Senate Banking Committee Holds Hearing on Recent Bank Collapses, Calls for Tougher Regulations

On Tuesday, the U.S. Senate Committee connected Banking, Housing, and Urban Affairs, besides known arsenic the Senate Banking Committee, held a proceeding to sermon the caller slope collapses successful the United States and the regulatory response. Throughout the testimonies, integer assets and crypto businesses were mentioned. Senate Banking Committee president Sherrod Brown claimed connected Tuesday that Signature Bank “found itself successful the mediate of Sam Bankman-Fried’s transgression spree astatine the crypto speech FTX.”

Regulators Highlight Bank Exposure to Crypto Asset Businesses successful Senate Banking Committee Hearing About Bank Failures

Following the illness of Silvergate Bank, Silicon Valley Bank, and Signature Bank, the Senate Banking Committee held a hearing to sermon the concern and its implications. The proceeding witnesses included Martin Gruenberg, president of the Federal Deposit Insurance Corporation (FDIC); Michael Barr, vice president for supervision with the Board of Governors of the Federal Reserve; and Nellie Liang, the Treasury’s home concern undersecretary, successful summation to committee president Sherrod Brown and ranking subordinate Tim Scott.

Senate proceeding connected caller slope failures happening now. All 3 witnesses are folks I named arsenic architects of OCP2.0https://t.co/xRQ8LONpGA

— nic 🌠 carter (@nic__carter) March 28, 2023

“Right now, nary of the executives who ran these banks into the crushed are barred from taking different banking jobs, nary person had their compensation clawed back, nary person paid immoderate fines,” explained Brown. “Some executives person decamped to Hawaii. Others person already gone connected to enactment for different banks. Some simply wandered disconnected into the sunset.” The president of the Senate Banking Committee revealed that helium is preparing authorities that volition heighten regulators’ capableness to enforce fines and penalties, reclaim bonuses, and prohibit executives who are liable for slope failures from ever moving astatine different slope again.

wow.. Barr tells Senate Banking that SVB told regulators $100b was going to alert retired the doorway connected Friday… aft $42b fled connected Thursday, starring to the bank's closure. If you don't deliberation we're successful a caller satellite of imaginable hyper-speed slope runs, you're not paying attention.

— Steve Liesman (@steveliesman) March 28, 2023

The FDIC chairman, Gruenberg, discussed the vulnerability to cryptocurrency businesses successful transportation to the slope failures. Gruenberg talked astir however Silvergate Bank stated that it held “$11.9 cardinal successful integer asset-related deposits” and had “less than 10 percent of full deposits” exposed to FTX. The president besides mentioned the crypto plus clientele of Signature Bank, arsenic good arsenic the integer currency colony systems of some Silvergate and Signature. Gruenberg noted that these banks held agelong Treasuries and were unprepared for the involvement complaint increases that followed the Covid-19 pandemic.

“A communal thread betwixt the illness of Silvergate Bank and the nonaccomplishment of SVB was the accumulation of losses successful the banks’ securities portfolios,” Gruenberg said.

The president of the FDIC stated that the situations involving some Signature Bank and Silicon Valley Bank “warrant further extended introspection by some regulators and policymakers.” Michael Barr of the Federal Reserve added that SVB’s downfall was caused by its management’s inability to header with involvement complaint adjustments and a slope run. “SVB failed due to the fact that the bank’s absorption did not efficaciously negociate its involvement complaint and liquidity risk, and the slope past suffered a devastating and unexpected tally by its uninsured depositors successful a play of little than 24 hours,” Barr emphasized.

Barr stressed the value of processing the existent comprehension of banking “in airy of evolving technologies and emerging risks.” He stated that the Federal Reserve was “analyzing” caller incidents and variables specified arsenic “customer behavior, societal media, concentrated and caller concern models, accelerated growth, deposit runs, involvement complaint risk, and different factors.” The U.S. cardinal slope typical added that, with each of these caller and emerging variables, regulators indispensable reconsider however they supervise and modulate fiscal institutions successful the United States. “And for however we deliberation astir fiscal stability,” Barr concluded.

What bash you deliberation astir the Senate Banking Committee proceeding astir the slope failures? Share your thoughts astir this taxable successful the comments conception below.

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