On April 28, 2023, the Federal Reserve Board announced the results from the review of the supervision and regulation of Silicon Valley Bank, which was led by Vice Chair for Supervision Michael S. Barr. The review identified four key causes of the bank's failure.
From Vice Chair for Supervision Barr’s statement:
"Following Silicon Valley Bank's failure, we must strengthen the Federal Reserve's supervision and regulation based on what we have learned. This review represents a first step in that process—a self-assessment that takes an unflinching look at the conditions that led to the bank's failure, including the role of Federal Reserve supervision and regulation."
The report discusses in detail the management of the bank and the supervisory and regulatory issues surrounding the failure of the bank. The four key takeaways on the causes of the bank's failure includes the following:
Silicon Valley Bank's board of directors and management failed to manage their risks;
Federal Reserve supervisors did not fully appreciate the extent of the vulnerabilities as Silicon Valley Bank grew in size and complexity;
When supervisors did identify vulnerabilities, they did not take sufficient steps to ensure that Silicon Valley Bank fixed those problems quickly enough; and
The Board's tailoring approach in response to the Economic Growth, Regulatory Relief, and Consumer Protection Act and a shift in the stance of supervisory policy impeded effective supervision by reducing standards, increasing complexity, and promoting a less assertive supervisory approach.
In another news, the FDIC released its Supervision Report of Signature Bank, which was shut down on March 10, 2023.
The FRB’s announcement can be found here.
The full report can be downloaded here.