Federal Reserve Chair Jerome Powell said Thursday that the central bank may have to tighten its oversight of the American financial system in the wake of the failure of three large U.S. banks this spring, the Associated Press reports.
Tougher regulations put in place after the 2007–2008 financial crisis have made large multinational banks much more resilient to widespread loan defaults, such as the bursting of the housing bubble that led to that crisis.
The collapse of Silicon Valley Bank, Signature Bank, and First Republic Bank, however, exposed different vulnerabilities that the Fed will likely address through new proposals, Powell said. Other Fed officials have said banks should be required to hold more capital in reserve to guard against loan losses.
Powell indicated that the rules needed to be updated to account for how quickly a bank run could happen. Banks with $100 billion – $250 billion in assets, which included all three failed banks, were freed from some requirements in 2018 under legislation passed by Congress and rules issued by the Fed.
Powell said during those hearings that a proposal might be issued next month, but any new rules would require a public comment process and would be phased in over time, meaning they might not come into effect for several years.
