President Joe Biden on Thursday used his executive powers to urge regulators to reinforce banking regulation in the aftermath of the failures of Silicon Valley Bank (SVB) and Signature Bank.
In a White House fact sheet, Biden called on federal banking agencies to “consider a set of reforms that will reduce the risk of future banking crises.” The recommendations put forward largely reverse changes to banking regulation made during the Trump administration, which aimed to reduce burdens on mid-sized institutions regarding liquidity requirements, stress tests, and more.
Democrats have pointed to these changes as a significant driving factor behind what went wrong to cause SVB’s collapse. Republicans have levied criticism at the actions of the current administration and on the social and climate-related activities of SVB.
Changes Biden is pushing for include:
- Reinstating liquidity requirements for banks with between $100 and $250 billion in assets to hold sufficient high-quality liquid assets to cover expected net outflows during a stress period;
- Shortening transition periods for stress tests and empowering regulators to use those tests to ensure banks with $100 billion or more in assets have enough capital to withstand rising interest rates;
- Reinstating the requirement for bank holding companies with between $100 and $250 billion in assets to submit comprehensive resolution plans;
- Strengthening capital requirement rules for regional banks “to incorporate some of the requirements that already apply to the largest banks”;
- Expediting the expansion of long-term debt requirements, as initiated by the Federal Deposit Insurance Corporation (FDIC) in October; and
- Ensuring future costs of replenishing the FDIC’s Deposit Insurance Fund after bank failures are not borne by community banks.
Biden on March 17 called on Congress to expand the FDIC’s ability to claw back compensation from bank executives who oversee institutions that fail. A bipartisan group of senators responded this week with the introduction of the Failed Bank Executives Clawback Act.