Federal Reserve Vice Chair for Supervision Michelle Bowman said an independent review of the failure of Silicon Valley Bank found the Fed’s supervisory staff knew, or should have known, about SVB’s vulnerabilities a year before its collapse.
Details: Speaking in London on the initial findings of the review, Bowman said the review also found:
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SVB failed due to a confluence of vulnerabilities including unrealized accounting losses on its securities portfolio, a run-prone deposit basis, and a lack of operational readiness to borrow from the discount window when needed.
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The Fed’s supervisory staff should have known about these vulnerabilities as early as March 2022 but did not take prompt and decisive action.
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The delays in supervisory action were not caused by the regulatory tailoring mandate in the S. 2155 regulatory relief law.
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Supervisory inaction was caused in part by a culture of risk aversion and a lack of clarity regarding decision rights.
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Social media did not trigger or accelerate the bank run at SVB.
FDIC Report: The FDIC in May published a staff study of deposit flows at the three banks, including SVB, that failed in the spring of 2023.