Key takeaways from Congressional hearings on recent bank failures

Published by: Jared Weiser

April 6, 2023 | Government Affairs

Last week, the U.S. House and Senate held hearings regarding recent bank failures and the Federal regulatory response. Your League advocacy team was watching closely to identify challenges and risks likely to surface for credit unions as federal government machinery gears up on policy change intended to prevent a recurrence of the recent and ongoing banking crisis.

Here are the high-level Committee takeaways:

Committee members generally agree the bank was mismanaged, interest rate risk and inflation were large contributing factors, and federal supervision and regulation modifications demand consideration.
Committee member comments highlight the growing rift between large banks and community banks over which type of banking institution should bear regulatory consequences.
Senator J.D. Vance (R-Ohio) and Congressman Warren Davidson (R-Ohio) emphasized the need for federally and privately insured credit unions to be treated equitably under federal liquidity programming.

Here are the discussed potential legislative/regulatory pursuits:

The Federal Deposit Insurance Corporation (FDIC) will undertake a comprehensive review of the deposit insurance system and release a report by May 1, 2023.
The report will include policy options for consideration related to deposit insurance coverage levels, excess deposit insurance, and the implications for risk-based pricing and deposit insurance fund adequacy.
- Modified stress test requirements for Fed-examined institutions.
- Updated Fed rulemaking on capital and liquidity requirements for larger banks.
The Fed retains the discretion to contemplate certain exemptions for smaller institutions.

The League will keep close to the policy outcomes and fiercely advocate for credit unions’ best interests by focusing on the unique mission, structural and operational differences, and people or community first focus that makes credit unions unique and invaluable in the market.

Contact Jared Weiser for questions or assistance.