In wake of bank failures, Powell agrees: supervision, regulation of large banks must be strengthened

Supervision and regulation of large banks will need to be strengthened in the wake of the recent failure of two institutions, the chair of the Federal Reserve Board said Wednesday.

Speaking to the press following a meeting of the interest-rate setting Federal Open Market Committee (FOMC) – which increased interest rates by 25 basis points (bp) – Federal Reserve Board Chair Jerome H. (“Jay”) Powell said he would not offer his own views on what changes should be considered by his agency or other federal financial institution regulators.

Powell indicated any changes would be recommended by Fed Board Vice Chair for Supervision Michael Barr, who is leading a review of the Fed’s supervisory role in the failures of the two banks, Silicon Valley Bank (SVB) of Santa Clara, Calif., and Signature Bank of New York, N.Y.

However, Powell did indicate that action is coming.

“We do need to strengthen supervision and regulation,” Powell said.

Barr was given the marching orders to lead the review of the bank failures on March 13, three days after California regulators shut down SVB, and one day after New York regulators shuttered Signature. The Federal Deposit Insurance Corp. (FDIC) was named receiver for both banks.