US regulators are taking steps to strengthen the financial systems, including raising the capital requirements of large banks by an average 20%, according to a report in Monday’s Wall Street Journal.
The changes may be proposed as early as this month as regulators implement measures to prevent further failures in the sector, the WSJ said, citing people familiar with the matter. The move comes in the wake of a spate of midsize bank failures, including Silicon Valley Bank (SVP) and Signature Bank.
The precise amount of capital requirements will depend on the bank's business, with those that are highly dependent on fee income, such as from investment banking or wealth management, facing large capital increases.
Last month, the US Federal Reserve promised tougher supervision and stricter rules for banks in an assessment of its own supervision and regulation of the sector following SVB’s failure.
“Regulatory standards for SVB were too low, the supervision of SVB did not work with sufficient force and urgency, and contagion from the firm’s failure posed systemic consequences not contemplated by the Federal Reserve’s tailoring framework,” Federal Reserve vice chair for supervision Michael Barr said in the review.
SBV’s sudden collapse was sparked by dispositors withdrawing $42 billion in a single day as part of a social-media fuelled bank run, with Signature Bank failing just two days later.
Contact the author at stephen.gunnion@proactiveinvestors.com