CRS Reviews Bank Oversight Authorities and Responsibilities

The Congressional Research Service ("CRS") reviewed policy issues related to the oversight of banking agencies in light of the failures of Silicon Valley Bank ("SVB") and Signature Bank.

In an InFocus report, CRS reviewed congressional oversight on:

• Supervision. CRS stated that regulators require banks to provide periodic call reports with "extensive data on their financial conditions" and that if a bank is publicly listed, it must include information regarding operations and material risks. With regard to SVB and Signature, CRS said that several of the factors that led to their respective failures, such as unrealized losses on their assets, were included in their call reports. CRS also stated that some information is confidential under the Freedom of Information Act due to its "sensitive nature" and could make a bank appear less stable if the information is publicly released.
• Failures and Resolution. CRS said that Congress monitors a failed bank’s impact on financial stability and the FDIC’s Deposit Insurance Fund. CRS explained that the FDIC must choose the lowest-cost resolution option, but provides "little information" in its process to determine the resolution or alternative option pricing in comparison to the chosen resolution. CRS said that pending legislation would require regulators to conduct internal reviews and that outside evaluation may provide a more "critical perspective" on banking regulators’ actions.
• Emergency Assistance. CRS reviewed the banking agencies use of authority under the "systemic risk exception." CRS stated that these "emergency powers" allow for financial support in the event of a crises, but they lack detail and are ultimately backed by taxpayers which could "potentially increase systemic risk." CRS summarized the statute as requiring the Treasury Secretary to send the committees of jurisdiction a letter describing the basis for the determination within three days, and for GAO to review the decision. CRS also described the statutory reporting requirements for the Federal Reserve Board ("FRB") under the Federal Reserve Act, stating that they are "more detailed and could provide a model for other emergency programs." CRS said that under the Federal Reserve Act, FRB is required to report to the committees of jurisdiction "the justification for the action; the identity of the recipients; and the date, amount, and terms of the assistance." Further, the statute requires the Fed to report every 30 days "the value of collateral backing the facility, the amount of interest and fees received, and the expected cost to taxpayers."