Terming actions by the previous administration on bank regulation a “weakening” of common-sense safeguards and supervision for large regional banks, President Joe Biden (D) late Thursday urged the supervisors to reverse those decisions, which he indicated would strengthen the banking system.
However, smaller institutions (such as community banks) should not be on the hook to replenish losses to the fund insuring bank deposits caused by the recent failures of two regional banks, the president stated.
“It is important to put in place common-sense safeguards to reverse the Trump Administration’s harmful weakening of bank safeguards and supervision and help ensure that community and regional banks remain resilient and continue supporting small businesses and jobs,” Biden said in a fact sheet released by the White House.
The president said he urged federal banking regulators to “consider a set of reforms that will reduce the risk of future banking crises.” Among the reforms he recommended:
- Reinstate rules for banks with assets between $100 billion and $250 billion, including: liquidity requirements and enhanced liquidity stress testing; annual supervisory capital stress tests; strong capital requirements for banks, “at an appropriate time after a considerable transition period.”
- Take steps to “once again ensure strong supervision.” Those steps include: reduce the transition periods for applying “common-sense safeguards” to growing banks that are projected to exceed the $100 billion threshold; and strengthen supervisory tools, including stress testing, to make sure banks can withstand high interest rates and other stresses.
- Expand long-term debt requirements to a broader range of banks.
The president, however, voiced that a particular effort is needed to shield community banks from the costs of replenishing the Federal Deposit Insurance Corp.’s (FDIC) Deposit Insurance Fund (DIF) related to the failure of two banks earlier this month.
“The FDIC relied on the Deposit Insurance Fund (DIF) – a fund made up entirely of fees paid by banks – to help ensure that all depositors at Silicon Valley Bank and Signature Bank had full access to their deposits,” the president stated. “Current law requires the FDIC to levy a special assessment on banks to recover losses to the DIF and gives the FDIC discretion on how to implement the assessment.”
The White House indicated that the recommended changes could be accomplished without congressional action. Biden’s statement said the reforms would build on regulatory reforms already on his administration’s agenda – including completion of the executive compensation rule for bank executives.
FACT SHEET: President Biden Urges Regulators to Reverse Trump Administration Weakening of Common-Sense Safeguards and Supervision for Large Regional Banks