2023-06-26 03:17:24
An official of the American central bank (Fed) called on Sunday, during a symposium in Austria, for an “independent and impartial” investigation into the causes of the failure of several American banks at the start of the year, rejecting proposals for increase in the equity of establishments.
According to Michelle Bowman, a member of the board of governors of the Federal Reserve (Fed), the investigation report published at the end of April, carried out by the institution’s vice-president in charge of banking supervision, Michael Barr, “did not been submitted to the other members of the council before its publication”.
“The other members of the board were disturbingly unable to contribute to the drafting of the report,” she told a conference in Salzburg, “there is a legitimate question that this report provides sufficient answers to what happened”.
The Fed’s report published at the end of April came out in favor of a strengthening of the control of the banking sector, acknowledging the failures of the institution in this area during the bankruptcy of the Silicon Valley Bank (SVB) and several other banking establishments at the beginning of the year.
But Ms Bowman’s comments underscore the divisions that exist within the board of governors over how to proceed with oversight and oversight.
During a hearing before a US Congressional committee on Thursday, Fed Chairman Jerome Powell responded to rumors of an increase in bank capital requirements, which might reach 20%.
“The capital requirements will be very very limited, to the eight main banking establishments”, he assured, adding that other banks might be affected by an increase in their capital, in lesser proportion however.
But these new rules “should not affect banks with less than $100 billion” in assets, Powell said.
For Ms. Bowman, there “is no space to improve the supervision of the big banks”. A review of supervision might only take place following “an impartial and independent investigation into what led to these bankruptcies”, she said.
“We need to be careful regarding what went wrong,” be “voluntary regarding what to fix, and be aware of the unintended consequences” that might arise, Ms Bowman argued.
“A mistake in perception and a misunderstanding of the root causes” of these bankruptcies might have “negative effects on banks and their customers, on the financial system and on the economy in general”, she added.
For Ms Bowman, an independent report would emphasize that “improvements to be made in terms of supervision, a review of capital requirements or better preparation of institutions to access liquidity will be more effective than an obligation to increase capital for a number of banks.
“It is absolutely clear that regulatory and supervisory reform is underway, but we need to ensure that these changes are in favor of a stronger and healthier banking system,” Ms. Bowman concluded.
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