Regulators were grilled twice this week: first by the House Financial Services Committee on Tuesday and then by the Senate Banking Committee on Thursday.
While the House hearing covered a lot of ground, the Senate one proved feistier in places. Sen. John Kennedy, R-La., accused Fed Vice Chair Michael Barr of offering a "hollow" apology when the regulator told the committee he accepts full responsibility for the failure of SVB. He instead said the Fed was trying to claim that "Trump ate my homework" by shifting blame to past Republican appointees. Like other GOP senators, he was angry that nobody from the agencies was fired as a result of the failures. "If Elizabeth Holmes worked for one of your agencies, she'd probably be getting a bonus," Kennedy said at one point. Barr did push back, telling Kennedy he was misreading the report on SVB's collapse.
Meanwhile, Comptroller Michael Hsu also received criticism despite the fact that SVB, Signature, and First Republic were not national banks. Sen. Elizabeth Warren sharply questioned Hsu for signing off on allowing the remains of First Republic to be sold to JPMorgan Chase. She wanted it blocked on the basis of size alone, while Hsu insisted he had to look at other factors beyond that.
During this week’s hearings, Senators from both sides of the aisle blasted former SVB CEO Greg Becker and two ex-Signature Bank execs over issues related to compensation, rapid growth, and rising interest rates before both banks collapsed in March.
Arguably the toughest line of questioning came from Sen. Bob Menendez, D-NJ, who grilled Becker for selling $84 million worth of SVB shares over a two-year span in which the bank received 30 supervisory findings on issues related to risk management, board effectiveness, and interest rate modeling. Specifically, Menendez asked if Becker considered supervisory findings about governance and risk management to be material, nonpublic information. Becker replied that he didn't.
Former CEO of First Republic Michael Roffler told lawmakers on Wednesday that the bank collapsed due to contagion. "Before March 10, First Republic was conducting business as usual," he said. It even received a "significant inflow of deposits" from SVB customers the day before SVB failed. Then "everything collapsed overnight."
How Banks Can Compete Amidst Liquidity Crunch
Recently, a guest contributor for BankDirector reminded readers: “the competition for deposits is hot.” He explains that “recent bank failures demand that bankers scrutinize their portfolios and cash reserves and determine whether they’d be able to withstand a crisis or economic downturn.” The author suggests that banks can compete with fintechs, money market funds, and large technology firms by creating intuitive, engaging shopping experiences and making the deposit process more seamless. “Understanding that customers have a choice, banks should leverage their customers’ data to personalize offers and make the deposit process more seamless and easy,” he writes.
Many regional banks have CRE and construction loans that exceed regulatory thresholds, Reuters reported. With regulatory scrutiny of CRE expected to increase amid concerns over the space, banks may have to sell those loans at steep discounts.
Many banks and other financial institutions are welcoming the U.S. Postal Service's plan to add 12,000 high-security mail-collection boxes across the country and install electronic locks on 49,000 existing boxes. However, mail theft is just one of several fronts in the war on check fraud.
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