This month, former chief executives of two collapsed banks will appear before Congress as lawmakers investigate the reasons behind a series of failures at medium-sized financial institutions.
On May 16, the Senate Banking Committee, led by Democratic Senator Sherrod Brown of Ohio, will hold a hearing featuring Gregory Becker, former CEO of Silicon Valley Bank, Scott Shay, former chairman and co-founder, and Eric Howell, former president of Signature Bank.
Additionally, the committee will conduct two other hearings on the banks’ failures this month. On Thursday, various industry experts will provide their testimonies, and on May 18, Michael Barr, Chief Regulator of the Federal Reserve, and Martin Gruenberg, Chairman of the Federal Deposit Insurance Corp. (FDIC), will testify.
The Federal Reserve primarily regulated Silicon Valley Bank in California, while the FDIC served as the primary federal regulator for New York-based Signature Bank.
Barr released a report last month attributing Silicon Valley Bank’s failure to inadequate management, weakened regulations, and insufficient oversight by Federal Reserve employees. The report urged the industry to improve monitoring efforts to prevent future bank collapses.
A separate FDIC report stated that Signature Bank’s failure was likely a consequence of Silicon Valley Bank’s collapse but also identified regulatory shortcomings within the FDIC, including inadequate staffing to supervise the bank properly.
Senators have expressed frustration with the banking industry, regulatory agencies, and the rollback of financial stress tests in 2018. However, in a closely divided Congress, there is little consensus among Democrats and Republicans on the necessity of new legislation.
In March, Brown and the Senate Banking Committee’s leading Republican, Senator Tim Scott, sent a letter to Silicon Valley Bank and Signature Bank executives, notifying them of their expected testimonies and cautioning that they “must answer for the bank’s downfall.”
In the lead-up to the hearings, lawmakers from both parties are preparing to scrutinize the actions of the former executives and the regulatory agencies that were supposed to oversee them. The hearings will explore how deregulation, mismanagement, and insufficient oversight contributed to the banks’ failures.
Some lawmakers call for stricter regulations and increased oversight to prevent similar collapses. In response to the upcoming hearings, Senator Elizabeth Warren, a Democrat from Massachusetts, has voiced her concern over the failures and stated that it is vital for Congress to strengthen regulations and hold the banks’ executives accountable.
On the other hand, some Republicans argue that over-regulation could stifle growth and innovation in the banking sector. They maintain that the focus should be on identifying the specific factors that contributed to these failures and addressing them accordingly, without imposing blanket regulations that could harm the industry.
The hearings will examine the reasons behind the banks’ collapses and determine whether additional measures are required to protect consumers and taxpayers from the consequences of potential future failures. The testimonies of former CEOs, regulatory officials, and industry experts will be crucial in guiding Congress’s decision-making process.
The outcomes of the hearings could have significant implications for the banking industry, potentially leading to new regulatory measures or prompting a reevaluation of existing policies. As a result, financial institutions nationwide will be closely monitoring the hearings and their aftermath.
While it remains to be seen what concrete actions will be taken following these hearings, they are expected to serve as an essential first step in addressing the issues that led to the failures of Silicon Valley Bank and Signature Bank and preventing similar collapses the future.
