Silicon Valley Bank: Federal Reserve Board examines factors that contributed to failure

The US Federal Reserve Board announced the findings of a review of Silicon Valley Bank’s supervision and regulation led by Vice Chair for Supervision Michael S Barr on Friday.

The review identifies four key takeaways regarding the reasons for the bank’s failure: The board of directors and management of Silicon Valley Bank failed to manage their risks.

As Silicon Valley Bank grew in size and complexity, Federal Reserve supervisors did not fully appreciate the extent of the vulnerabilities; 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, as well as a shift in supervisory policy, hampered effectiveness.

The Vice Chair for Supervision Barr said in a statement “Following Silicon Valley Bank’s failure, we must strengthen the Federal Reserve’s supervision and regulation based on what we have learned.”

“This review represents a first step in that process–a self-assessment that takes an unflinching look at the conditions that led to the bank’s failure, including the role of Federal Reserve supervision and regulation.”