Biden to Regulators: Get Tougher On Banks

The White House proposed a raft of new banking rules to reverse Trump-era soft-on-banks changes

US President Joe Biden attends a press conference after a trilateral meeting with Australian Prime Minister Anthony Albanese and British Prime Minister Rishi Sunak during the AUKUS summit on March 13, 2023 in San Diego, California. President Biden hosts British Prime Minister Rishi Sunak and Australian Prime Minister Anthony Albanese in San Diego for an AUKUS meeting to discuss the procurement of nuclear-powered submarines under a pact between the three nations.
Leon Neal / Getty Images.

U.S. President Joe Biden called on regulators to set tougher rules to avoid more bank failures after the collapse of Silicon Valley Bank.

The standards Biden proposed on Thursday would target institutions in the $100 million to $250 million range, covering mid-sized banks like SVB, the nation’s 16th-largest before its collapse. Regulators including the Federal Reserve, the Federal Deposit Insurance Commission and the Treasury Department would be able to impose the new rules without approval from Congress, White House officials said.

Biden’s regulatory push is the latest effort to reform the financial system in the wake of the collapse of Silicon Valley Bank and Signature Bank earlier in March. 

Democrats say undoing Trump-era deregulation would make the system more stable, while Republicans contend stronger rules would make the industry less efficient and cost banks and consumers money. Lawmakers pressed those arguments earlier this week when bank regulators went before Congress to propose rules similar to what Biden suggested on Thursday.

The Biden administration proposed the changes after consulting with regulators, White House officials said. Biden gave rough outlines for the policies, leaving the details up to the regulatory agencies. They include:

  • Restoring stricter pre-2018 standards for liquidity, requiring medium-sized banks to have more of their holdings in assets that can be quickly converted to cash in case many customers want to withdraw their money at once. This could make banks less prone to bank runs like the panic that toppled SVB.
  • Subjecting banks to yearly “stress tests” by regulators to evaluate whether they have enough capital to withstand losses. Currently, mid-sized banks only have to take such tests every two years. The White House contends Silicon Valley Bank never went through a rigorous capital stress test and that made depositors less confident in the bank’s stability, contributing to its downfall. 
  • Imposing stronger capital requirements for banks, ensuring that they can stay afloat even when some of their holdings lose value. 
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  1. The White House. "FACT SHEET: President Biden Urges Regulators to Reverse Trump Administration Weakening of Common-Sense Safeguards and Supervision for Large Regional Banks."

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