A legal overhaul five years ago that loosened oversight of midsized lenders wasn’t to blame for last month’s collapse of Silicon Valley Bank, according to a top official at the Federal Deposit Insurance Corp.
(Bloomberg) — A legal overhaul five years ago that loosened oversight of midsized lenders wasn’t to blame for last month’s collapse of Silicon Valley Bank, according to a top official at the Federal Deposit Insurance Corp.
FDIC Vice Chairman Travis Hill on Wednesday waded into a simmering debate over whether tougher regulations are needed for financial firms like SVB and Signature Bank, another lender that failed last month. Progressive Democratic lawmakers, Treasury Secretary Janet Yellen and the White House have all said the firms’ collapse spotlighted rule gaps.
Hill, a former Republican Senate staffer, said that a law signed by then-President Donald Trump in 2018 that freed up firms like SVB from some of the strictest post-financial crisis regulations wasn’t behind the bank’s collapse. Rather, Hill blamed mismanagement of risks around rising interest rates and a high concentration of uninsured depositors yanking their money in a panic.
“To the extent there are holes, there are holes in the existing regulatory framework, not the 2018 rollbacks,” he said in remarks for an event at the Bipartisan Policy Center in Washington. “There is a need for tailoring.”
Hill worked on the legislative changes as a senior adviser to the then-Chair of the Senate Banking Committee. The law received support from more than a dozen Democrats in the chamber.
During congressional hearings last month, FDIC Chairman Martin Gruenberg signaled that he thought regulators bore some responsibility for SVB’s failure. The watchdog is investigating the failure of the two banks.
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