Policy Backgrounders

Banking Crisis Updates; Fed and FDIC Publish Reviews of Supervision

May 02, 2023

Amid the sale of First Republic Bank to JPMorgan, the Federal Reserve and the FDIC released reports reviewing the role of supervision in recent bank failures and policy considerations moving forward.

• The Federal Reserve’s report on SVB and FDIC’s report on SBNY each found lapses in regulatory oversight but also revealed repeated inaction by both management teams to address identified issues. Each agency plans to review its escalation and enforcement processes.

• The Federal Reserve’s review of SVB detailed plans to review capital and liquidity requirements for mid-sized banks (over $100 billion in assets) while revisiting how the agency assesses risk of uninsured deposits and its handling of growing banks transitioning between size classes. Nearly all the potential changes outlined can be made through standard rulemaking under existing authorities.

• The FDIC’s review of SBNY cited resource and staffing challenges as key contributors to supervisory issues at SBNY while also stating it will review its guidance related to uninsured deposits and to liquidity management.

• The FDIC’s separate review of deposit insurance recommends a targeted increase in insurance limits on business payment accounts, along with other provisions to support stability.