After a series of bank runs in 2023, Federal Reserve officials and other bank regulators seem likely to propose a new regulatory response this spring that could help avoid meltdowns in the future. The policies are expected to focus on liquidity, an issue that plagued Silicon Valley Bank and other regional lenders last year.
However, these new regulations come on the heels another potential set of rules, known as “Basel III Endgame,” that have already risen tensions between banks and the regulators. They would required the amount of capital that banks must have on hand in case of an emergency, such as needing to avoid a taxpayer-funded bailout like those that occurred during the 2008 financial crisis.
Jamie Dimon, CEO of the country’s largest bank, JPMorgan Chase, reportedly said to clients that nothing the regulators have done since last year have addressed the issues that led to the midsize bank failures in 2023. He also said that the Basel proposal affected larger banks that were not a significant part of the meltdowns.
Although details are still being decided, the proposal being released this spring will likely have at least three key provisions. First, it may encourage or require banks to be in a position to borrow from the Fed’s short term funding option, known as the discount window. Next, it could address some customer deposits differently to ensure banks have enough funds available to get through a period of turmoil. Finally, it may touch on how bank regulations account for held-to-maturity securities.
