Fed blames bank and inadequate supervision for SVB bankruptcy
The Fed has announced the results of its review of the SVB’s supervision and regulation, led by Michael Barr, Executive Vice President of Financial Institutions.
The report, which detailed the bank’s management and the supervisory and regulatory issues surrounding its collapse, outlined the bank’s rapid growth, as well as the challenges Fed supervisors faced in identifying the bank’s vulnerabilities and forcing the bank to fix them.
In the report, which made 4 main conclusions regarding the reasons for the bankruptcy of SVB, it was stated that the first of these was the inability of the SVB management to manage the risks.
The report noted that as the SVB grew in size and complexity, Fed supervisors did not fully grasp the extent of security vulnerabilities.
The report emphasized that the change in the stance of the audit policy hinders effective auditing by reducing standards, increasing complexity and encouraging a less assertive audit approach.
The report said that when the SVB went bankrupt, the bank had 31 unresolved safety and soundness audit warnings, three times more than its industry peers.
– Fed Vice Chairman Barr urges to strengthen oversight and regulation
In his statement on the report, Fed Vice President for Financial Institutions Michael Barr stated that the management of the SVB was unable to manage the key interest rate and liquidity risk and that the board of directors failed to oversee senior management.
Barr, who also made a self-criticism, stated that the Fed auditors failed to take strong enough steps. “The bankruptcy of SVB shows that there are weaknesses in regulation and oversight that need to be addressed,” Barr said. used the phrase.
Barr stressed that as risks to the financial system continue to evolve, the supervisory and regulatory framework must be continually evaluated, adding, “We must strengthen the Fed’s supervision and regulation based on what we learned in the wake of the SVB’s bankruptcy.” made its assessment.