U.S. Bank Lobbying Increased by Nearly 20% After SVB and Signature Failed

There were fears of a banking contagion spreading across the country last quarter that led about 30 of the largest US banks as well as the groups that represent them to spend 19.3% more on lobbying Congress.

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During the first quarter of 2023, 32 of the largest banks and four trade groups have collectively spent $22 million on lobbying lawmakers, up from $18.4 million during the same period last year, according to federal lobbying disclosures.

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In terms of lobbying expenses, regional banks, including PNC Financial Services Group Inc., KeyCorp, and Citizens Financial Group, were among those that had increased lobbying expenses at the highest rates. It is estimated that Bank Policy Institute, which counts a number of large- and mid-sized banks as members, has nearly quadrupled its expenditures since the first quarter of last year, from $550,000 to $1.9 million in the first three months of this year. Requests for comments were not immediately responded to by any of them. 

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The rise in lobbying activity by banks coincided with the collapse of a crypto-friendly lender, Silvergate Capital Corp., and the failure of regional institutions Silicon Valley Bank and Signature Bank. All of these events undermined confidence in the banking system and prompted calls for more oversight. 

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There are a variety of factors that can influence the amount companies spend on lobbying, including how much companies are willing to invest in influencing policies that may not be implemented for several years, but the near-universal increase suggests that banks are reacting to the prospect of an increase in regulation. SVB, State Street Corp., Truist Financial Corp., and Ally Financial Inc. were the only financial companies that cut expenditures compared to the first quarter of last year.

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In the first quarter of last year, SVB, which is the largest bank to fail since the global financial crisis began in 2008, spent $50,000; however, this amount is down from the $50,000 spent by SVB in the first quarter of last year. Companies have an obligation to list the specific issues they are lobbying Congress about in their lobbying materials, but many of them are vague. The SVB did not deviate from the norm, naming only one priority for the first quarter: "Banking issues related to technology and innovation."

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Treasury Department, Federal Reserve, and Federal Deposit Insurance Corporation (FDIC) stepped in with a last-minute deal designed to protect startup-focused SVB's deposits, fearing that if the funds were not protected, it could result in a system-wide run on the banks. There is a process underway by the FDIC to sell the assets of the lender.

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After being shut down by regulators in March, Signature Bank, which has ties to the crypto industry and was shut down by regulators a month later, has not reported any lobbying expenditures since 2020.

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The biggest banks such as US Bancorp and PNC were already preparing for more regulation before there was any turmoil in the banking industry this spring after Michael Barr took over as the Fed's No. 2 official last summer. The failures of a number of banks in March mean that still, more banks will face regulation or scrutiny as a result of congressional legislation.

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Do those who appear to be least concerned with increasing their lobbying presence in Washington seem to be the least concerned? Both the biggest and the smallest banks are affected. 

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While many community banks do not have their own lobbyists, the trade group that represents them has spent at a level that is in line with what it spent in previous quarters. 

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Also, banks deemed systemically important, such as Bank of America Corp. and Citigroup Inc., are already subject to regulations imposed by the Federal Reserve after the 2008 financial crisis, which did not spike their spending like smaller, regional banks, which are more likely to be subject to additional regulations.