President Joe Biden is calling on regulators to reinstate most of the regulatory restrictions on regional US banks, removed in 2018 by Congress at the behest of Donald Trump, to limit the risks of further banking crises, the president said. The White House Thursday. The US head of state suggests focusing on medium-sized establishments, with assets between 100 and 250 billion dollars, as was the case with Silicon Valley Bank (SVB) and Signature Bank, which went bankrupt in early March.
In May 2018, Congress approved, by a large majority that includes Democrats and Republicans, the lifting of a series of regulatory and prudential obligations imposed on credit institutions with assets of at least $50 billion and up to $250 billion. These changes have, in particular, meant that these midsize banks no longer have to undergo “stress tests”, tests carried out by regulators to see how a store would behave in the event of a severe disruption. This exercise makes it possible to determine whether a bank has sufficient capital and liquidity available to withstand one or more external shocks.
Steps that could be taken without congressional intervention
Since the fall of SVB and Signature Bank, dozens of elected Democrats have called for the reinstatement of the provisions canceled in 2018 and introduced a bill to that effect. However, the actions demanded by President Biden on Thursday “could be taken without legislative amendment, without congressional intervention,” a White House official said.
Bank regulation in the United States is divided among three separate entities, the US central bank (Fed), the Deposit Insurance Agency (FDIC) and the OCC (Office of the Comptroller of the Currency), the authority that oversees some 1,200 banks. Present in several American states. The White House did not mention the Fed, which is an institution nominally independent of the executive branch and receives no direction from the government. It is she who conducts the “stress tests” in banks.
Source: BFM TV
