the ability of social media to spread information among depositors at a much faster pace than ever before.
  • Increasing the frequency of stress tests for mid-sized banks.
  • Requiring mid-sized banks to submit plans to regulators explaining how they would close down in the event that they fail, without transmitting added stress to the financial system.
  • Updating stress tests to account for novel situations not accounted for in current models, like the effect of rapid interest rate hikes on banks with high rates of low yield, long term debt.
  • Limiting which banks must contribute to replenishing the Deposit Insurance Fund, which the government used to bail out Silicon Valley Bank’s uninsured depositors.

Several of the proposals the White House endorsed are already under consideration, according to bank regulators who testified this week before two congressional committees.

Among these are stricter rules for measuring liquidity in mid-sized banks, those with over $100 billion in combined assets, but under $250 billion.

While the Trump-era deregulation bill passed in 2018 limited regulators’ ability to impose liquidity demands and stress tests on small banks, it gave agencies broad discretion as to how to tailor bank capital requirements for mid-sized banks like SVB.

On Wednesday, group of Democratic senators, led by financial regulatory hawk Sen. Elizabeth Warren, D-Mass., sent a letter to bank regulators demanding stronger bank capital requirements.

Since SVB collapsed in mid-March, members of Congress have introduced a half-dozen bills intended to penalize bank executives and help stabilize the financial system going forward.

This is a developing story. Please check back for updates.

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