Tougher Regulations for Banks

The Federal Reserve's Michael Barr has announced plans to strengthen the financial cushions for larger banks to enhance the system's resilience following recent midsize bank failures. Barr stated that recent events have highlighted the need for a cautious and skeptical approach that ensures banks can withstand both anticipated and unforeseen risks. The plan may entail larger banks being required to hold an additional two percentage points of capital or $2 of capital for every $100 of risk-weighted assets. The plan has faced opposition from the industry and its supporters on Capitol Hill, who argue that the existing framework is already robust and allowed banks to weather the pandemic-induced downturn effectively. Barr intends to apply the Federal Reserve's toughest regulations to banks with assets of at least $100 billion, eliminating the regulatory leniency that allowed certain midsize banks to mask losses on their securities holdings, which contributed to the collapse of Silicon Valley Bank.