The Federal Reserve Board (FRB) on Friday published the results from their review of the supervision and regulation of Silicon Valley Bank, led by Vice Chair for Supervision Michael S. Barr.
The review finds four key takeaways on the causes of the bank’s failure:
- 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.
The FRB review also indicates the SVB failure was impacted by:
- The speed of the run due to the impact of social media;
- The creation of systemic impact on the industry, not due to size, but instead the connection of SVB to other financial counterparties and
- The relatively weak capital position of SVB
- Click here for the Fed’s press release on the report
- Click here to access the Fed’s 118-page report
Additionally, the FDIC issued its own report on the failure of Signature Bank.
- The report noted the root cause of the failure was poor management and its pursuit of rapid, unrestrained growth without appropriate risk management practices and controls.
- Further, the report indicates FDIC’s supervision was not escalated as quickly as it should have been and the examination work product was not as timely in its processing and communication with Signature Bank management to be as effective as it could have been. These delays, the report indicates, were the result of resource challenges with examination staff.
- Click here to read the FDIC press release.
- Click here to access the FDIC’s 63-page report.
NASCUS will provide a more detailed review of this information in the days ahead.