As a result of last year’s regional bank failures, the FDIC is reviewing the capital treatment of unrealized losses, long-term debt requirement, resolutions resources and potential need for additional liquidity supervision and regulatory requirements, FDIC Chairman Martin Gruenberg said Friday. Speaking at a conference in Italy, Gruenberg shared what he described as lessons learned by the agency following the failure of Silicon Valley Bank and two other regional banks.
The FDIC is reviewing its toolkit and hopes of “better aligning capital requirements with changes in the value of securities, building loss-absorbing capacity with long-term debt requirements, improving resolution planning at the bank level, and strengthening bank supervision. The FDIC also released a paper on options for reforming deposit insurance,” Gruenberg said. Concerning change expected on supervision and regulation of liquidity risk, “the FDIC is reviewing whether its supervisory instructions on funding concentrations should be bolstered to better capture risks related to high levels of uninsured deposits generally or types of deposits more specifically, such as business operating account deposits.”
Gruenberg added that the FDIC is renewing its supervisory efforts to ensure that banks have access to appropriate sources of contingent liquidity, including the Federal Reserve’s discount window. “Recent supervisory work has focused on assessing discount window operational readiness by ensuring that legal and operational documents are current, responsibilities are well-defined and testing is performed as appropriate,” he said. “Additionally, supervisors are reviewing the sufficiency of pre-pledged collateral and the ability to move additional collateral to the discount window given potential funding needs during stress.”
