NEW YORK — The US banking industry is facing a critical juncture as regulators seek to bolster oversight in the aftermath of a series of failures that have weakened public confidence in the financial system.
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The spotlight has turned on regional banks, which are now lobbying for increased scrutiny of their larger counterparts, who may be required to shoulder a greater share of the costs of future bailouts.
However, the lack of a coherent message and the competing priorities of different factions within the industry have made it difficult for the financial sector to influence the decision-making process.
The Federal Reserve, the Federal Deposit Insurance Corp., and Congress are all being targeted from multiple angles, making it challenging for any one group to shape the regulatory landscape in their favor.
This discord is especially troubling given the amount of money that has been spent on lobbying in recent years.
According to public records, the industry spent a staggering $122.9 million over the past two years alone. Despite these efforts, it appears that regulators are determined to cast a wider net in terms of the banks that will be subject to stricter oversight.
The recent collapse of crypto-friendly lender Silvergate Capital Corp. and the failures of regional institutions Silicon Valley Bank and Signature Bank have intensified the push for more stringent regulations.
Even larger banks such as US Bancorp and PNC Financial Services Group Inc. have been preparing for an increase in oversight since Michael Barr took over as the Fed’s No. 2 official last summer.
In this environment, the industry must find a way to present a united front and work collaboratively with regulators to rebuild public trust.
Members of Congress are under pressure to respond to public anger over the perceived preferential treatment of wealthy depositors. This makes them less likely to be receptive to lobbying efforts that seek weaker regulation.
It is vital for the industry to recognize that a failure to act now could result in even more stringent regulations being imposed in the future. By working proactively with regulators, the banking sector can ensure that any new rules are fair, balanced, and promote the stability of the financial system.
“Before all of this happened, we knew that additional regulations were on the table,” said Kyle Sanders, a financial services analyst with Edward Jones.
“The events with SVB guarantee that there are regulations coming down the pike.”
In conclusion, US banks are facing a pivotal moment in their history as they seek to navigate a complex regulatory landscape in the wake of a series of failures.
The industry must work together to present a unified message and build bridges with regulators to ensure that any new rules are in the best interests of all stakeholders.
Failure to do so could result in even greater challenges down the line.