US Fed admits to failure in identifying start-up bank troubles
SVB’s failure on March 10 after taking on too much interest-rate risk caused shock waves throughout the banking sector, and led to the failure of another regional US bank and the merger under pressure of Swiss investment banking giant Credit Suisse
The US Fed will also look to strengthen the regulatory framework for banks, and consider toughening the rules around interest-rate risk, liquidity and capital requirements, and stress-testing. File Photo.
The United States Federal Reserve has called for greater banking oversight and admitted its own failures in a widely-anticipated report published on Friday which delved into the collapse of Silicon Valley Bank (SVB) last month.
“Following Silicon Valley Bank’s failure, we must strengthen the Federal Reserve’s supervision and regulation based on what we have learned,” Federal Reserve vice chair for supervision Michael Barr said in a statement.
Michael Barr said the bank’s management had failed to adequately manage risks prior to the SVB’s swift collapse, while Fed supervisors failed to take adequate enough action after they had identified issues at the Californian high-tech lender.
Related Articles
SVB’s failure on March 10 after taking on too much interest-rate risk caused shock waves throughout the banking sector, and led to the failure of another regional US bank and the merger under pressure of Swiss investment banking giant Credit Suisse.
Concerted efforts by regulators on both sides of the Atlantic in the days that followed SVB’s collapse appear to have reduced the banking turmoil and lowered volatility in the financial markets.
The report found that the Fed “did not appreciate the seriousness of critical deficiencies in the firm’s governance, liquidity, and interest rate risk management,” as SVB’s assets more than doubled in size between 2019-2021 in the middle of a high-tech boom.
In response, Michael Barr said the Fed will look at strengthening banking supervision to ensure the Fed could more quickly identify risks and vulnerabilities.
The Fed will also look to strengthen the regulatory framework for banks, and consider toughening the rules around interest-rate risk, liquidity and capital requirements, and stress-testing.
The review will be far-reaching and look more broadly at the Fed’s liquidity and capital rules, a senior Fed official told reporters prior to the report’s release.
Fed chair Jerome Powell said in a statement that he welcomed Michael Barr’s “self-critical” report into SVB’s collapse.
“I agree with and support his recommendations to address our rules and supervisory practices, and I am confident they will lead to a stronger and more resilient banking system,” he said.
Read all the Latest News, Trending News, Cricket News, Bollywood News,
India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.
also read
UBS-Credit Suisse merger: What the future will look like for the 'superbank'
UBS CEO Sergio Ermotti revealed how Switzerland's largest bank will integrate Credit Suisse once the takeover is completed in the coming months
How the failure of Silicon Valley Bank might have affected the entire financial system
Research suggests that a run-on deposits at Silicon Valley Bank and Signature Bank could have set off a cascading series of bank failures, crippling small businesses and economic activity across wide parts of the country
Credit Suisse bankers jostle for slim pickings at UBS, say sources
In order to move rapidly on possible new employment after the merger is done, UBS bankers have recently started meeting with their Credit Suisse colleagues in the world's largest financial cities, according to sources