President Biden today called on banking regulators to reinstate rules on regional banks that were “rolled back” during the Trump administration, including rules concerning liquidity stress testing. His statement came as the Federal Reserve, FDIC and Government Accountability Office conduct investigations on whether regulators missed key warning signs ahead of the closures of Silicon Valley Bank and Signature Bank, with the American Bankers Association saying the president’s call for action was premature given those ongoing probes.
In a statement, Biden faulted the previous administration for allegedly weakening rules for regional institutions with assets from $100 billion to $250 billion, including SVB and Signature Bank. He urged regulators to reverse those decisions. Specifically, the administration is seeking to reinstate Dodd-Frank Act rules concerning liquidity requirements and enhanced liquidity stress testing, annual supervisory capital stress tests and comprehensive resolution plans. It also supports strong capital requirements for banks “at an appropriate time after a considerable transition period.” All changes can be accomplished through current law, the White House said.
In addition, the administration urged regulators to reduce the transition periods for applying rules to growing banks that are projected to exceed the $100 billion threshold. It called for strengthening supervisory tools—including stress testing—to ensure banks can withstand high interest rates and other stresses. It also called for expanding long-term debt requirements to a broader range of banks. Finally, the White House said that replenishing the Deposit Insurance Fund after the recent bank failures should not be borne by community banks.
Responding to Biden’s remarks, ABA President and CEO Rob Nichols said the association takes bank closures very seriously and agreed with the administration and members of Congress about the need to learn what happened and why. However, given the ongoing agency investigations on the bank closures, “it is premature to call for rule changes by independent regulatory agencies before determining the extent to which supervisors failed to make full use of their existing regulatory tools and authority,” Nichols said. “Allowing for a thoughtful and deliberate process will yield better and more lasting results.”
