The Vice President of Supervision of the Federal Reserve of the United States (Fed), Michelle Bowman, has pointed out that, after commissioning an independent review of the bankruptcy of Silicon Valley Bank (SVB), the analysis has determined that the Fed team "knew or should have known" the weaknesses of the bank as early as March 2022, that is, a year before the intervention by U.S. authorities.
"Despite what they knew or should have known, the supervision staff did not take swift and decisive action to encourage or require SVB to reduce its interest rate risk or the concentration of vulnerabilities," Bowman indicated in light of the results obtained.
Silicon Valley Bank, specialized in financing technology 'startups', announced in March 2023 a capital increase of 1.75 billion dollars (1.525 billion euros) to try to offset estimated losses of 1.8 billion dollars, which triggered alerts and led to a massive withdrawal of funds.
At the end of 2022, the entity had 209 billion dollars (about 182 billion euros) in assets and 175.4 billion dollars (around 153 billion euros) in deposits. Its collapse generated concern throughout the international banking system and also dragged down the U.S. Signature Bank.
The external review concludes that a "significant factor" behind the lack of reaction from supervisors was a "deep-rooted culture of risk aversion," to the point that "the staff believed it was personally safer not to act unless they were sure that the action was the right one."
The report requested by the Fed also downplays the role of social media, despite several analyses following the bankruptcy pointing to the dissemination of information through these channels as one of the triggers of the SVB crisis. "Among other things, they found that 96% of the conversations on social media about the bank run appeared when the bankruptcy of SVB was already inevitable," Bowman indicated.
"This report reflects our commitment to providing the American people what they deserve. The professionals dedicated to daily oversight also deserve the tools, authority, and support necessary for success. We have a responsibility to the American people to ensure that the lessons learned from the failure of SVB lead to meaningful and lasting improvements in the way we protect our financial system," concluded the Vice Chair of Supervision of the Fed.