Davis Polk partner and Financial Institutions practice head Margaret Tahyar discussed what to watch as bank earnings are announced and what the data could mean for potential bank reforms on Bloomberg Television’s “Bloomberg Markets: The Close.”

When asked what she thinks regulators will be watching, Margaret said, “I think the regulators already have the data. As part of their supervisory duties, they’ve been talking to banks all around the country and probably getting, in some cases, twice daily updates from banks on what they’re seeing.” She added, “I’d be surprised if the supervisors or the regulators are surprised by anything.”

She also shared her thoughts on investor concerns regarding FDIC insurance. “The key thing that I think is happening on deposits is the coverage cap. There’s just a big swirl around, should that be raised and how will that work,” she explained, noting that there are many options for next steps and that the FDIC’s report on deposit insurance will be released next month. When asked if she thinks if the cap should be raised, she responded, “I’m holding fire. I have this probably old-fashioned view, which is data first and policy second.”

Margaret also addressed differing messages coming from two different FDIC directors on what is to blame for recent bank failures. “It’s pretty unusual,” she explained. “There are two interesting things going on there. They obviously are saying quite different things about the 2018 bipartisan law – Director Chopra is saying it is responsible for a lot of it, and Vice Chair Hill is saying, no it’s not. Both of them are saying, we need to think about targeted reforms to match the situation. And interestingly, both are holding fire and urging caution on, how do we raise the insurance coverage.”

Margaret continued. “I’m hoping we’ll have a lot more data after the earnings season to inform where we might go with increases in deposit insurance coverage – which by the way, requires Congress to act, and that is a challenge.”

“Bloomberg Markets: The Close,” Bloomberg Television (starting at the 1:58:46 mark) (April 13, 2023) 

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