In a scathing self-assessment, the Federal Reserve’s autopsy on Silicon Valley Bank’s failure puts blame partially on its own doorstep, as regulator reports on Signature Bank’s collapse cite the lender’s “poor management.”
The autopsy on failure has been released ahead of schedule.
The 114-page unflinching and, at times, self-critical post-mortem review of the central bank’s oversight and regulation of SVB, which was promised by the Fed’s vice chair for supervision, Michael Barr, during contentious congressional hearings last month, was compiled in just over six weeks and published Friday (April 28).
Both the Federal Deposit Insurance Corporation (FDIC) and the New York State Department of Financial Services (NYDFS) also released their own respective reports Friday on Signature Bank’s subsequent failure.
“These collapses represent a massive failure in supervision over our nation’s banks,” Sen. Elizabeth Warren of Massachusetts said.
While the FDIC and NYDFS lay much of their blame for Signature’s failure at the bank’s own feet, the Fed’s latest report reads in line with Warren’s assessment.
The mea culpa review, conducted by Barr, documented how lax supervision and loosened regulation, combined with poor executive management, led to SVB’s collapse.
SVB “failed because of a textbook case of mismanagement by the bank,” the review stated. “Its senior leadership failed to manage basic interest rate and liquidity risk. Its board of directors failed to oversee senior leadership and hold them accountable. And Federal Reserve supervisors failed to take forceful enough action…”
All three regulatory reviews concluded that the banking industry needs stricter policing across multiple fronts in order to prevent future failures.