After the sudden collapse of Silicon Valley Bank (SVB) on March 10 and the rapid intervention of financial regulators, the Federal Reserve Bank of San Francisco faces criticism regarding the lack of supervision and corrective measures.
Currently, San Francisco Fed President Mary Daly is being questioned regarding inaction on former SVB CEO Greg Becker and prevention against the risks of an adverse bank run taking place.
The San Francisco Fed is in charge of much of the western United States, it is the main regulator of Silicon Valley Bank, therefore, Supervision of the institutions that live on that side of the country was key to guaranteeing security and soundness of the banking system.
Within the questions to the Fed, it is raised whether it really carried out the liquidity stress tests on SVB and what the results were, since despite the fact that the bank had a high base of uninsured deposits, in its last regulatory presentation it was possible to confirm that it was at risk of bankruptcy, something that could have been avoided through monitoring.
Silicon Valley Bank became fully exposed to the sharp rises in interest rates, while continuing to buy government bonds and mortgage securities, until they fell in value and generated losses on sales, causing it to become insolvent.
The Federal Deposit Insurance Corporation (FDIC) intervened after the failure of SVB and thus be able to guarantee customer deposits and in a great effort to stabilize and contain the situation to avoid infecting other banking institutions, policies were created together with the Treasury Department and the Federal Reserve.
In this sense, for Dennis Kelleher, co-founder and executive director of the financial sector defense group Better Markets, “it is inexplicable how the Federal Reserve supervisors could not see this clear threat to the safety and soundness of the banks and to financial stability.” “, said.
For his part, the vice president of the Federal Reserve of the United States, Michael Barr announced that the board will review the data produced during the supervision and regulation of SVB, lThe results will be announced on May 1st. “We need to be humble and conduct a careful and thorough review of how we oversee and regulate this company, and what we should learn from this experience,” Barr said in a statement.
Source: La Opinion