Federal Reserve Report Blames Own Regulators for SVB Collapse
A report commissioned by a Fed official points to shortcomings in bank supervision during the Biden administration.
A recent report commissioned by a Federal Reserve official has attributed the collapse of Silicon Valley Bank (SVB) to failures within the Fed's own bank supervision staff, particularly during the Biden administration.
The report, which was commissioned by Fed Governor Michelle Bowman, a Republican appointed by former President Donald Trump, suggests that supervisory staff did not adequately identify or address the risks building up at SVB. The findings indicate that the bank's management was aware of the risks associated with its large, uninsured deposits and its significant holdings of long-dated securities, but regulators failed to compel the bank to address these issues effectively.
SVB, a major lender to technology startups, failed in March 2023, triggering broader concerns in the banking sector. The bank's collapse was largely due to a bank run that followed its announcement of significant losses on its bond portfolio, which had declined in value as interest rates rose. The rapid withdrawal of deposits by its tech-heavy client base overwhelmed the bank's liquidity.