Fed Rethinks Loophole That Masked Losses on SVB’s Securities

WASHINGTON—The Federal Reserve may close a loophole that allows some midsize banks to effectively mask losses on securities they hold, a contributing factor in the collapse of Silicon Valley Bank.

Led by vice chair for supervision Michael Barr, the Fed is considering ending an exemption that allows some banks to boost the amount of capital they report for regulatory purposes, according to people familiar with the matter. Capital is the buffer banks are required to hold to absorb potential losses.