Biden urges regulators to crack down on banks

US President Joe Biden urged regulators to adopt stricter rules to avoid further bank failures following the collapse of Silicon Valley Bank.

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

Biden’s regulatory push is the latest attempt to reform the financial system following the collapse of Silicon Valley Bank and Signature Bank in early March.

Democrats say reversing Trump-era deregulation would make the system more stable, while Republicans say tighter rules will make the industry less efficient and cost banks and consumers money. Lawmakers made those arguments earlier this week when banking regulators went before Congress to propose rules similar to those proposed by Biden Thursday.

The Biden administration proposed the changes after consulting with regulators, White House officials said. Biden provided broad outlines for the guidelines, leaving the details to regulators. They include:

• Restoration of tighter pre-2018 liquidity standards that require mid-sized banks to hold more assets 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 vulnerable to bank runs like the panic that brought down the SVB.
• Banks are subjected to annual “stress tests” by regulators to assess whether they have enough capital to absorb losses. At present, medium-sized banks only have to take such tests every two years. The White House claims Silicon Valley Bank never underwent a rigorous capital stress test, which weakened depositors’ confidence in the bank’s stability and contributed to its demise.
• Imposing stricter capital requirements on banks to ensure they can stay afloat even if some of their holdings fall in value.