The U.S. Federal Reserve blamed last month's collapse of Silicon Valley Bank on poor management, watered-down regulations and lax oversight by its own staffers, and said the industry needs stricter policing on multiple fronts to prevent future bank failures.
The Fed was highly critical of its own role in the bank's failure in a report released Friday. The report, compiled by Michael Barr, the Fed's chief regulator, says banking supervisors were slow to recognize blossoming problems at Silicon Valley Bank as it quickly grew in size in the years leading up to its collapse. The report also points out underlying cultural issues at the Fed, where supervisors were unwilling to be hard on bank management when they saw growing problems.
The FDIC's report concerned the failure of Signature Bank on March 12 and the specific problems that led to its collapse: the bank's exposure to cryptocurrencies and an overreliance on uninsured deposits. The FDIC also found that Signature Bank's failure was also likely fallout from the failure of Silicon Valley Bank.
"While higher supervisory and regulatory requirements may not have prevented the firm's failure, they would likely have bolstered the resilience of Silicon Valley Bank," the report said. "It is long past time to roll back the dangerous deregulation under the last administration to the greatest extent possible, and pay close attention to the largest banks so this crisis does not worsen," she said.
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