North Columbus News

Following reports of misconduct at the Federal Deposit Insurance Corporation (FDIC), Senator JD Vance has called for the passage of his Bank Failure Prevention Act. The proposed legislation aims to enhance bank supervision and regulation for banks with assets exceeding $100 billion. Under this act, state-chartered financial institutions currently overseen by the FDIC and Federal Reserve would be placed under the jurisdiction of the Office of the Comptroller of the Currency (OCC). According to Senator Vance, "The OCC, unlike the Federal Reserve and FDIC, is focused solely on the supervision and regulation of banks and has a strong track record in preventing bank failures."

Senator Vance expressed concerns about the FDIC's ability to regulate effectively, citing recent bank collapses. "This year, they failed to prevent the collapse of Signature Bank and First Republic Bank," he stated. He questioned why Americans should trust the FDIC if it cannot manage its internal issues.

An internal review found that Signature Bank's failure was partly due to missteps by the FDIC in supervisory actions and communication with management. Similarly, a postmortem by Michael Barr from the Federal Reserve highlighted inadequate regulatory standards for Silicon Valley Bank.

Currently, nationally chartered banks are regulated by the OCC, while state-chartered banks have different primary federal regulators based on their membership status with the Federal Reserve. The overlapping structure is criticized for lacking clarity.

Under Vance's proposal, all state-chartered banks with assets over $100 billion would be reclassified as nationally chartered banks under OCC supervision. This change would also apply to future cases where banks reach or exceed this asset threshold.

In June, Senator Vance discussed regulatory structures with Rohit Chopra from the Consumer Financial Protection Bureau (CFPB). Mr. Chopra acknowledged potential benefits in restructuring oversight responsibilities: "If we were starting from scratch, we probably would not create this balkanized system."