The White House plans to call for tougher regulation of midsize banks.
The recommendations for congressional action could be announced within days and would follow the recent collapses of Silicon Valley Bank and Signature Bank, The Wall Street Journal (WSJ) reported Wednesday (March 29), citing unnamed sources.
President Joe Biden has already called for laws that would impose tougher penalties on executives responsible for bank failures, according to the report.
Beyond that, the administration has not yet determined what changes it would like to see made, the report said.
Actions it could call for, based on statements in the past, include restoring parts of the Dodd-Frank law that were eliminated during the Trump administration; reviving other financial regulations that were altered during the previous administration; and either temporarily extending federal deposit insurance to all bank customers or raising the cap above the current maximum of $250,000, according to the report.
Any new recommendations from the administration are likely to include banks with assets totaling between $100 million and $250 million because institutions of that size have been under pressure, both Silicon Valley Bank and Signature Bank fell within that range, and their failures showed that the collapse of banks of even that smaller size can generate risks to the entire banking system, the report said.
This report comes on the same day on which House lawmakers grilled regulators during congressional hearings about why the regulators didn’t use the tools they already have during the lead up to the recent bank failures.
In another action on Wednesday, lawmakers proposed a new bill called The Failed Bank Executives Clawback Act of 2023 that would require federal regulators to claw back compensation from executives whose banks fail.
During an earlier day of hearings, on Tuesday (March 27), Federal Reserve Vice Chair for Supervision Michael Barr and Federal Deposit Insurance Corp. (FDIC) Chairman Martin Gruenberg mentioned possible future banking regulations.
Possible proposals mentioned by one or both officials during the Senate committee hearing included exploring liquidity rules for banks, enhancing stress tests for banks and looking into changes to the current deposit insurance rules.