Fed Review Reveals Supervisors Knew of SVB's Risks Before Its Collapse in March 2023
An independent review commissioned by the Federal Reserve found that supervisors were aware or should have been aware of Silicon Valley Bank’s (SVB) vulnerabilities as early as March 2022, more than a year before its collapse. The report, conducted by Starling Advisory Group and announced by Fed Vice Chair for Supervision Michelle Bowman in London on September 18, identified seven key findings, including the bank's exposure to interest rate risk and an over-concentration of uninsured deposits from tech startups. The review highlighted a culture of excessive caution among supervisory staff who hesitated to act due to fear of making incorrect decisions. It also dismissed prior explanations for inaction, such as regulatory changes or leadership directives, noting that the former supervisor had left before SVB's risks became most evident. The Fed has since introduced new operating principles and will require monthly reports from examination teams directly to supervision leaders. The findings are more critical than a 2023 internal review led by then-Vice Chair Michael Barr, which only noted examiners were overly cautious.
Topics: Federal Reserve oversight risk management failures SVB collapse