The Economic Growth, Regulatory Relief and Consumer Protection Act, also known as S. 2155, passed in 2018 with bipartisan support. The law rolled back bank policies, originally enacted shortly after the Great Recession, that created restrictions for banks with more than $50 billion in assets, such as requiring them to undergo annual stress tests conducted by the Federal Reserve. The legislation raised the threshold to require such restrictions only for banks with more than $250 billion in assets, among many other changes.
In recent weeks, some Democratic lawmakers on Capitol Hill have blamed the law for the second biggest bank failure in U.S. history. However, Mr. Hill maintained that "mismanagement of interest rate risk was at the core of SVB's problem."
Michael S. Barr, vice chairman for supervision of the Federal Reserve Board of Governors, made a similar statement during the first congressional hearing on the bank failures in late March. He told the Senate Banking Committee that SVB failed "because the bank's management did not effectively manage its interest rate and liquidity risk, and the bank then suffered a devastating and unexpected run by its uninsured depositors in a period of less than 24 hours."
During that same hearing, Sen. Elizabeth Warren, D-Mass., asked each individual testifying — Mr. Barr, FDIC Chairman Martin J. Gruenberg and Nellie Liang, undersecretary for domestic finance at the U.S. Treasury Department — whether they agree that banking rules need to be strengthened going forward, to which all agreed.
"We should closely review the lessons to be learned from the recent failures and be open to targeted changes to our framework, but we should be humble about what our rules and policies can accomplish and avoid the temptation to overcorrect," Mr. Hill said during his remarks Wednesday.
In a moderated discussion after his remarks, Victoria Guida, economics reporter at POLITICO, asked Mr. Hill whether he thinks it's worth toughening regulation on medium-sized banks, and whether applying some restrictions to which large banks are subject could have helped the matter.
"I don't think this is an issue of midsized banks not being subject to rules that large banks are subject to," Mr. Hill replied. "It's, if anything, it's a question of are we approaching things like interest rate risk the right way?"
