MNI: Fed’s Powell Wants Stronger Bank Regulation, Supervision

Federal Reserve Chair Jerome Powell believes regulators need to learn lessons from the U.S. bank failures in March and sees the need for strengthened supervision and regulation of mid-sized banks.

Speaking at a Bank of Spain conference on financial stability Thursday, Powell said the U.S. banking system overall is “sound and resilient,” with capital and liquidity at the largest U.S. banks more than doubling since the financial crisis.

That doesn’t mean U.S. regulators can rest, he said. Recent developments in banking, including the failure of Silicon Valley Bank, "suggest a need to strengthen our supervision and regulation of institutions of the size of SVB," Powell said, also noting that bank runs that used to take days or weeks could now be "nearly instantaneous."

"The bank runs and failures in 2023 were painful reminders that we cannot predict all of the stresses that will inevitably come with time and chance," he said. "We therefore must not grow complacent about the financial system’s resilience."

Powell’s remarks come as Fed Vice Chair for Supervision Michael Barr is pursuing a wide-ranging review of existing bank supervision and capital requirements. Barr has previously pushed for stricter capital requirements, and a report in The Wall Street Journal this month indicated the coming proposal could seek to raise overall capital requirements by as much as 20% at larger banks.

This past weekend, Fed Governor Michelle Bowman advocated for better bank supervision and called for an independent review of recent bank failures rather than pushing for higher capital requirements.

Fed Governors Philip Jefferson and Lisa Cook both indicated during a recent appearance last week they favor a “measured” approach to bank regulatory reform. Cook added she believes “tailoring” is needed when it comes to regulatory oversight.