US Federal Reserve to consider tougher rules for midsize banks after SVB collapse: Source

The bank's collapse set off fears across the financial system, drove an extraordinary government effort to reassure depositors and backstop the system, and set off debate about reversing previous rule easing for regional banks.

Now, a review of the US$209 billion (S$280 billion) bank's failure being conducted by Fed Vice Chair for Supervision Michael Barr could lead to strengthened rules on banks in the US$100 billion to US$250 billion range, the source told Reuters.

That review of Fed supervision and regulation of the bank will be released by May 1, and augments a review of bank capital rules by Barr already underway.

The Wall Street Journal reported on Tuesday (March 14) the Fed was reconsidering regulations regarding midsize banks, which could lead to more stringent capital and liquidity requirements and potentially beefed up annual "stress tests."

Currently, the toughest capital and liquidity requirements are reserved for the nation's largest banks, after a 2018 deregulation law from Congress and Fed rule-making under prior leadership eased those rules for smaller firms. Larger firms also face more frequent and rigorous stress testing and accounting requirements.

All those requirements could be reworked by the Fed in the aftermath of the collapse, which has also spurred fresh calls from proponents of tougher rules for regulators to rebuild those restrictions.

On Tuesday, 50 Democratic lawmakers, including Senator Elizabeth Warren, introduced a bill to repeal the law that eased rules for banks in 2018. REUTERS