The news: The Federal Reserve has privately sent warning notices to a slew of midsize lenders with assets ranging from $100 billion to $250 billion, Bloomberg reports. The concerns range from the state of the banks’ capital and liquidity to their technology and compliance.
How it works: The warnings—known as matters requiring attention (MRA) and the more urgent matters requiring immediate attention (MRIA)—are issued by bank examiners who monitor a bank’s safety and soundness.
What they’re looking at: Regulators are worried about any further signs of weakness in a banking system already strained by the collapses of Silicon Valley Bank, Signature Bank, and First Republic Bank. Banks of all sizes are getting closer scrutiny, but the banks receiving these warnings are in the same size range as the banks that failed.
The focus of these on-site examinations—deposits, liquidity, funding risk—is consistent with regulators’ proposals to tighten up requirements for regional banks.
Why it matters: Those who scrutinize closely also come under close scrutiny. The Fed’s self-critical report on what went wrong at Silicon Valley Bank admitted that supervisors had previously uncovered many of the issues that caused the bank to fail—but it also said they didn’t make a strong enough effort to ensure it fixed what they’d pointed out.
With their demands for corrective actions, examiners are showing they’re awake now, and they’ll drop lots of hammers—if they have to.
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