(New York) President Joe Biden is asking regulators to restore most regulatory constraints on US regional banks, removed in 2018 by Congress at the instigation of Donald Trump, in order to limit the risks of new banking crises, indicated the White House on Thursday.
The US head of state suggests focusing on medium-sized institutions, with assets between $100 billion and $250 billion, which was the case for Silicon Valley Bank (SVB) and Signature Bank, which both have went bankrupt in early March.
In May 2018, Congress validated, by a large majority including 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 at 250 billion.
These changes notably eliminated the need for these medium-sized banks to undergo “stress tests”, tests conducted by regulators to verify how an institution would behave in the event of severe disruptions.
This exercise makes it possible to determine whether a bank has enough capital and available liquidity to withstand one or more external shocks.
However, the measures called for by President Biden on Thursday “could be taken without legislative amendment, without congressional intervention”, said a White House official.
The regulation of banks in the United States is divided between three distinct entities, the American central bank (Fed), the Deposit guarantee agency (FDIC) and the OCC (Office of the Comptroller of the Currency), the authority which oversees some 1200 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 does not receive direction from the government. She is the one who does the “stress tests” on the banks.