The Federal Reserve is considering stricter rules for midsize banks following the recent collapse of Silicon Valley Bank (SVB) and Signature Bank.
The Fed could increase capital and liquidity requirements and rollout
tougher annual stress tests for banks holding between $100B and $250B in
assets, sources familiar with the discussion told the Wall Street
Journal.
- Under the proposed rules, some
banks will have to report unrealized gains and losses on some
securities so that regulators can better assess their financial
strength.
- The proposed changes come after SVB held much of its capital in long-term Treasury bonds, hence incurring big losses once the Fed started rising interest rates, and making it vulnerable to a bank run.
Zoom Out:
- In 2010, the Dodd-Frank Act imposed stricter rules on banks but lawmakers rolled back some of those changes in 2018.
- As
a result, the most strict regulations only apply to banks with more
than $250B in assets, excluding dozens of small and medium-sized banks
such as SVB.
- More than 50 Democratic representatives put forward a bill this week to increase regulatory oversight over banks holding at least $50B in assets.
