On March 29, 2023, Vice Chair for Supervision Barr has submitted identical remarks to the Committee on Financial Services, US House of Representatives, addressing the Federal Reserve's supervisory and regulatory oversight of Silicon Valley Bank (SVB).
In his remarks, Barr highlighted the soundness and resilience of the banking system, with strong capital and liquidity, thanks to the Federal Reserve's decisive actions to protect the US economy and strengthen public confidence in the banking system. He emphasised that the Federal Reserve will continue to closely monitor conditions in the banking system and use all of its tools for any size institution, as needed, to keep the system safe and sound.
However, Barr also raised questions about evolving risks and what more can be done so that isolated banking problems do not undermine confidence in healthy banks and threaten the stability of the banking system as a whole. He expressed concern for maintaining the strength and diversity of banks of all sizes that serve communities across the country.
Barr then addressed the recent failure of Silicon Valley Bank (SVB), citing management's failure to effectively manage its interest rate and liquidity risk. The bank suffered a devastating and unexpected run by its uninsured depositors in a period of less than 24 hours. Barr stated that SVB's failure demands a thorough review of what happened, including the Federal Reserve's oversight of the bank.
Barr committed to ensuring that the Federal Reserve fully accounts for any supervisory or regulatory failings and fully addresses what went wrong. The first step is to establish the facts, taking an unflinching look at the supervision and regulation of SVB before its failure. This review will be thorough and transparent and reported to the public by May 1. The report will include confidential supervisory information, including supervisory assessments and exam material, so that the public can make its own assessment. External reviews are also welcomed and expected.
Barr's remarks signal the Federal Reserve's commitment to maintaining the stability of the banking system and addressing any regulatory failings. The review of SVB's failure will provide transparency and accountability to the public, helping to ensure that such failures do not undermine public confidence in the banking system.
In March 2023, SVB collapsed in the US after failing to raise USD 2.2 billion to plug a loss from the sale of assets, mainly US government bonds, that were affected by higher interest rates. Its troubles prompted a run on the bank in the US and sparked investor fears about the general state of the banking sector.
Soon after, regulators closed US-based Signature Bank as it represented the second casualty of the ongoing banking crisis and caused a systemic risk for the system.
Steve Boms, Founder and President of Allon Advocacy and Executive Director of FDATA North America, shared valuable insights into the collapses of Silvergate, SVB, and Signature Bank and how US regulators prevented the crisis from spreading.
Near end of March, US regulators announced that Silicon Valley Bank (SVB) will be acquired by rival First Citizens Bank following its collapse in March 2023, according to Euronews.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now