(MENAFN) Fitch Ratings, a credit rating agency, said in a statement on Thursday that the recent turmoil in the US banking industry may lead to tighter regulations for large banks in the nation. The agency noted that the recent failures of Silicon Valley Bank and Signature Bank have raised concerns regarding the prudential regulatory regime. It highlighted the importance of interest rate-risk management practices during an era of rising policy rates.
Fitch Ratings stated that US regulators may consider tightening the regulatory regime for large regional US banks with more than USD100 billion in assets. The aim would be to align regulatory requirements more closely with European and Asia-Pacific frameworks. This would help to strengthen the banking sector and mitigate the risk of future failures.
The sudden collapse of Silicon Valley Bank and Signature Bank, in addition to financial difficulties surrounding Silvergate Bank and First Republic Bank, in recent weeks has caused turmoil in the banking sector of the world's biggest economy. These failures have highlighted the need for stricter regulations and oversight of the banking industry.
The failure of Silicon Valley Bank and Signature Bank, in particular, has raised concerns about the prudential regulatory regime in the US. Both banks were relatively small in size compared to the largest banks in the country. However, their failure has highlighted the importance of interest rate-risk management practices, especially during an era of rising policy rates.
Fitch Ratings' statement suggests that tighter regulations may be necessary to prevent further failures in the banking sector. The agency's call for aligning regulatory requirements more closely with European and Asia-Pacific frameworks indicates a need for greater international coordination in regulating the banking industry. Such coordination could help to strengthen the global banking sector and prevent future financial crises.
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