FDIC’s Hill cautions against regulatory overreaction to bank closures

As policymakers draft new rules in response to the recent bank failures, it is important not to overreact and saddle the banking industry with overcorrections to address targeted problems, FDIC Vice Chairman Travis Hill said today during a conference on minority depository institutions. “What we don’t want to do is make it more difficult for institutions like MDIs and CDFIs to be able to navigate when there is stress,” he said.

Hill was asked during a Q&A about his policy priorities in light of the failure of Silicon Valley Bank. He said that as banking regulators think about their upcoming rulemakings, they need to keep in mind the current environment that banks face. “The Fed in particular has talked about a pretty ambitious rulemaking agenda for the coming months and years, and I think this is at a time where there are still some fragilities in parts of the banking sector,” Hill said. “We are still trying to rebuild confidence in the industry.

“I think there’s a compelling argument to at least just get through this rate-hiking cycle and see where the dust settles,” Hill added. “Once we’re through that, take a look at the lay of the land, see what lessons were learned and then, at that point, take a look at the potential proposals that we could consider and think about which ones are the most worthwhile given the conditions at the time.”