When Congress agreed in 2018 to exclude regional banks from stricter post-crisis capital regulations, it established a two-tier banking system in the United States. One of the goals of the Federal Reserve’s changes announced this summer was to reverse this trend and ensure that all banks with more than $100 billion in assets adhere to the same criteria as the largest institutions.

However, if these suggestions are approved, the US will still have a two-tier system, which is far from certain given the strong resistance. This is significant because the banks that will be minimally regulated have grown to become increasingly major lenders. Failures involving companies with less than $100 billion in assets should be less harmful, but they may not be.


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