Bank / Credit Union

Fed defends banking rules proposal in wake of collapses

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October 9, 2023

Michael Barr, vice chair of supervision for the Federal Reserve, has defended its recent proposal that would require banks to improve their capital buffers. He claims that this proposal would not impact lending or the economy, according to a report by Yahoo! Finance.

The regulator proposed these changes due to the highly publicized collapse of multiple banks earlier this year including Silicon Valley Bank, Signature Bank and First Republic.

"The private costs of capital must be weighed against the social benefits of higher capital in creating a healthier, more resilient financial system and reducing the likelihood of financial crises," Barr said during a speech.

The proposal would raise capital requirements by 16%. The Fed has also proposed changes in risk assessment for financial institutions with as much as $100 billion in assets.

Big banks have responded negatively to these changes, as JPMorgan CEO Jaime Dimon called it "hugely disappoint" and claimed it would push lending into private credit markets. David Solomon, CEO of Goldman Sachs, said the rules didn't "make sense."

"There is no evidence in the proposal or today's remarks that justifies a 20% increase, and no one should downplay the costs of these increases to the economy," Kevin Fromer, president and CEO of Financial Services Forum, said.