Failures of the SVB, the signature financial institution set off the danger identification plan of the treasury

The US Treasury Secretary testifies before the Senate Appropriations Subcommittee on Financial Services March 22, 2023 in Washington, DC.

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WASHINGTON — The Treasury Department’s risk oversight arm on Friday proposed new tools to detect problems in the U.S. financial system, more than a month after the collapse of Silicon Valley Bank And signature bank efforts to avert further damage to the economy.

The Financial Stability Oversight Council voted to approve a financial stability framework for public feedback. The plan, which will provide Americans with greater transparency about the council’s operations and the identification of systemic problems, will be the first such measure he has released.

“This framework outlines common vulnerabilities and transmission channels through which shocks can propagate through the financial system. And it sets out how the Council is considering the tools it will use to address those risks,” Treasury Secretary Janet Yellen said in pre-release comments.

Yellen said the council “does not generally prioritize one type of instrument over another” in an attempt to prevent problems in the financial system. It plans its response to a specific risk after an assessment, she said.

“The framework emphasizes the importance of a comprehensive and rigorous approach,” said Yellen. “Tackling the multiple financial vulnerabilities that exist today—and may arise tomorrow—requires a wide range of flexible tools.”

The Treasury Department, along with the Federal Deposit Insurance Corp. depositors as they feared repercussions from the collapse of SVB and Signature Bank, some of which powered digital currency exchanges. Federal regulators last month closed both banks, confiscated their deposits, sold both companies to other financial institutions and averted the biggest banking crisis since 2008.

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The FSOC also voted to release guidance proposals that would allow it to use Congressional powers to nominate non-bank financial firms for Federal Reserve Board oversight as needed.

Yellen did not identify which companies might be named, only saying that oversight of more institutions “is an important preventive tool to address systemic risk that may emanate from a non-bank financial company whose activities or distress threaten the financial system.” could”.

Rep. Maxine Waters, D-Calif., senior member of the House Financial Services Committee, welcomed the council’s move to nominate non-banks for financial oversight, which she says has been obstructed by the Trump administration.

“The unexpected failures of SVB and Signature Bank last month and the resulting banking crisis are a stark reminder that FSOC and our regulators must remain vigilant and seek to address vulnerabilities in our financial system promptly and quickly,” Waters said.

Both proposals will be released for a 60-day comment period.