Tighter Bank Oversight Rules Expected This Summer

Tighter Bank Oversight Rules Expected This Summer

This week, Federal Reserve Vice Chair for Supervision Michael Barr said tighter bank oversight rules could be revealed this summer. Barr noted that the new oversight plan would see regulatory supervisors increase scrutiny of lenders, according to Reuters.

Barr’s comments were delivered to Congress earlier in the week, in testimony before the House Financial Services Committee. Officials from the Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation also provided testimony.

The Committee hearing occurred as regulators have been facing intense criticism in the aftermath of recent bank collapses. Several regulatory bodies have already acknowledged their failures to properly oversee lenders like Silicon Valley Bank and Signature Bank.

New bank oversight rules under consideration

Regulators have suggested several new rules that would enhance their supervisory powers. Barr noted that key rule changes would be focused on regional banks holding assets valued at more than $100 billion. The new rules could include requirements for those banks to include unrealized losses when determining their overall capital levels.

The FDIC and Comptroller’s Office also said that their own supervisors would be urged to take a more aggressive approach to oversight. They noted that their post-crisis analysis found that regulators were aware of problems that led to the recent bank failures but had apparently not acted to correct them before the banks collapsed.

Are new rules needed if regulators fail to enforce the old ones?

While Democrats and regulators have called for new powers to implement tighter bank oversight, not everyone agrees. For their part, House Republicans questioned the need for additional powers. Instead, they urged the regulators to do a better job using their existing tools. Republican Committee Chairman Patrick McHenry said as much in his comments to the attending officials.

“You have used this crisis to justify progressives’ long-held priority to increase capital requirements and impose more regulations on banks.”

Nevertheless, regulators responsible for supervising banks have made it clear that they intend to pursue additional powers to aid in oversight. The financial sector and policymakers may have to wait until the summer months to learn exactly what those tighter bank oversight rules will actually look like.

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