White House proposes tougher bank rules, new tests after crisis

President Joe Biden’s administration is calling on regulators to tighten the rules for mid-sized banks, the latest step in its response to the banking crisis that led to the failure of a pair of regional lenders.

The White House on Thursday called for federal banking agencies, in conjunction with the Treasury Department, to enact a series of changes to tighten rules. None of the measures requires Congressional approval, the White House said in a statement.

The changes include reinstating rules for banks with assets between $100 billion and $250 billion — a category that Silicon Valley Bank, which failed, fell into — including liquidity requirements, enhanced stress testing and so-called “living wills” that show how banks that size could be wound down.

The White House also called for:

• annual stress tests for banks in that range, instead of every two years
• shortening the time to apply stress tests once banks reach $100 billion in assets
• strengthening supervisory tools to ensure banks can withstand rising interest rates

The White House backed calls for community banks to not share the cost of replenishing the Deposit Insurance Fund, which was used to backstop SVB and Signature Bank, which also failed. The White House called on the Federal Deposit Insurance Corp. to replenish the fund without relying on community banks.

The moves come as Biden searches for tools to further calm the banking crisis and prevent another failure. Lael Brainard, the former Fed vice chair who now leads Biden’s National Economic Council, has argued in the past that the Fed went further than it had to in rolling back regulations under 2018 measures enacted by Congress.

A White House official, briefing reporters on the announcement, said it will ultimately be up to regulators to enact the changes but that the administration had spoken with them in preparing its proposals.

Treasury Secretary Janet Yellen will warn in a speech Thursday that deregulatory efforts might have gone too far and contributed to the recent crisis. 

Yellen plans to say it is important to “reexamine whether our current supervisory and regulatory regimes are adequate for the risks that banks face today.”

Progressive lawmakers have pointed to the 2018 deregulation push as a contributor to the bank failures, whereas conservative lawmakers who backed deregulation have laid blame elsewhere, such as with regulators.

The rollback of banking regulations under former President Donald Trump garnered the votes of more than a dozen Democratic senators.

The Fed has launched an investigation into the events that led to the collapse of Silicon Valley Bank in California, and Congress is likely to open its own inquiries.