Banks in the US could face stricter capital requirements following the three major failures earlier this year.
Federal Reserve vice chair for supervision Michael Barr is proposing that banks with at least US$100bn in assets are subject to similar regulation to those with US$700bn in assets.
These regulations would mean banks must hold an additional US$2 of capital for every US$100 of risk-weighted capital.
Barr also suggested that lenders with at least $100bn in assets “account for unrealized losses and gains in their available-for-sale securities when calculating their regulatory capital.”
Silicon Valley Bank, which collapsed in March and sparked the chaos which also saw Silvergate Bank and Signature Bank go under, was criticised for not having to account for unrealised losses it accumulated.
Requiring lenders to hold more cash could help mitigate risks when they are under stress, nut at the cost of limiting profits.
“Some industry representatives claim that inadequate capital had nothing to do with those bank failures,” Barr said Monday in CNNBusiness.
“I disagree. It was an unsuccessful attempt by SVB to raise capital that caused uninsured depositors to look more closely at how the bank was capitalized.”