One Year After SVB Collapse, Warren Calls on Banking Regulators to Deliver on Commitments to Strengthen Regulations for Big Banks
In March 2023, Federal Reserve, FDIC, and OCC Leaders Committed to Strengthening Regulatory Standards for Banks with $100 Billion in Assets
Washington, D.C. – One year after the collapse of Silicon Valley Bank (SVB), United States Senator Elizabeth Warren (D-Mass.), a member of the Senate Banking, Housing, and Urban Affairs Committee (BHUA), sent a letter to three key banking regulators: Michael Barr, Vice Chair for Supervision of the Federal Reserve (Fed), Martin Gruenberg, Chair of the Federal Deposit Insurance Corporation (FDIC), and Michael Hsu, Acting Comptroller of the Currency at the Office of the Comptroller of the Currency (OCC), seeking an update on their progress in delivering on their public commitments to strengthen regulatory standards for banks with assets of $100 billion or more.
“A year ago on March 10, 2023, SVB – then the 16th-largest bank in the country – collapsed, making it the second-largest bank failure in American history at the time and the biggest bank failure since the 2008 financial crisis. SVB followed the sudden dissolution of Silvergate Bank on March 8, 2023 and triggered the collapse of Signature Bank, then the 29th-largest bank in the country, on March 12, 2023. First Republic Bank, the 14th-largest bank in the country, failed less than two months later on May 1, 2023,” wrote Senator Warren.
These bank failures followed the 2018 enactment of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which rolled back critical Dodd-Frank protections. The bill removed a set of strict rules applied to banks with $50 billion and $250 billion in assets – then covering about two dozen of the country’s largest banks, including SVB.
Post-mortem analyses, including a report by the Fed, identified the 2018 Dodd-Frank roll back, and the banking agencies’ further weakening of big bank regulations in response to that law, as a key contributing factor to last year’s bank failures. According to the Fed, the actions it took after passage of the 2018 law “impeded effective supervision by reducing standards, increasing complexity, and promoting a less assertive supervisory approach.”
Following SVB’s collapse, President Biden urged bank regulators to “(r)einstate rules that were rolled back in the previous Administration for banks with assets between $100 and $250 billion, including liquidity requirements and enhanced liquidity stress testing, annual supervisory capital stress tests, comprehensive resolution plans and strong capital requirements for banks.” And at a March 2023 hearing, the three regulators made public commitments to Senator Warren that they would do so.
“I… urge you to follow through on the commitments you made in March 2023 to implement President Biden’s request for stronger capital and liquidity requirements, stress tests, and resolution planning for banks with at least $100 billion in assets,” concluded Senator Warren.
To understand the steps these regulators have taken in the last year toward meeting their public commitments to strengthen rules for big banks, Senator Warren is asking each regulator to answer a set of questions about their progress by March 25, 2024.
Since the crash of SVB, Senator Warren has led the fight to hold regulators accountable to establishing guardrails around the banking industry to protect the financial system, economy, and consumers:
- In March 2024, at a BHUA hearing, Senator Warren called out Fed Chair Jay Powell for backpedaling on his commitment to strengthen capital rules for big banks in the wake of the First Republic, SVB, and Signature Bank’s crashes.
- In February 2024, at a BHUA hearing, Senator Warren called out giant banks’ lobbying against stronger capital requirements in order to protect their profits and executive compensation, and made clear that the new Fed’s proposed Basel III rule to strengthen capital requirements for banks with more than $100 billion in assets would help protect the financial system from taxpayer-funded bailouts and would only impact a few giant banks. In questioning, Secretary of the Treasury Janet Yellen clarified that the rule is “not about community banks” and does not apply to community banks, but is about “diminish(ing) the odds of a systemic financial crisis” if a billionaire bank crashes.
- In September 2023, on the 15-year anniversary of the collapse of Lehman Brothers, Senator Warren called for updated bank merger review guidelines to safeguard the economy from too-big-to-fail banks, and tougher regulatory scrutiny on banks with assets between $100 billion and $250 billion in assets, among other provisions.
- In August 2023, Senator Warren sent a letter to Chair Powell, calling on him to quickly finalize proposed rules to strengthen capital standards for the country’s largest banks, in line with the international Basel III agreement, and resist any bank lobby pressure to water down these rules.
- In August 2023, Senator Warren and Representative Katie Porter (D-Calif.) sent a letter to Chair Gruenberg, urging the FDIC to act aggressively to ensure the nation’s biggest banks are accurately reporting their uninsured deposits and contributing their full and fair obligations to the Deposit Insurance Fund. The letter comes in response to a FDIC public notice that some large banks are not reporting their uninsured deposits in accordance with FDIC instructions.
