Fed official: Bank rules under review in wake of SVB failure
The Federal Reserve’s bank supervisors warned Silicon Valley Bank’s management as early as the fall of 2021 of risks stemming from its unusual business model, a top Fed official said Tuesday, but its managers failed to take the steps necessary to fix the problems, according to an Associated Press report.
The Fed official, Michael Barr, the nation’s top banking regulator, said during a Senate Banking Committee hearing that the Fed is considering whether stronger bank rules are needed to prevent a similar failure in the future.
Silicon Valley Bank’s management was deficient, Barr said. In particular, he said, the interest rate model the bank used “was not at all aligned with reality.”
The timeline that Barr laid out for when the Fed had alerted Silicon Valley’s management to the risks it faced is earlier than the central bank has previously said the bank was on its radar screen.
Tuesday’s hearing was the first formal congressional inquiry into the March 10 collapse of Silicon Valley Bank and the subsequent failure of New York-based Signature Bank, the second- and third-largest bank failures in U.S. history.