The White House is preparing to call for federal banking regulators to impose new rules on midsize banks, prompted by the collapse of Silicon Valley Bank earlier this month, The Washington Post revealed.

The Washington Post quoted two people aware of internal discussions as saying that in the meantime, lawmakers continue to press for answers on how the financial system became so vulnerable to failures of SVB and Signature Bank.

On Wednesday, top officials from the Federal Reserve, Treasury Department and Federal Deposit Insurance Corporation testified before the House Financial Services Committee, where members grilled the regulators on they knew about a run on SVB before it failed on March 10 and on officials’ responsibility for the failure.

“I think that anytime you have a bank failure like this, bank management clearly failed, supervisors failed and our regulatory system failed,” said Michael Barr, the Fed’s vice chair for supervision who is running an internal investigation. “We’re looking at all of that.” President Biden is expected to seek tougher regulations as part of his response to the crises, which led the administration to backstop billions in deposits that had been uninsured because they were over the $250,000 limit for federal protection, according to The Washington Post.

The new oversight measures would need to be implemented separately by the Federal Reserve, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency.

Biden aides will pitch the plan as necessary to prevent similar bank emergencies and similar federal interventions in the future, said the newspaper.

The exact details of the White House’s recommendations are not clear, but they will try to reestablish rules for banks with between $100 billion and $250 billion that were deregulated by Congress and the Fed during the Trump administration.

Among the measures White House aides have discussed include imposing higher capital requirements on the banks, meaning they would need to have a larger share of safe assets relative to their riskier loans; requiring them to have greater stores of immediately available cash; and mandating they formulate plans for an orderly dissolution in the event of a crisis.

The banks would also be required to undergo more frequent “stress tests” from federal regulators that assess their financial health.

The people familiar with the deliberations said discussions were still under flux and could change before the White House’s plans are finalized.

The Fed and FDIC are also conducting investigations into this month’s financial panic and are expected to announce their own recommendations to strengthen banking rules.

Testifying Tuesday before the Senate Banking Committee, Barr, FDIC Chair Martin Gruenberg and Nellie Liang, undersecretary for domestic finance at Treasury, said that banks with more than $100 billion in assets may need tougher oversight. The government will also review the federal insurance program that protects deposits.

Barr said that the Fed’s investigation will look at the power of social media in fueling online panic, with results to come by May 1. (QNA)

Source: Qatar News Agency