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Business News›News›International›World News›Fed review finds supervisory delays contributed to Silicon Valley Bank failure

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Fed review finds supervisory delays contributed to Silicon Valley Bank failure
Synopsis

Federal Reserve supervisors knew of Silicon Valley Bank's weaknesses early. Action was delayed despite identified vulnerabilities in the bank's balance sheet. The bank collapsed after a rapid run on uninsured deposits exposed its issues. A culture of risk aversion and unclear authority contributed to supervisory inaction. Measures are now being implemented to strengthen oversight and examiner flexibility.

ANI

London: An independent review of Silicon Valley Bank's (SVB) 2023 failure has found that Federal Reserve supervisory staff knew, or should have known, about key vulnerabilities at the bank as early as March 2022, but failed to take prompt and decisive action to address them.



The initial findings were released by Federal Reserve Vice Chair for Supervision Michelle Bowman at the Lord Mayor of London's luncheon at Mansion House on Friday. Bowman said the review by Starling Advisory Group examined whether supervisors had identified SVB's vulnerabilities in advance, why action was delayed and whether supervisory inaction contributed to the bank's failure.



SVB collapsed in March 2023 after a rapid run on deposits exposed weaknesses in its balance sheet. The bank had invested heavily in longer-term securities whose market value fell as interest rates rose, while 94 per cent of its deposits were uninsured and concentrated among venture capital-backed technology companies. On March 8, 2023, SVB announced a USD 1.8 billion after-tax loss from selling securities and sought to raise capital. More than USD 40 billion in deposits were withdrawn the following day, while the bank expected further outflows of more than USD 100 billion, leading regulators to close it on March 10.

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Silicon Valley Bank failureFederal Reserve supervisory reviewbank supervision delaysFederal Reserve measuresSVB collapse causesbank run analysisStarling Advisory Group reviewrisk aversion in bankingventure capital technology companiesSilicon Valley Bank

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