If federal regulators plan to revise bank liquidity requirements or related reporting, then they should first issue advance notices of proposed rulemaking to give the public and banking industry sufficient time to review and comment on the proposals, the American Bankers Association said Tuesday in a letter to top officials at the Federal Reserve, FDIC and Office of the Comptroller of the Currency.
ABA’s comments were in response to recent speeches by Acting Comptroller of the Currency Michael Hsu and Fed Vice Chairman of Supervision Michael Barr in which both suggested revisiting bank liquidity requirements in the wake of last year’s Silicon Valley Bank and Signature Bank failures. The association noted that agency reviews found that those failures were largely idiosyncratic and primarily the result of inadequate risk management. ABA also expressed concern about regulators’ focus on uninsured deposits as a proxy for liquidity risk, noting that the term covers a diverse set of deposits and bank products. A more granular approach to uninsured deposits would avoid penalizing certain banks, depositors and activities, the association said.
Should regulators move forward with new liquidity requirements, or changes to liquidity-related reporting, ABA urged them to take the optional step of first issuing an advance notice of proposed rulemaking so the public can weigh in on whether the changes are needed. Regulators would later issue a legally required notice of proposed rulemaking should they decide to finalize the changes. Banking agencies “will at a minimum need more information than is currently available to evaluate factors related to deposit flows, stability and duration of deposits, depositor behavior and the relevance of deposit insurance for large corporate and institutional investors,” the association said.
