Politics

The Office of Financial Research — a Treasury agency tasked with examining sources of systemic financial risk — published a report that found that full integration of a central bank digital currency could hurt banking-sector stability but offers significant benefits for consumers.

The Senate Banking Committee Chairman Sen. Sherrod Brown will introduce legislation soon along the lines of President Joe Biden's framework for executive compensation outlined last week.

Rep. Patrick McHenry, R-N.C., the chairman of the House Financial Services Committee, said that expanding deposit insurance could have "serious consequences."

Sen. Sherrod Brown, D-Ohio, chairman of the Senate Banking Committee, told bankers not to lobby for weaker regulation in the wake of the Silicon Valley Bank and Signature Bank failures.

The Senate Banking Committee will host top Treasury, Federal Reserve and Federal Deposit Insurance Corp. officials March 28, one day before an identical hearing at the House Financial Services Committee.

Economists have warned since last summer that speedy monetary tightening could be destabilizing. This week, the Federal Reserve will decide whether to stay on that course.

The incentive structures for both banks and large, sophisticated depositors have changed because of federal regulators' decision to guarantee the uninsured deposits of Silicon Valley Bank and Signature Bank.

In prepared remarks to the American Bankers Association, Treasury Secretary Janet Yellen says the government's intervention to cover uninsured deposits at Silicon Valley and Signature banks "reduced the risk of further bank failures."

The $1.25 trillion-asset Home Loan Bank System collectively issued $303.9 billion in discount notes and bonds last week, with demand tapering dramatically from $111.8 billion on Monday to $21.7 billion by Friday.

On Monday, the top banking Republicans in both chambers laid blame for Silicon Valley Bank and Signature Bank's failures on the Federal Deposit Insurance Corp. and Federal Reserve, and they asked the agencies for a full autopsy of what went wrong.

Properly executed, the new anti-money-laundering program has the potential to cripple laundering networks by altering the landscape for financial services professionals.

FDIC Chairman Martin Gruenberg and Federal Reserve Vice Chair for Supervision Michael Barr are scheduled to appear before the House Financial Services Committee later this month to answer questions about the collapse of Silicon Valley Bank and Signature Bank. The hearing will be bipartisan, the committee's Republican chairman and its top Democrat said.

Politicians on both sides of the aisle say the regional reserve bank deserves special scrutiny for Silicon Valley bank's failure. But larger-bank supervision tends to center on the Fed Board of Governors.

President Biden asked that Congress pass measures that would expand the Federal Deposit Insurance Corp.'s ability to claw back compensation from the executives of failed banks, among other measures.

Treasury Secretary Janet Yellen took the first step of walking back an implicit guarantee by the U.S. government that other banks would see their depositors fully backstopped should the bank fail.

Sen. Sherrod Brown, chairman of the Senate Banking Committee, said in a letter to regulators that they should consider the role of social-media-led coordination among depositors.

The new fees based on the DTI, which lenders have said is too likely to vary throughout the origination process for a single loan, will now go into effect in August.

After the failure of two banks between $100 billion and $250 billion of assets, many are asking regulators to change their oversight practices for these banks. The Fed has a wide berth to make a wide array of changes.

Depositors' trust in their banks — and banks' trust in their customers — is the cornerstone of finance. The demise of Silvergate, Silicon Valley and Signature has demonstrated how fragile that trust can be, and how difficult it will be for regulators and bankers to win it back.

Maxine Waters, the top Democrat on the House Financial Services Committee, says she's confident some of the issues surrounding the failures of Silicon Valley Bank and Signature Bank will require legislation.