Washington (EFE).- The US Federal Reserve (Fed) made self-criticism by admitting its insufficient supervision of Silicon Valley Bank, and although it stressed that the management of this bank “failed to manage the risks” it ran, it also recognized their fault for not appreciating the extent of the entity’s vulnerabilities.
These are two of the conclusions of the report on the fall of Silicon Valley Bank that the Fed made public this Friday.
In which he acknowledges that supervisors did not take “sufficient steps” to ensure that the bank quickly solved its problems when it detected them.
In any case, the Fed also denounced that in the most recent supervision of the entity, Silicon Valley Bank did not address 31 warnings sent by the supervisor, triple the average for entities of this type.
Silicon Valley Bank Collapse Investigation
The investigation into the causes of the bank’s collapse in March, led by the vice president responsible for Fed Supervision, Michael S. Barr, also considers that supervision was relaxed after the approval of the law on Economic Growth, Regulatory Relief and Protection of the Consumer approved in 2018.
Said regulation, he assures, represented a turn that “has prevented effective supervision” by reducing standards.
Increase complexity and promote “less firm” surveillance than the previous one.
“Following the fall of the Silicon Valley bank, we must strengthen Federal Reserve oversight and regulation based on what we have learned,” Barr said in the statement provided by the Fed.
“This review represents a first step in the self-assessment process” and a look at the circumstances why the bank failed, “including the role the Fed played as supervisor and regulator,” he continued.
The Fed Chairman’s Opinion
For his part, Fed Chairman Jerome Powell welcomed “this insightful and self-critical report.”
And he considered that his recommendations must be taken into account to apply them to the norms and practices of the supervisor.
“I am convinced that these recommendations will lead to a stronger and more resilient banking system,” Powell added.
The report looks “in detail” at the way the bank has been managed, supervisory and regulatory issues surrounding its fall.
It studies recent supervision of the bank and includes more than two dozen documents such as letters from the supervisor, test results and warnings.
According to the Fed, Silicon Valley Bank did not address 31 warnings issued by the supervisor, three times the average for entities of this type.
