Fed admits failures in Silicon Valley bank oversight

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The Fed underestimated the “significance of critical failures in governance, liquidity and interest rate risk management” at Silicon Valley Bank, according to a Fed report released Friday on the March bankruptcy of the California regional bank.

The report said that when vulnerabilities emerged, the Fed did not take “adequate steps to ensure that the Bank of Silicon Valley resolves these issues quickly enough.”

The Federal Reserve (Fed) is taking the SVB’s leadership harshly to court: the board and management were unaware of how risky the business model focused on the technology sector was. Those in charge of the SVB “had not been able to manage their risk”.

The collapse of the regional bank caused significant turmoil in the banking sector and stock markets. SVB, the 16th largest bank in the US by assets and a major financier for startups, especially in Silicon Valley, had to be shut down by authorities on March 10 after its investors drew large amounts of capital.

The biggest bank failure in the USA since the 2008 financial crisis dragged other US credit institutions into the crisis and had repercussions in Europe. The big bank UBS in Switzerland, under the pressure of the state, took over Credit Suisse, the country’s number two bank, which has been struggling with scandals in recent years.

The US Federal Reserve has now declared that tighter banking supervision is necessary to avoid future crises. The Fed should be able to identify risks and weaknesses in banks more quickly. Among other things, the Fed may tighten requirements for interest rate risks, liquidity, capital requirements and stress tests.

(SDA)

Source :Blick