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Interest Rates, Agency Reports, and Deposit Insurance Coverage

230504 Reg Corner Blog

‘The central bank suggested this may be the last rate hike as the economy and job market are cooling.’

One Last Hike? As expected, the Federal Reserve raised interest rates a quarter of a percentage point Wednesday. It was the 10th rate increase since March 2022 and puts the benchmark interest rate between 5 and 5.25%—a 16-year high—as the Fed continues its inflation fight. The country’s annual inflation fell to 5% in March but remains much higher than the Fed’s goal of 2%. The central bank suggested this may be the last rate hike as the economy and job market are cooling.

Report Reax: Widely anticipated reports from the Federal Reserve, FDIC, and Government Accountability Office were released last Friday, offering postmortems of March’s two collapsed banks, Silicon Valley Bank and Signature Bank of New York. The reports covered actions by the banks and the regulatory agencies themselves. Topics and themes included regulatory rollbacks, culture, missed red flags, and staffing. The law firm Debevoise & Plimpton, which identified several takeaways from the reports, said that in the near-term banks should expect “enhanced supervisory scrutiny”—especially related to interest-rate risk and liquidity risk.

Read the Fed report here.

Read the FDIC report here.

Read the GAO report here.

The 411 on 1071: Last month the Consumer Financial Protection Bureau issued its final rule to implement Section 1071 of Dodd-Frank, requiring lenders that originate more than 100 small business loans or finance products per year to collect and report specific data points about the credit applications they receive. Now the industry is getting ready to comply. JD Supra breaks down the key components of the rule and identifies notable changes that were made since the original proposal.

Raise the Insurance Roof? A different FDIC report, released Monday, recommends that Congress consider “significantly increasing deposit insurance coverage to business payment accounts.” FDIC Chair Martin Gruenberg said that was “the most promising option to improve financial stability relative to its effects on bank risk-taking, bank funding, and broader markets.”

Read the FDIC report here