The proposals, which would not require congressional approval, are a response to Silicon Valley Bank’s failure earlier this month, which sent shocks through the financial system.
WASHINGTON — President Biden on Thursday called on financial regulators to toughen oversight of medium-sized banks that faced reduced scrutiny following a regulatory rollback during the Trump administration, his most aggressive response yet to the failure of two banks earlier this month that rattled the nation’s financial system.
Mr. Biden’s proposals would not require any action from Congress and could be accomplished by regulators, administration officials said. They include requiring banks to protect themselves against potential losses and maintain enough access to cash to carry them through a crisis.
The proposals would also subject more banks to annual stress tests conducted by regulators to ensure they could survive events like the Federal Reserve rapidly raising interest rates, a catalyst in the failure of Silicon Valley Bank earlier this month. They would broadly increase regulation on banks with between $100 billion and $250 billion in assets, like Silicon Valley Bank.
Many of those measures could have helped regulators to spot and stem problems earlier at Silicon Valley Bank, which saw losses mount quickly on its balance sheet as interest rates rose over the last year. The bank was heavily invested in government bonds; when rates went up, the bonds’ value fell, eventually spurring the largest depositor flight in American history.
That chain of events culminated in the bank's failure and an emergency government effort to rescue depositors at the bank and similarly sized Signature Bank.
Mr. Biden also called on regulators, including the Fed, to increase supervision on banks with between $100 billion and $250 billion in assets. He specifically asked the Federal Deposit Insurance Corporation to exempt community banks from new fees meant to cover the costs of the recent depositor rescues, which an administration official said reflected the importance of the community banking system to the U.S. economy.
White House officials characterized the proposals as requests, not presidential directives, and said they were made in consultation with the regulators involved. In a briefing on Thursday, an official referred reporters to regulatory agencies on whether and when the changes might be implemented.
The move seeks to revive some of the requirements included in the 2010 Dodd Frank law enacted in the wake of the 2008 financial crisis. Nearly a decade later, Mr. Trump signed into law a bipartisan bill that allowed regulators to ease some of that oversight for small and midsize banks, which Mr. Biden and his aides have blamed for the recent crisis.
“Unfortunately, Trump administration regulators weakened many important common-sense requirements and supervision for large regional banks like Silicon Valley Bank and Signature Bank, whose recent failure led to contagion,” administration officials wrote in a fact sheet released to reporters on Thursday.
A Fed spokesman declined to comment. Officials at the F.D.I.C. did not immediately respond to a request for comment.
The Bank Policy Institute, which represents top banks in Washington, criticized the proposals.
“It would be unfortunate if the response to bad management and delinquent supervision at SVB were additional regulation on all banks that would impose meaningful costs on the U.S. economy going forward,” Greg Baer, the institute’s president and chief executive, said in a statement.
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Thursday’s announcement was the president’s second bid to strengthen financial regulation in the wake of the banks’ collapse, but by far the most sweeping.
Soon after his administration and the Fed acted to guarantee depositors’ access to all their funds and provide attractive loans to other banks to firm up confidence in the banking system, Mr. Biden called on Congress to pass a trio of measures targeting executives at failed banks that are of a similar size as Silicon Valley Bank.
Those proposals included giving regulators additional ability to fine executives from banks that fail, to claw back the compensation they received in the run-up to the failures and to bar them from working elsewhere in the financial system.
At a hearing this week with administration and Fed regulators, Senator Sherrod Brown, Democrat of Ohio and chairman of the Banking Committee, said he planned to introduce similar legislation.
Those plans face a murky future in Congress, where Republicans control the House and have signaled little appetite to increase bank regulation. In recent weeks, Republican lawmakers have sought to blame the banks’ failure on distracted executives and on insufficiently stringent supervision by bank examiners at the Federal Reserve.
Mr. Biden hinted earlier this week that he was considering additional requests to strengthen bank oversight, while saying that the financial system had safely weathered the turmoil.
“It’s pretty much under control now,” Mr. Biden said Tuesday. “It remains to be seen, but we’re looking to see whether it needs any further legislation.”
Other top administration officials have also said that Congress would likely need to strengthen financial regulations.
“I absolutely think that it’s appropriate to conduct a very thorough review of what factors were responsible for the failure of these banks,” Janet L. Yellen, the Treasury secretary, told a Senate committee last week. “Certainly we should be reconsidering what we need to shore up regulation to prevent this.”
Mr. Biden has kept a mostly low profile on the issue after giving brief remarks the day after the depositor rescue was announced. At public events, he has highlighted his administration’s efforts to invest in manufacturing and infrastructure, and allowed Ms. Yellen and others to reassure investors and consumers.
In an interview on Thursday, the outgoing chair of Mr. Biden’s Council of Economic Advisers, Cecilia Rouse, said the financial system is stabilizing after being shaken by Silicon Valley Bank.
“I think there’s clearly a lot of understanding of what happened" to the failed banks and how lawmakers can and should improve financial regulations, Dr. Rouse said. “We have a lot more tools than we did before the 2008 financial crisis,” she added. “I don’t think we’re done yet. But it’s no question that we’re seeing that the situation has made huge improvements from where it was a week or two ago.”
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