The Biden administration today proposed a limited list of new measures to strengthen medium-sized banks. Banks with assets between USD 100 billion (EUR 91.7 billion) and USD 250 billion (EUR 229.2 billion) must hold more liquid assets, increase their capital, undergo regular stress tests and prepare “living wills” detailing how they can be settled, the White House said.
The White House’s push for more regulation comes after days of turmoil in the banking sector following the bankruptcy of US lenders Silicon Valley Bank and Signature Bank. Bank stocks plummeted worldwide and the turmoil led to a government-orchestrated bailout for Swiss Credit Suisse.
“Today, the president is urging federal banking agencies to consider a series of reforms that will reduce the risk of future banking crises,” the official said. “This is really about making sure we protect the resilience and stability of the banking system going forward,” the official added. “These are all actions that can be taken under existing law and, consequently, no Congressional action is required to authorize the agencies to take any of these steps,” said a senior White House official.
Reintroduce old law
A 2018 law relaxing requirements of the post-financial crisis Dodd-Frank Act, pushed by Republicans and some moderate Democrats, raised the threshold at which banks are considered systemic risk and subject to stricter oversight of $50 billion (45.8 billion euros) to 250 billion (229.2 billion euros). The partial reintroduction of the rules that were rolled back under former President Donald Trump’s administration would affect fewer than two dozen companies out of a total of more than 4,000 FDIC-insured US banks.
According to Federal Reserve data, about 30 banks had assets in excess of $100 billion at the end of last year, a list that included Silicon Valley Bank and Signature Bank. Nearly half of those were already under tighter scrutiny because they had more than $250 billion in assets, and a handful of banks were about to cross that threshold. The Silicon Valley bank had 209 billion dollars (191.6 billion euros) in assets at the end of last year. The government also called on regulators to require medium-sized institutions to undergo annual stress tests that larger banks must undergo, and to submit so-called “living wills” or resolution plans.
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