Senate Committee Confronts Surge Of Bank Failures - Demands Swift Action, Stricter Regulations

The Senate Banking Committee on Thursday held a hearing on the recent spate of bank failures.

Senator Sherrod Brown (D-OH), the Committee Chairman, underscored the importance of heightened accountability for banking executives. He advocated for legislation that would enhance the authority of financial regulators to levy penalties and reclaim remuneration, as well as to prohibit bank executives from the sector if they fail to adequately supervise their institutions.

The hearing comes after the failures of four small to mid-size U.S. banks triggered a sharp decline in global bank stock prices. Silvergate Bank and Signature Bank, both with significant exposure to cryptocurrency, failed during the turbulence in the digital asset market.

Silicon Valley Bank experienced failure following the sale of its Treasury bond portfolio at a significant loss, leading to worries among depositors about the bank's liquidity.

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On Monday, regulators took control of First Republic Bank, the third financial institution to be seized by the government this year. JPMorgan Chase & Co (NYSE: JPM) immediately accepted an offer to acquire virtually all of FRC's assets.

PacWest Bancorp (NASDAQ: PACW) on Wednesday said it is exploring “all strategic options” after its share price was cut in half in after-hours trading following a Bloomberg report that it was considering a sale.

Brown called for legislation to make it easier for agencies to bring actions against bank executives and managers who are asleep at the switch, to disincentivize lax oversight that leads to bank failures.

Additionally, he called for legislation mandating agencies to complete the implementation of the Dodd-Frank section 956 rule. This rule would compel large financial institutions to disclose further details about their executive compensation practices and incentive-based remuneration.

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