President Biden has proposed reforms to strengthen oversight and regulation of larger banks following the collapse of Silicon Valley Bank and Signature Bank, as CNBC reveals. The reforms aim to reinstate safeguards for banks that have assets between $100 billion and $250 billion and increase supervision over financial institutions.
The proposed reforms include raising liquidity requirements for mid-sized banks, updating liquidity stress tests, increasing the frequency of stress tests, requiring mid-sized banks to submit closure plans, updating stress tests to account for novel situations, and limiting which banks must contribute to replenishing the Deposit Insurance Fund.
The White House said the proposals could be accomplished under existing law. Bank regulators who testified several days ago before two congressional committees said several of the proposals were already under consideration. The administration has pushed for possible fixes that would not require new legislation as Republicans control the House.
The Trump-era deregulation bill passed in five years ago limited regulators’ ability to impose liquidity demands and stress tests on small banks but gave agencies discretion to tailor bank capital requirements for mid-sized banks. Republicans have criticized the Biden administration and regulators rather than bank executives, saying that federal officials had the tools they needed to prevent the collapses but did not act properly.
Banks play a critical role in the US economy. They serve as intermediaries between depositors and borrowers, facilitating the flow of funds throughout the economy. Banks provide a wide range of financial services to individuals, businesses, and governments, including loans, savings accounts, checking accounts, credit cards, and investment services.
In addition, banks are a vital source of credit for businesses and consumers, which can stimulate economic growth and create jobs. They also help to stabilize the economy by providing liquidity during times of financial distress.
Moreover, banks are subject to extensive regulatory oversight by federal and state agencies to ensure their safety and soundness. These regulations help to maintain confidence in the banking system and protect consumers from fraudulent or abusive practices.
