(New York) President Joe Biden asks regulators to restore most of the regulatory constraints for American 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 establishments, with assets between 100 and 250 billion dollars, 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 to 250 billion.
These changes have notably enabled these medium-sized banks to no longer have to submit to “stress tests”, tests carried out by regulators to check how an establishment would behave in the event of major disruptions.
This exercise makes it possible to determine whether a bank has enough capital and available liquidity to withstand one or more external shocks.
Since the fall of SVB and Signature Bank, dozens of elected Democrats have called for the reinstatement of the provisions canceled in 2018 and tabled a bill to this effect.
However, the measures demanded 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 1,200 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. It is she who carries out the “stress tests” on the banks.