- In June 2023, Senator Warren sent a letter to Goldman Sachs, seeking answers about the firm’s conflicting roles in the March 2023 collapse of SVB – profiting as both the buyer of SVB-held bonds and as the architect of failed efforts to raise capital for the bank. Senator Warren’s letter comes as federal regulators investigate Goldman’s role in this crisis.
- On June 1, 2023, Senators Warren , J.D. Vance (R-Ohio), Bob Menendez (D-N.J.), Katie Britt (R-Ala.), Mark Warner (D-Va.), Kevin Cramer (R-N.D.), Chris Van Hollen (D-Md.), Tina Smith (D-Minn.), Raphael Warnock (D-Ga.), and John Fetterman (D-Pa.), all members of the Senate BHUA Committee, joined Senators Catherine Cortez Masto (D-Nev.), Josh Hawley (R-Mo.), and Mike Braun (R-Ind.), to update their original legislation and introduce the Failed Bank Executives Clawback Act – bipartisan legislation that would require federal regulators to claw back up to three years of compensation received by big bank executives, board members, controlling shareholders, and other key decision-makers in the event of a failure or resolution.
- On April 28, 2023, following the Fed’s report on SVB’s failure, Senator Warren released a statement calling on the Fed to immediately adopt stricter bank oversight and called out Chair Powell’s failure to supervise and regulate banks that posed a systemic risk to the economy.
- On May 16, 2023, at a BHUA hearing, Senator Warren blasted the former CEOs of SVB and Signature Bank for lobbying Congress to weaken banking regulations, loading up their banks with risk, ignoring regulators’ warnings, and crashing their banks – all while keeping their multi-million dollar paychecks.
- On May 4, 2023, at a BHUA hearing, Senator Warren highlighted the importance of passing strong legislation to provide the FDIC with the necessary authority to claw back executive pay whenever banks collapse, regardless of the specific process the FDIC uses to pick up the pieces.
- On May 4, 2023, Senator Warren sent a letter to First Republic Bank’s former CEO Michael J. Roffler, inquiring about his and First Republican executives’ mismanagement of the bank, their lobbying for weaker rules, and their compensation and stock sales.
- On March 22, 2023, Senators Warren and Rick Scott (R-Fla.) introduced bipartisan legislation to require a presidentially-appointed and Senate-confirmed Inspector General to the Board of Governors of the Federal Reserve System and the Bureau of Consumer Financial Protection.
- On March 22, 2023, Senators Warren, Tammy Duckworth (D-Ill.), Richard Blumenthal (D-Conn.), Bernie Sanders (I-Vt.), Jack Reed (D-R.I.), Mazie Hirono (D-Hawaii), Ed Markey (D-Mass.), Angus King (I-Maine), Sheldon Whitehouse (D-R.I.), Tina Smith (D-Minn.), Chris Van Hollen (D-Md.), and Brian Schatz (D-Hawaii) sent a letter to the Vice Chair for Supervision of the Federal Reserve Michael Barr, calling on him to exercise the Fed’s authority to apply stronger regulation and supervision to banks with assets totaling $100 to $250 billion.
- On March 19, 2023, Senator Warren sent a letter to the Inspectors General at the Department of Treasury, the FDIC, and the Fed, urging them to immediately open a thorough, independent investigation of the causes of the bank management and regulatory and supervisory problems that resulted in this month’s failure of Silicon Valley Bank and Signature Bank and deliver preliminary results to Congress and the public within 30 days.
- On March 14, 2023, Senator Warren and Representative Katie Porter (D-Calif.) led dozens of Democratic lawmakers to introduce the Secure Viable Banking Act, legislation that would repeal Title IV of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 following the collapse of SVB and Signature Bank. In 2018, Senator Warren was outspoken about the dangers of passing the Economic Growth, Regulatory Relief, and Consumer Protection Act, which reduced critical oversight and capital requirements for large banks.
- On March 14, 2023, Senator Warren sent a letter to ex-SVB CEO Greg Becker, asking for answers about his and SVB lobbyists’ efforts to roll back Dodd-Frank rules prior to the collapse of the bank.
- On March 14, 2023, Senator Warren called on Federal Reserve Chair Jay Powell to recuse himself from the Federal Reserve’s announced internal review of its supervision and regulation of SVB.
- On March 13, 2023, Senator Warren published an op-ed in the New York Times calling Congress and federal regulators to strengthen weakened rules to avoid another crisis, intensify bank oversight, reform deposit insurance, and hold SVB executives accountable for any malfeasance or mismanagement that led to its failure.
- On March 10, 2023, Senator Warren released a statement following the collapse of SVB.
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