Fed prepares to tighten banking rules

The Fed is considering changes to its rules governing midsize banks that could include stricter capital and liquidity requirements and steps to strengthen annual stress tests. The U.S. central bank is considering tougher rules for midsize banks after three banks, including Silicon Valley Bank (SVB), failed in the space of a week. Bloomberg has learned from a person familiar with the matter that Fed officials are considering rules that could bring capital and liquidity thresholds for midsize banks closer to those faced by the largest Wall Street firms. The source said one change under consideration could affect stress tests, which are used to measure banks’ ability to withstand a crisis. The decision to review regulations for banks with assets between $100 billion and $250 billion came after the seizures of SVB on Friday and Signature Bank on Sunday. Last Wednesday, crypto-focused Silvergate Capital Corp. decided to voluntarily liquidate the bank it owns. Meanwhile, managements at regional banks, which have faced significant selling pressure following SVB’s collapse, have begun to buy back their own bank stocks at falling prices. More than 100 banks, including PacWest Bancorp, Metropolitan Bank Holding Corp. and CVB Financial Corp., have spent at least $13.9 billion buying their own stocks, according to data compiled by Bloomberg. Most of the transactions occurred in the past few days. Meanwhile, Moody’s downgraded its outlook for the U.S. banking system to negative from stable, citing a “significant decline” in deposits and investor confidence.