Possible Banking Regulations Come to Light During Senate Hearing

Possible future banking regulations came to light during a Senate committee hearing.

The proposals were mentioned by Federal Reserve Vice Chair for Supervision Michael Barr and Federal Deposit Insurance Corp. (FDIC) Chairman Martin Gruenberg during a Tuesday (March 28) hearing of the Senate Banking Committee that focused on the failures of Silicon Valley Bank and Signature Bank, Bloomberg reported Tuesday.

One potential project is to explore liquidity rules for banks, according to the report.

In addition, the Fed will enhance its stress tests of banks and propose a long-term debt requirement for more big banks, the report said.

For its part, the FDIC will issue a report on May 1 covering ways deposit insurance could be changed, and Gruenberg said more attention should be paid to the capital requirements for banks’ securities portfolios, per the report.

Officials testifying during the hearing also reiterated earlier statements that the banking system is sound, the report said.

Democrats who questioned the regulators during the hearing called for stronger banking rules and attributed the recent bank failures to a softening of regulations during the Trump administration, according to the report.

Republicans, on the other hand, opposed additional rules, said the bank failures showed that regulators had not enforced the existing rules, and blamed the troubles in the sector on the steep interest rate hikes seen during the Biden administration, the report said.

As PYMNTS reported Tuesday, lawmakers let their frustrations with regulators fly during the Senate hearing and took the opportunity to grill the officials about what went wrong regarding the collapse of Silicon Valley Bank and Signature Bank. Regulators responded by looking to emphasize bank executives’ culpability.

A second Senate hearing will be held Wednesday (March 29). In addition, Republicans on the House Financial Services Committee have indicated they are conducting a comprehensive review of the events leading up to the failures of the banks, and the Federal Reserve is undertaking an internal review of its own oversight and regulation of the failed banks.

The FDIC, too, has investigations underway that are looking into any misconduct in the management of the failed banks.