By Douglas Gillison (Reuters) - As U.S. regulators start to overhaul the way they police lenders after three banks failed this year, they will have to ...
By Douglas Gillison - As U.S. regulators start to overhaul the way they police lenders after three banks failed this year, they will have to address examiners' hesitancy to raise red flags,Musicians, humour and stories galore help Bruce Guthro's Celebration of Life | SaltWire - As U.S.
Federal Reserve examiners spotted"foundational" issues with SVB's liquidity risk management in 2021 but were still drafting a disciplinary action the day it died, the Fed report found. Likewise, a 2019 FDIC notice warning Signature Bank's board about liquidity planning problems"remained outstanding" when it failed, according to the FDIC's review.
"Once you've detected the information; do you have the courage to do something?" said Charles Calomiris, a professor at Columbia Business School and former official at the Office of the Comptroller of the Currency , noting examiners worry that raising red flags will"make everybody angry."Signature Bank's management was"generally dismissive" of examiners' findings, the FDIC said.
Examiners monitor banks and perform onsite supervision. They rate their health on a range of metrics and can instruct them to correct problems. But the work is with the rarest of exceptions strictly confidential. That means there is often little public accountability, even after something blows up. Quarles said that this is not true and that supervisors have"always been fully supported" by Fed leadership."I expressly encouraged examiners to focus on liquidity risk and concentration of deposit risk," he said in an email to Reuters.
But how to get there remains an open question. Barr has floated imposing additional capital requirements when supervisors detect weak risk controls, providing an incentive for banks to act quickly.
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