According to a source with knowledge of the situation, the Federal Reserve is exploring stricter regulations and oversight for midsize banks with a size comparable to Silicon Valley Bank, which abruptly folded last week.
The bank’s failure caused widespread financial system concerns, sparked an extraordinary government effort to reassure depositors and support the system, and sparked discussion about rolling back recent regulation loosening for regional banks.
Currently, Fed Vice Chair for Supervision Michael Barr is reviewing the $209 billion bank’s failure, which might result in tighter regulations for banks with $100 billion to $250 billion in assets, the source told Reuters.
By May 1, an assessment of Fed supervision and regulation of the bank will be published, adding to Barr’s ongoing examination of bank capital regulations.
The Fed may introduce stricter capital and liquidity requirements as well as potentially more rigorous yearly “stress tests,” according to a story in The Wall Street Journal on Tuesday.
The nation’s largest banks currently have to meet the strictest capital and liquidity standards after a 2018 deregulation law from Congress and Fed rule-making under previous leadership loosened those rules for smaller firms. Bigger businesses must also comply with stricter accounting standards and more regular stress tests.
In the wake of the collapse, the Fed may decide to overhaul all of these standards, which has led to new calls for stricter regulations for regulators to reinstate these limitations.
A bill to repeal the law that loosened regulations for banks in 2018 was introduced on Tuesday by 50 Democratic senators, including Senator Elizabeth Warren.