U.S. Rep. Ritchie Torres announced on Friday that he is filing three new pieces of federal legislation: the “Critical Bank Review Act,” the “Financial Stability Mandate Act” and the “Emergency Liquidity Act.” These new pieces of legislation follow the failures of Silicon Valley Bank in California and Signature Bank in the representative’s home state of New York.
The “Critical Bank Review Act” requires the U.S. Treasury Department, in consultation with banking regulators, to take inventory of and designate certain financial institutions as “sectorially critical.” Those identified institutions, under the legislation, would receive a higher level of federal oversight and regulatory supervision to help safeguard and insulate America’s critical sectors from a potential future bank collapse.
“One of the lessons learned from the failures of Silicon Valley Bank and Signature Bank, I believe, is that we need to be thinking of risk to the American economy not just in terms of the size and scope of a financial institution, but also in terms of sector,” said Torres. “It’s in the interest of both our national security and strategic competitiveness to track the level of importance particular banks have in connection to our country’s most critical sectors.”
Currently, the Cybersecurity and Infrastructure Security Agency classifies 16 critical infrastructure sectors whose assets, systems and networks, whether physical or virtual, are extremely vital to the U.S. Their incapacitation or destruction would have a debilitating effect on security, national economic security, national public health or safety, or any combination thereof.
The “Financial Stability Mandate Act” requires the board of governors of the Federal Reserve and the Federal Open Market Committee to consider the country’s overall financial stability in addition to inflation and employment rates under the Federal Reserve System’s current “dual mandate,” when setting interest rates.
The “Emergency Liquidity Act” requires the board of governors of the Federal Reserve to establish and maintain a permanent emergency lending program to provide member banks and other depository institutions with short-term liquidity against long-term assets.
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