The Federal Deposit Insurance Corporation published a Brookings Institution speech by Chairman Martin J. Gruenberg reviewing the thrift and banking crisis of the 1980s and early 1990s, the 2008 Global Financial Crisis, and the 2023 regional bank failures, and setting out recurring drivers of banking stress. He argued that interest rate and liquidity risk, concentrated and uninsured funding, leverage and rapid growth, poorly understood new products and nonbank interconnections, and supervisory and regulatory shortcomings have repeatedly led to destabilising runs and, in some cases, extraordinary public interventions. The speech links each episode to specific policy choices and subsequent reforms, including the role of deregulatory measures and weak supervision in the thrift crisis, followed by the Financial Institutions Reform, Recovery, and Enforcement Act and the Federal Deposit Insurance Corporation Improvement Act’s prompt corrective action and least-cost framework. For 2008, it highlights how expanding financial firm activities, inadequate capital and leverage constraints, and largely unregulated over-the-counter derivatives amplified mortgage-market shocks, and notes crisis responses including the Temporary Liquidity Guarantee Program and later Dodd-Frank reforms on heightened prudential standards, resolution planning, and derivatives clearing and margin. For 2023, Gruenberg attributes SVB and Signature’s failures in part to high uninsured deposit reliance and interest rate risk, and argues that post-2018 rollbacks in liquidity, stress testing, and resolution planning expectations for mid-sized firms reduced resilience; he points to post-turmoil measures including the FDIC’s June 2024 insured depository institution resolution planning rule for banks with at least USD 100bn in total assets, a joint proposal for minimum long-term debt at insured depository institutions above USD 100bn, and FDIC analysis of deposit insurance reform options that identifies targeted coverage for business payment accounts as the most promising approach relative to its costs.
Federal Deposit Insurance Corporation 2025-01-14
Federal Deposit Insurance Corporation chairman draws lessons from three crises and highlights post-2023 push for resolution planning and long-term debt at banks above USD 100bn
The Federal Deposit Insurance Corporation published a speech by Chairman Martin J. Gruenberg, reviewing historical banking crises and identifying recurring stress drivers like interest rate risk, uninsured funding, and regulatory shortcomings. Gruenberg linked these crises to policy choices and reforms, highlighting deregulatory measures and inadequate supervision. He noted recent failures like SVB and Signature were partly due to high uninsured deposits and post-2018 regulatory rollbacks, with subsequent measures including a resolution planning rule and proposals for minimum long-term debt requirements.