California Banker May/June 2023

Legislatively, we will likely see pro posals that roll back regulatory re lief achieved just a few years ago from the Dodd-Frank Act, relief designed to create a more tailored and sophisticated approach to bank supervision. Proposals will likely focus on executive compensation, claw-backs, the barring of future employment in the industry, and the minimum qualifications of in dividuals serving on certain bank boards and committees. As we move forward, there will be ef forts to divide the industry based on asset size, the value of the dual bank ing system will be questioned, and some will wonder about the capacity for state regulators to supervise insti tutions that reach a particular asset size. During these times, it’s espe cially critical that we stand together, unified, to preserve the diversity of banks serving communities across the country. Community banks, mid size banks, regional banks, and large banks are integral to the success of our customers, communities and the overall economy. Banks of every size and business model add unique value and are a source of strength for our economy.

The debate has begun on whether more or less regulation would have avoided SVB’s failure or whether it will prevent future occurrences.

that: in general, large banks with large amounts of uninsured depos its benefitted the most from the sys temic risk determination; no bank ing organizations with total assets under $5 billion will be subject to the special assessment; the special assessment will be collected at an annual rate of approximately 12.5 basis points over eight quarterly as sessment periods; and, collection will begin with the first quarterly assessment period of 2024. With the failure of SVB and concerns regarding FDIC insurance coverage limits, especially those related to a business’ ability to meet payroll, the FDIC has published a comprehensive overview of potential options for de posit insurance reforms. Three options have been identified: maintaining the current deposit insurance framework, providing insurance up to a specified limit; extending unlimited deposit insurance coverage to all depositors; and, different deposit insurance limits across account types, where business payment accounts receive higher cov erage than other accounts. While not an endorsement, the FDIC believes targeted coverage best meets the ob jectives of deposit insurance for finan cial stability and depositor protection. It’s important to note that all options require Congressional approval.

stand what might happen in dif ferent interest rate environments is innate. Notwithstanding, the de bate has begun on whether more or less regulation would have avoided SVB’s failure or whether it will pre vent future occurrences. Several oversight hearings div ing into these very questions have been conducted both before Con gress and in California. Back in DC, back-to-back hearings were conducted on March 28 and 29 be fore the U.S. Senate Banking Com mittee and the House Financial Services Committee, respectively. The California Assembly Commit tee on Banking and Finance held a preliminary hearing on April 10 followed by a joint oversight hear ing between that committee and the Senate Committee on Banking and Financial Institutions on May 10. And then, three hearings took place in one week, two by the Senate Banking Committee (May 16 and 18) and one in the House Financial Services Committee (May 17). Meanwhile, the FDIC issued its proposed rule for the special assess ment to address the $15.8 billion impact on the Deposit Insurance Fund, a figure down from the $22 billion originally estimated. In issu ing the draft rule, the FDIC noted

Kevin Gould is the Executive Vice President and Director of Government Relations for the California Bankers As sociation. He joined the CBA in 2004, bringing with him more than seven years of

legislative experience. In his role, he oversees the management and operation of CBA’s state and fed eral government relations department and serves as one of CBA’s three registered lobbyists. Gould’s advocacy responsibilities and issues focus mainly in the areas of bank operations, commercial lend ing, and wealth management issues. You can reach him at kgould@calbankers.com.

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CaliforniaBanker | Issue 3 2023