Fed Mulling Stricter Rules And More Oversight For Midsize Banks After SVB Collapse, Report Says

Topline

The Federal Reserve is considering a stricter set of rules to govern midsize banks which could see these entities face similar oversight as the largest banks in the country, the Wall Street Journal reported, following the sudden collapse of Silicon Valley Bank last week.

Key Facts

According to the Wall Street Journal, this move would impact banks holding assets worth between $100 billion to $250 billion.

Under these rules, midsize banks would be subjected to stricter capital and liquidity requirements and face harder annual “stress tests,” like their larger counterparts.

Fed Vice Chair for Supervision Michael Barr is currently undertaking a review of the central bank’s supervision and regulation of Silicon Valley Bank, and is set to release a report of his findings on May 1.

Aside from reviewing SVB’s collapse, Barr is also leading a broader review of the Fed’s capital requirements for banks that began last year.

It is unclear if the new rules for midsize banks will be proposed as part of Barr’s May 1 report.

Big Number

$209 billion. That is the total amount of assets held by Silicon Valley Bank before its sudden collapse last week. This makes it the second biggest bank collapse in U.S. history, after the 2008 crash of Washington Mutual, which held $309 billion in assets.

Key Background

Following the 2008 financial crisis, the Fed and other federal regulators had instituted strict rules on capital requirements, regular stress tests and enhanced risk-measuring standards. These rules were implemented under the 2010 Dodd-Frank law, a portion of which was rolled back in 2018. The partial repeal meant the law’s most stringent measures only applied to banks with more than $250 billion in assets, excluding the likes of Silicon Valley Bank. SVB CEO Greg Becker was one of the most vocal supporters of the rollback. In the past few weeks, many top Democrats, including President Joe Biden, have blamed this Trump era repeal for last week’s collapse of Silicon Valley Bank and crypto-focused lender Signature Bank.

Further Reading

Fed to Consider Tougher Rules for Midsize Banks After SVB, Signature Failures (Wall Street Journal)

Democrats Blame SVB Collapse On Trump-Era Regulatory Rollbacks—But GOP Opposes Stricter Rules (Forbes)