The failure of Silicon Valley Bank (SVB) on March 10 was due to “mismanagement” and “poor supervision,” according to Federal Reserve Vice Chairman for Supervision Michael Barr. The internal investigation released by the US central bank reveals that supervisors did not fully appreciate the extent of the bank’s vulnerabilities and did not take sufficient action to ensure that the problems were addressed quickly enough.
The passage of legal changes during Donald Trump’s presidency also impeded effective supervision. The Federal Reserve’s regulation and oversight of fast-growing entities will be strengthened. The Fed will need to improve the speed, strength, and agility of supervision so that the bank is prepared to meet strengthened regulatory and supervisory standards more quickly.
In addition, it intends to be attentive to the particular risks that may be posed by fast-growing institutions, concentrated business models, or other special factors, regardless of their asset size. There will be other more specific changes, such as a review of how to supervise and regulate the management of interest rate risk and liquidity risk, especially deposits not covered by the guarantee fund.