Regulators Had the Tools They Needed, SOTE’s Kathy Dick Assesses
Kathy Dick, SOTE’s Founder & CEO, spoke yesterday with Bill Alpert, a reporter at Barron’s about whether regulators will require more tools to address the concentration risk issues that arose at Silicon Valley Bank and Signature Bank before they were closed by regulators. If you’re a Barron’s subscriber, you can access the article here.
Her assessment: Supervisors at the state banking agencies that supervised these two banks could have raised concerns about risk concentrations at any time.
“The regulators had the tools they needed. If I were sitting at a banking agency, I’d look at the banks that fall between the Big Eight on down to $100 billion in assets, and make sure I have my arms around concentration at these institutions.” Both Silicon Valley and Signature fall in that range.
Alpert, B. (2023, March 13). Regulators Had the Tools Needed to Prevent Bank Failures, Experts Say. Barron’s.
It is also worth asking whether the bank’s board was aware that over 90% of deposits were above the $250,000 threshold for federal deposit insurance. It seems to Dick that they may not have understood this.
Also, she believes there’s a tendency toward revisionism when a new crisis strikes. Right now, one Washington parlor game is to blame the recent bank failures on the deregulatory provisions of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which President Trump signed into law in 2018. Dick’s opinion is that this is a sideshow; for one thing, the law enjoyed strong bipartisan support. It reduced the asset threshold for “systemically important financial institutions” from $50 billion to $250 billion, a move intended to ease the regulatory burden on regional and community banks of some of the strictest rules of the 2010 Dodd-Frank. But make no mistake, regulators still had the authority to clamp down on smaller banks when risks arose.
“I don’t know what kind of stress-testing is being done in banks below the $250 billion threshold today, but regulators can use their existing authority to require any bank to conduct some form of stress testing. You don’t need new regulations to do that.”
Alpert, B. (2023, March 13). Regulators Had the Tools Needed to Prevent Bank Failures, Experts Say. Barron’s.
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