‘Weakening of supervision for banks should be reversed,’ says Biden

As the banking crisis deepens following the bankruptcy of Silicon Valley Bank (SVB), a small and medium-sized U.S. bank, President Joe Biden has announced plans to strengthen regulations on larger banks with assets exceeding 100 U.S. billion dollars. In addition, Treasury Secretary Janet Yellen stated the need to regulate so-called "shadow finance" entities such as virtual currencies and hedge funds.

In a press release on Thursday (local time), the White House announced, “The weakening of common-sense bank safeguards and supervision during the Trump Administration for large regional banks should be reversed.” It said that banks with assets exceeding 100 billion dollars would be required to strengthen their liquidity and capital ratios to prepare for potential crises and undergo an annual review process.

Following the global financial crisis in 2008, the U.S. implemented stricter supervision standards for banks with assets exceeding 50 billion dollars. However, in 2018, the Trump administration raised the threshold to 250 billion dollars. Now, the Biden administration plans to lower the threshold back to 100 billion dollars to strengthen regulatory oversight.

During a speech on the same day, Secretary Yellen expressed her support for the president's stance and stated that it was necessary to determine whether the deregulation policies implemented by the previous administration had gone too far. Despite the potential increase in company costs due to tighter regulations, Yellen argued that proper regulation costs were minimal compared to the financial losses incurred during the previous crisis. She emphasized the importance of regulating "shadow finance" entities such as money market funds (MMFs), hedge funds, and virtual currencies.


chaewani@donga.com