The Federal Reserve (Fed) and the Federal Deposit Insurance Corporation (FDIC) released reports on their actions regarding the collapses of Silicon Valley Bank (SVB) and Signature Bank (Signature) and what could be changed to prevent a similar bank collapse in the future. Both reports rightfully conclude that bank management at SVB and Signature played a role as to why both banks failed but did not dwell too long on this point. Bank leaders at both institutions were clearly at fault for why both banks failed and became 2 of the largest bank failures in U.S. history.
The Fed’s report also states that regulators had begun to realize that SVB had issues with their management and risk years ago but had been slow to react to the problems occurring at SVB as the bank grew in size. The FDIC also stated similar themes about being slow to react to rising issues with Signature. In addition to the reports by the Fed and FDIC, a report released by the Government Accountability Office, a congressional watchdog, said regulators identified problems at both banks in recent years but didn’t escalate supervisory actions in time to prevent their failures. Regulators had the tools but didn’t act promptly or with enough speed to potentially prevent the collapse of these institutions.
Regulators in both reports called for revamping rules on how banks are monitored and regulated but clearly had the tools at their disposal to address the issues at both banks. The Fed goes after a 2018 bill that rolled back certain regulations in the 2010 Dodd-Frank bank bill. The 2018 bill allowed for banks under $250 billion in assets to be subjected to less stringent oversight by financial regulators. Randal Quarles, former Vice Chair for Supervision at the Fed disputed the Fed’s finding by saying the report “provides no evidence at all for what it describes as one of its main conclusions—that a ‘shift in the stance of supervisory policy’ impeded effective supervision of the bank.”
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